Overview of Nonprofit Boards

© 2014 SAGE Publications, Inc.

Chapter 4: Nonprofit Chapter 4: Nonprofit Governing BoardsGoverning Boards


TerminologyTerminology• Governing boards -- boards that hold ultimate

responsibility for ensuring that the organization serves its mission and for the overall welfare of the organization itself

• Terminology depends on specific organization• Board of directors• Board of trustees• Board of governors• Governing council• Other terminology

• Boards that lack legal responsibility for governing their organizations are not governing boards (e.g., advisory boards)


Types of Governing BoardsTypes of Governing Boards

Elected boards• Common in member-serving and advocacy organizations• Governing board elected by the membership of the

organization; can lead to a “popularity contest”• Membership terms of an elected board may be

brief/turnover• Skills of board members may be uneven• CEO must have a high tolerance for uncertainty• Board members less likely to become stale, uninvolved or

homogeneous in their membership



Self-perpetuating boards•New members are selected by the existing members of the board who recruit them according to criteria established by the board•In a new nonprofit, the initial board members are known as “founding board members” who then develop bylaws, etc., which outline how the organization will be governed•Creates a relatively stable situation for the organization and its CEO as board members change less frequently; boards recruit new members with skills/expertise needed at the time•Board needs to maintain diversity to guard against becoming homogeneous



Appointed and hybrid boards•A typical model for public organizations such as universities•Members selected through appointment by some authority such as the governor of a state, etc.•In hybrid boards, some members may be elected and some appointed or serving ex-officio•Hybrid boards can keep organizations responsive to their constituencies as well as better accountability•Appointed or hybrid board members may lack the commitment to the organization and may not fully participate in the work



Advisory Boards & CouncilsAdvisory Boards & Councils• Better term should be “councils” rather than “advisory

boards” to avoid confusion with governing boards• Have no legal responsibility or authority for governance

of an organization• Members may provide a nonprofit with technical

assistance/expertise, assist with fundraising activities, serve as advocates or ambassadors in the community• May or may not be formally established in the

nonprofit’s bylaws• Role and parameters should be formalized with

guidelines that outline the responsibilities of the council, etc.


Board ResponsibilitiesBoard Responsibilities

• Board members are “fiduciaries of the organization’s resources and guardians of its mission” (Hopkins, 2003, p. 1)• Board members are accountable “for everything

the organization does and how those things are accomplished” (Howe, 2002, p. 30)


Board Responsibilities: LegalBoard Responsibilities: Legal• The Sibley Hospital Case (1974)• Care – exercising due diligence in monitoring and supervision• Loyalty – members put the interests of the nonprofit above

their own personal financial interests• Obedience – members ensure that the organization complies

with all laws and actions are consistent with the mission• Intermediate sanctions (1996)• Sarbanes-Oxley Act (2002)• Destruction of documents• Protection for whistle-blowers

• Form 990


Board Responsibilities: FunctionalBoard Responsibilities: Functional

• Appoint, support, and evaluate the CEO• Establish a clear institutional mission and

purpose• Approve the organization’s programs• Ensure sound financial management and the

organization’s financial stability• Establish standards for organizational

performance and hold the organization accountable


The Board and the CEOThe Board and the CEO• Who leads the nonprofit organization?• Extreme scenario 1 -- CEO manipulates the

board, orchestrates board meetings, and relegates the board to the role of a rubber stamp for his or her initiatives• Extreme scenario 2 -- Board micromanages the

organization and usurps the authority of the CEO• Partnership between the board and the CEO as

ideal, but different views on exactly how this partnership should be constructed and how it should operate


Three Models ofThree Models ofBoard-CEO RelationshipBoard-CEO Relationship

• Policy Governance Model (Carver, 1990) -- need to establish and enforce a clear line between the board’s responsibility for policy making and the executive’s responsibility for implementation

• Governance as Leadership (Chait, Ryan, and Taylor, 2005) -- board should assume a leadership role that blurs the distinction between policy and implementation, focusing everyone’s attention on “what matters most”

• "Psychological Centrality and Board-Centered Leadership (Herman and Heimovics, 2005) -- CEOs should accept the reality of their “psychological centrality” in the organization and provide “board-centered leadership”


““Twelve Principles that Power Twelve Principles that Power Exceptional Boards”Exceptional Boards”

• Constructive partnership• Mission driven• Strategic thinking• Culture of inquiry• Independent-mindedness• Ethos of transparency• Compliance with integrity• Sustaining resources• Results-oriented• Intentional board practices• Continuous learning• Revitalization Source: Board Source, 2005


Problems with Measuring Board Problems with Measuring Board EffectivenessEffectiveness

• Reliance on practitioner wisdom rather than science

• Lack of a substantial body of research on nonprofit board performance

• Lack of a single definition of board effectiveness

Board effectiveness is “whatever significant stakeholders think it is, and there is no single

objective reality"(Herman and Renz, 2002)


The Challenge of Nonprofit The Challenge of Nonprofit GovernanceGovernance

• Janus metaphor -- nonprofit boards are positioned on the boundary between the organization and its external environment• Inward-looking role in fulfilling fiduciary

responsibilities on behalf of the membership or society• Outward-looking role in meeting responsibilities

to the organization itself and advance its interests

• Complex responsibilities require diverse qualities in the individuals selected to serve on the board


The Board’s Sometimes Competing The Board’s Sometimes Competing ResponsibilitiesResponsibilities

To Society

• Accountability for resources and results• Adherence to mission

and law• Representation of

community needs

To the Organization

• Advocacy and authenticity• Protection of autonomy• Fiscal stability and

sustainability

Education

Overview of Nonprofit Boards