Chapter 4 from "Nonprofit Management," Third Edition by Michael J. Worth, https://secure.sagepub.com/protected/worth3e/icfr/intro.htm

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Chapter 4: NonprofitChapter 4: Nonprofit
Governing BoardsGoverning Boards

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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)

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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

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Types of Governing BoardsTypes of Governing Boards
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

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Types of Governing BoardsTypes of Governing Boards
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

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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.

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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)

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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

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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

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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

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Three Models ofThree Models of
Board-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”

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““Twelve Principles that PowerTwelve 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

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Problems with Measuring BoardProblems 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)

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The Challenge of NonprofitThe 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

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The Board’s Sometimes CompetingThe 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