Nonprofit board

A nonprofit board, also called a nongovernmental or voluntary board, is a formal group of directors, governors, or trustees with legal and fiduciary responsibility for managing the affairs of a nongovernmental, nonprofit or voluntary organization.

Broadly speaking, the responsibility of a board of directors is the fulfillment of the institution’s mission by implementation of practices that are consistent with the visions and values shared by all members. More specifically, they consider policy options, determine policy, implement selected policies, perform oversight of organization operations (monitoring and evaluating), and serve as courts of last resort. They are in charge of the organization’s financial stability and legal practice implementation. Consequently, the board’s decisions will often affect outsider’s views about the organization, i.e., funders, the government, and taxpayers.

Composition

The make-up of a board depends on its constitution, which in turn should depend on the purposes of the organization. Bodies formed on a representative model or with some ex officio appointments have less control over the board membership (and consequently its effectiveness — see below) than those where the board has legal or effective control over appointments, though in the case of a representative board, shortcomings in the board may be remedied by the accountability to the membership.

Effectiveness

Efficient boards usually have well identified board size and structure. Organizations should determine the ideal size, composition, and committee structure before listing board’s assignments (Axelrod, 2004). The use of committees to accomplish organizational objectives is based on the premise that smaller groups of individuals can conduct themselves more efficiently than the whole and that a definitive structure is required to operate efficiently. Meeting format also plays vital rule in such effectiveness. According to John Carver (1997), even though there is great opportunity for leadership among nonprofit boards, “intelligent, caring individuals regularly exhibit procedures of governance that are deeply flawed.” Among them are too much time spent on the trivial and not enough time spent on strategic positioning […]. In overall, the most important component of a well established structure is the cohesiveness among its members. Chat, Holland, and Taylor (1996) studied causes of success and failure among boards and found that the most effective boards were more cohesive, in other words, members worked as a high-performing group in its various capacities: contextual, educational, interpersonal, analytical, political, and strategic. “Boards that don’t come together as a well-performing group can create barriers to their own effectiveness that range from dysfunctional harmony and groupthink to control of the governance process by a few”.

Past research has suggested that “governance models and board development interventions can be helpful once the criteria of board effectiveness have been defined” (Axelrod, 2004). The author complements that self-evaluating questions can help a board to start understanding its roles and building effectiveness. Axelrod suggests the following questions: Why does our border matter beyond its legal and symbolic functions? What is working well? What areas need attention or improvement? What performance measures will demonstrate improved board performance or effectiveness? What steps can we take to improve the board’s performance and effectiveness? Effectiveness is also achieved when board base its performance in four primary roles: 1) define and advance the organization’s mission; 2) ensure, develop, and conserve the organization’s resources; 3) provide oversight of management, and ensure assessment of the organization; 4) engage in outreach as a bridge and a buffer between the organization and its stakeholders (Axelrod, 2004).

Legal framework of governance

Generally, board members are held to three standards of conduct: the duty of obedience, the duty of care, and the duty of loyalty. Lack of observation of these duties might cause legal liability. Boards and board members are legally responsible, collectively and individually, for the actions of the nonprofit organizations they serve (Conrad Jr., 2003). The board’s existence is based on law, which determines that every nonprofit organization must have one board of directors. Governing laws normally mandates that minutes be made of all meetings of the organization’s board of directors and committees. Organizations which are also charities have a distinct regulatory framework.