We’ve done a fair amount of work on the Boards of a few non-profits, and tried to set up a few ourselves… yet still, we look for sage advice on how to best establish a Board of Directors for a fledgeling 501(c)3 corporation. The best we’ve found is in a post on the Harvard Law Forum. You can read the article in it’s entirety, here. Here are a few points worth noting:
“The board of a well-governed nonprofit organization, like the board of a well-governed profit-making company, will do all of the following:
- Formulate key corporate policies and strategic goals, focusing both on near-term and longer-term challenges and opportunities.
- Authorize major transactions or other actions.
- Oversee matters critical to the health of the organization— not decisions or approvals about specific matters, which is management’s role—but instead those involving fundamental matters such as the viability of its business model, the integrity of its internal systems and controls, and the accuracy of its financial statements.
- Evaluate and help manage risk.
- Steward the resources of the organization for the longer run, not just by carefully reviewing annual budgets and evaluating operations but also by encouraging foresight through several budget cycles, considering investments in light of future evolution, and planning for future capital needs.
- Mentor senior management, provide resources, advice and introductions to help facilitate operations.”
Here’s some additional important advice about exactly what kind of individual makes a good choice for the Board:
“Board independence and board attention are of paramount importance in good nonprofit governance. The independence of the board is key because of the non-distribution constraint – nonprofits exist to serve the public interest, not to benefit owners or other private parties. Business or family relationships between the organization or its executives and a board member or her firm are frowned upon and should be strictly scrutinized under a conflict of interest policy administered by independent directors. Even absent outright business or family relationships, a common shortcoming of nonprofit boards is that they are too small, too insular, or too deferential to the founder or chief executive.
Another frequent error of nonprofit boards is inviting new members because of their marquee name within a certain field of endeavor (e.g., a famous dancer on the board of a dance organization) or their means and inclination to donate, without due consideration to the person’s ability and availability to fulfill fiduciary duties, providing the critical oversight function. The governing body of a nonprofit must be made up entirely of people in a position to govern it—setting the strategic direction of the organization and overseeing management’s execution of the mission. Wealthy or prominent persons— donors, artists, scientists, public officials, and others—with an interest in the organization’s program but lacking the time, availability, or expertise to provide meaningful oversight may serve the organization in a non-fiduciary capacity, such as an honorary or advisory board, donors’ circle, or professional council.”
Rosenthal sums up with an interesting comparison to a for-profit Board:
“By a number of measures, nonprofit and for-profit board governance are similar: the board’s oversight role, its decision-making power, its structural place within the organization, and its members’ legal duties. The similarities end, however, where shareholder interest in maximizing returns gives way to mission fulfillment, a multiplicity of stakeholders, more complex business models, and self-accountability rather than external accountability.”
Putting together a Board for a start-up non-profit may seem like almost an afterthought, or a necessary legal hurdle along the complicated road to putting together a successful MakerSpace – especially to the founders, awash in a sea of decisions and challenges, both financial and practical. However, it’s pretty obvious that from a legal as well as a practical perspective, a well-chosen Board with seasoned mentors could be the difference between a successful startup and a flash in the pan.
Good advice, indeed.
In a little more lighthearted note, Joan Garry has some advice in her post, “How to Select First Rate Board Members“, including questions she’d like to ask in the interview:
- “Are you rich? I mean, like really rich. We need really rich people on our board.
- Can you assure us that you won’t ask any really stupid questions at a board meeting?
- Do you really like to hear yourself talk?
- When someone says something you disagree with, do you either sigh or roll your eyes?
- How many times in the last month have you been on a conference call, hit the MUTE button, and checked your email?
- Will you commit to agreeing with absolutely everything I say? (Asked by the E.D.)
- Do you tend to assume that someone is doing a terrible job until proven otherwise?
- Does the idea of asking someone for money make your skin crawl?
- Do you care if you are late for stuff?”