Viewpoints

Care, Loyalty, and Obedience – How to Get Your NFP Board On-Board

Craig Stevens

Originally Published In:
BUSINESS STRATEGIES MAGAZINE
September 2007
Author: Craig Stevens, CPA

One of the key components of any successful not-for-profit corporation is the development of an effective Board of Directors.  This has become even more critical as scandals continue to occur in the not-for-profit sector resulting in an increased scrutiny of NFP governance practices.

A properly functioning Board serves as a valuable resource to the officers, management team, and volunteers of the organization.  The Board has a responsibility for managing and making decisions at a level that will guide and direct the organization as it carries out its mission.  

There are a number of valuable tools available to not-for-profit organizations that can help develop and train Board members in fulfilling their fiduciary responsibilities.  For example, the New York State Attorney General (AG) website is one such valuable resource.  The AG defines a Board member’s primary legal duties as the duties of care, loyalty, and obedience.

By exercising care, a Board member is active in the governance of the organization and is familiar with the services provided by the organization, including how these services are funded, i.e. government grants or contributions, and the costs that are incurred in delivering these services.

The duty of loyalty requires Board members to avoid any transactions in which they may benefit personally.  Transactions appearing as a having a “conflict of interest” with a Board member must be documented in the Board minutes.

A Board member also must be obedient.  This requires a Board member to help ensure that the Organization adheres to all applicable laws and regulations, including the organization’s corporate documents that outline its mission and exempt purpose.
After establishing a Board “culture”, the Organization must assemble a group of community volunteers to serve on the Board. .  Based on my experience of serving on Boards in the Rochester community and observing my clients’ Boards, this can be a difficult task.

Even though your organization may currently have a Board that is operating efficiently and effectively, attrition will occur due to term limits, relocations, or other demands on the time of these volunteers.  Consequently, the search for and identification of potential Board members should be a continuous process so that the replacement of Board members can be accelerated. 

A common question that I receive is “Where do we find new Board candidates and who should they be?”  There is no one answer to this question, as it depends on the nature of the organization, including its size, area of operation, etc.  However, here is some general guidance that would serve all organizations.

(1) Seek Professionals

Bankers, attorneys, accountants, financial planners, and other professionals have typically developed strong relationships in the community and are usually knowledgeable in economic matters. 

(2) Look for a Public Figure

Each community has “public figures” recognized for their volunteer service or other significant accomplishments. These individuals enjoy being involved in community affairs and may be interested in your organization’s mission. Even if they are not currently available for Board service, you have made it known that you are interested and have developed a relationship for future opportunities.

(3) Ask Staff and Volunteers

Discuss the need for new Board members with the organization’s employees and volunteers as they may have worked with someone who is a good Board candidate or have reason to believe someone else would be an “able and willing” participant. 
  
(4) Ask your Peers

Contact the President or Executive Director at other non-for-profit organizations.  They may have employees who understand the not-for-profit world, have the requisite management expertise, and are looking to expand their community involvement.

(5) Review Old Board Rosters

There may have been Board members who were forced to leave for a number of different reasons no longer affect their ability or desire to serve on the Board.  Contact with these individuals may regenerate that former enthusiasm or they may be able to provide potential referrals.

After your Board recruitment has been successful, your new recruit should be appropriately welcomed to the Board, both publicly and internally.  The appointment should be disclosed in the local business press and a “welcome kit” should be provided to the Board member.  This will hopefully smooth the transition for this individual, as well as convey the importance of this appointment to the community.

It is essential that every attempt be made to make new Board members feel comfortable as they begin to carry out their new responsibilities.  Hopefully, this will assist your organization in developing a Board whose members will exercise their duties of care, loyalty, and obedience.

Disclaimer: The Bonadio Group provides the information in Viewpoints for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in Viewpoints are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.