Are you in the dark about what your board of directors is supposed to do? You're not alone. Nonprofits’ board responsibilities are often poorly understood and/or badly communicated. Board duties fall into two categories: legal responsibilities and “moral” duties.
Legal Responsibilities of the Board of Directors
A nonprofit is incorporated in the state where it is headquartered and is governed by laws of that state. Many states have laws governing the broad functions of the board of directors of nonprofits and the conduct of board members.
The board of directors of a nonprofit is charged with overseeing the nonprofit organization's operations to make sure that the staff and volunteers act legally and ethically. Some key functions of a board of directors are:
- To make sure that the organization follows the law.
- To approve all key contracts.
- To hire and supervise the executive director/president.
- Make sure the organization remains financially solvent by evaluating financial policies, approving budgets, and reviewing financial reports.
- States often use the following principles to guide the conduct of the nonprofit organizations’ boards:
Duty of Care:
A board member must be active and prudent in organizational planning and decision making. Board members must exercise reasonable care when they make a decision for the organization.
Duty of Loyalty:
A board member must never use information gained through his/her position on the board of directors for personal gain; and must always act in the best interests of the organization. Board members must avoid conflicts of interest or the appearance of conflicts.
Duty of Obedience:
A board member must be faithfully committed to the organization's mission. He or she cannot act in a way that is inconsistent with the organization's goals. The donors trust the board to manage donated funds to fulfill the organization's mission.
To strike the delicate balance between the needs of a nonprofit organization and the board’s conduct, it’s incumbent on the executive director or the chairman of the board to make sure that each and every member of the board realize the seriousness of their duties when they agree to serve on the board and commit to the cause. Some organizations have formalized this process and have a ready list of board responsibilities for the incoming board members. This is best if it is coupled with formal training at which the new directors learn about the organization’s history, mission, bylaws, activities, and more. Depending on the size and nature of a nonprofit’s operations, a new director may find it very beneficial to have a tour of facilities, meeting staff and observing a program in action.
Areas that could particularly benefit from clarification are:
- What a nonprofit organization is
- how it is different from a for-profit corporation
- the role of staff versus board
- potential conflicts of interest
- and/or how nonprofits get their funding
Match Board Members to Your Organization's Needs
Your board can be a powerful source of pro bono expertise in areas that you may need expertise –but can’t afford professional help. For instance, your board members could have skills in:
- public relations
- legal and human resources
- social services, education, religion, etc.
Put Fundraising Front and Center
Some nonprofits are reluctant to mention fundraising to their board members. Yet, helping to raise funds has everything to do with making sure the organization remains financially sound. Finances are not just about overseeing the budget. It is about understanding how the organization is funded, how fundraising works and taking an active part in it.
So, do consider the fundraising potential of every board member before inviting them to join. That doesn't mean that every board member should be wealthy. However, they are expected to set an example by donating to the organization; and, more importantly, by soliciting other contributions. Every board member should participate in giving in the way that they can; but more notably, they should all act as catalysts in this vital function.
Many nonprofits require a donation to the organization from their board members. Although this should not be critical in deciding whether or not to invite a prospect to join the board. Far more important is the commitment to the organization’s cause.
In the end, board members should be comfortable with fundraising. In fact, the most successful nonprofits have active and engaged boards who take an active part in the organization’s fundraising campaigns. So, when a new board member is recruited, fundraising duties of the board should be made very clear.
Make a list of ways for the board to help with fundraising. Board members should be able to identify and reach out to potential major donors. If auctions are part of your fundraising exercise, ask that board members solicit items from businesses for the auction.
In summary, keep board members active. No one should get a free pass. Just showing up for board meetings is not enough!
Your Great Event is the leading event planning company with a focus on nonprofit organizations’ needs. We specialize in cause marketing, fundraising events, auctions and other special events in support of our client’s missions.