The Governing Board's Functional Responsibilities

1.) Appoint, Support, and Evaluate the CEO.
2.) Establish clear institutional mission and purpose.
3.) Approve the organizations programs.
4.) Ensure sound fiscal management and the organizations finical stability.
5.) Establish standards for organizational performance and hold the organization accountable.

give-or-get policy

Boards that hold ultimate responsibility for ensuring that the organization serves its mission and for the overall welfare of the organization itself.

Four Different Names for Governing Boards

1. Board Of Directors
2. Board of Trustees
3. Board of Governors
4. Governing Council

Advisory Boards

Boards that lack legal responsibility for governing their organizations.

Work with the organization or board of directors, and provide advice, resources, and support.

Often confused with Board of Directors.

Three Types of Boards

1.) Elected Boards
2.) Self Perpetuating Boards
3.) Appointed and Hybrid Boards

Depending on the size and profit of a nonprofit, some boards may be asked to assume _________?

Staff Roles
(ex. Volunteer Management)

Elected Boards

Boards elected by the membership of the organization.

Self-Perpetuating Boards

1.) New members are selected by the existing members of the board who recruit them according to criteria established by the board
2.) 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
3.) 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
4.) Board needs to maintain diversity to guard against becoming homogeneous

Appointed Boards 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

President | Chair

The name given to the board member who HEADS the board

Director | Executive Director | CEO

The paid staff person who manages the organization

Pro Forma Vote

...

Most common Governing Board using in member-serving and advocacy organizations.

Elected Boards

Cons of Elected Boards

1.) Governing board elected by the membership of the organization; can lead to a "popularity contest"
2.) Membership terms of an elected board may be brief/turnover
3.) Skills of board members may be uneven
4.) CEO must have a high tolerance for uncertainty

Pros of Elected Boards

Board members are less likely to become stale or homogeneous in their membership since they only serve for a short time.

Sibley Hospital Case (1974) 3 Responsibilities

- 1974

- Duty of Care
- Duty of Loyalty
- Duty of Obedience

Duty of Care

Paying attention and exercising due diligence in monitoring the organizations finances and supervising the actions of its management

Duty of Loyalty

Members of the board put the interest of the organization above their own personal financial interests or that of another organizations with which they may also have a formal relationship or conflict of interest.

Duty of Obedience

Requires that the board make sure the organization is complying with the law and, in addition, that any decisions or actions taken are consistent with the organizations mission and governing documents, including its charter.

Conflict of interest

Any circumstance or situation where a individuals personal interests might benefit from his or her official actions or influence.

Are conflict of interest illegal?

No, but formal policies should be put into place to prevent such issues from arising.

What is one issue in determining which owners the nonprofit is accountable to?

It is sometimes hard to determine what owners the organization is accountable to. This is an issue because you must look at the scope of whom the organizations activities effect. For example, a professional association might set standards for practice and certify members of the association. In this instance the organization must decide if it is to be accountable to the members of the organization, and possibly the individuals whom would be patients and subject to these practices.

The Sibley Hospital Case

Took place in 1974, when parents of children who had been patients at the hospital alleged that members of the board had mismanaged the hospitals assets and had placed hospital funds in accounts at banks in which they had personal financial interest.

Intermediate Sanctions

Financial penalties to punish individuals who engage in or permit improper transactions.

Why were intermediate sanctions needed?

The only sanction the government used to have towards individuals who took part in corrupt practices, were that of taking away the nonprofits tax exempt status. Penalized offenders rather then

Excess Benefit Transaction

One in which a person's level or type of compensation is deemed to be in excess of the value of the persons services.

The Sibley Hospital case is a (Federal/State) Law?

Federal

Intermediate Sanctions were created by who, and under what legislation?

Congress created intermediate sanctions under the Taxpayer Bill of Rights #2

Who is subject to intermediate sanctions?

Those persons who are in a position to exercise substantial influence over the affairs of the nonprofit organization, and their family members.

What and whom are disqualified persons?

Any individual who can exercise substantial influence over the affairs of an non-profit organization.

- Board Members
- Paid Staff
- Members
- Donors
- Spouse/Sibling

Sarbanes-Oxley Act (2002)

Federal law that set new standards on all US public boards, and their management and public accounting firms. Top management must individually certify the accuracy of financial information or face a penalty.W

Two Provisions That Directly Effect Nonprofit Organizations

- Criminalized The Destruction of Documents

- Protected Whistle-blowers

IRS Form 99

1.) Reporting form that certain tax-exempt organizations must file. Previously only a financial report, was later changed into a finance and governance report.
2.) Includes mission programs governance finances
3.) If organization is engaged in activities that is substantially unrelated to its mission, then it can be asses a UBIT (Unrelated Business Income Tax)

Carvers Policy Governance Model

1.) Developed by John Carver
2.) Need to establish and enforce a clear line between the board's responsibility for policy making and the executive's responsibility for implementat

4 Areas Boards devlop and maintain policies

1.) Ends to be achieved
2.) Means to an end
3.) Board-staff relationship
4.) Process of Governance

Ends To Be Achieved

Ends policy statements describe what the organization is to achieve and could be called results, impacts, goals, or outcomes, as well as ends. Each title should have its own connotation. The broadest ends statement would be the organizations mission. More specific ends policies might address more detailed goals.

Means To An End

Means statements are expressed in terms of executive/CEO limitations. These are boundaries that the CEO may not cross in pursing the ends established by the board. ex: the CEO may not violate the law. Basically, the board can say what the CEO may not do, the CEO is then granted maximum flexibility in achieving those means.

Board-Staff Relationship

Policy statements that clearly delineate the responsibilities of the board and CEO, defining what decisions are delegated to the CEO and which ones are retained by the board. This category also includes specific criteria for evaluating and compensating the CEO.

Process of Governance

The policy where the boards addresses its own role and operation, clarifying which owners it represents and defining its own job process and products. EX: The procedure in which board members are elected.

Governance as Leadership Model | Chait, Ryan, and Taylor

Believes that the board and ceo should work together and move between the three modes, fusion in thinking not division of labor.

Micromanages

...

Microgoverns

...

Fiduciary Mode

Bedrock of Governance | Legal Responsibilities
1.) Stewardess of tangible assets
2.) Faithfulness to mission,
3.) Performance accountability
4.) Obedience to law

Strategic Mode

Address matters of long-term directions and goals, and create a true strategic partnership with management.

Generative Mode

Out-of-the box thinking and planning, and understanding things in new ways.

Governance as Leadership

Carver | Divided into two categories of policy and implementation, where the board creates policy, so that the CEO can implement. Division of workforce
Chait, Ryan, and Taylor | Three sided table, board and CEO sit together, and move around to other sides depending on the buisnes..