Last week, we covered some basic roles and responsibilities of board members. Since the primary role (as defined by the IRS) of a nonprofit board of directors is governance, this week, we shall focus on that role.
The very word governance is derived from a Greek word that means, “to steer.” Think for a minute about a board of directors; steering the organization is exactly what they should be doing. They are guiding the direction of the organization, not necessarily making movement happen, but instead just setting the direction.
In this role, the board is responsible for setting the structure, policies and plans that guide the board and staff as they work to fulfill the mission of the organization. However, many boards are ineffective in this role. One of the primary reasons boards are ineffective is because they have never taken responsibility for governing themselves….in other words, steering their own operations.
Board members take responsibility for their own operations when they—-
- Actively recruit and select board members
- Provide training and orientation for new board members
- Contribute to the work of the organization at a level that is meaningfully significant
- Develop operating policies and procedures to ensure they are operating efficiently
One of the most important roles a board has is its fiduciary duty. The fiduciary duty requires that board members put all other interests aside and make decisions in the best interest of the organization. Remember, board members are keepers of the public’s trust; as part of that trust, the public assumes that all decisions will be made looking at what is best for the organization and those it serves.
Specifically, fiduciary duties are spelled out in three broad areas:
Duty of Care: The duty of care says that board members will make decisions that any prudent person would make in the same position, under the same circumstances and with the same information available. The duty of care requires that the board members will take reasonable care when making decisions recognizing that they are acting as a steward (manager) of the organization and its resources.
Duty of Loyalty: The duty of loyalty is all about faithfulness to the organization. Board members should give their undivided loyalty to the organization when making decisions. This means that board members must avoid conflicts of interest, never making decisions that would result in personal gain at the expense of the organization.
Duty of Obedience: The duty of obedience requires that board members are faithful to the organization’s mission. They ensure that the organization is meeting all state, federal and local laws by submitting all required documents, reports, etc. to the proper authorities.
It is recognized that for board members to carry out these duties, they will rely heavily on information from key staff leaders. For this reason, among others, it is essential that the board have a positive working relationship with the key staff. Further, it is also essential that board members attend meetings and read minutes and reports sent to them. This is the only way that they will be prepared to make decisions prudently in the best interests of the organization.
Perhaps your board of directors is struggling. It is our belief that boards struggle when they do not understand their roles and responsibilities. Start by sharing this newsletter series with the board. Still have questions? We can customize a training for your board to help them operate efficiently and work toward the God-sized vision being pursued.