Serving on a Board of Directors—What are the Expectations and Responsibilities?
People are often told, “You should join our Board of Directors—don’t worry, you won’t have to do anything if you agree to be on my board.” It is a LIE! Simply not true. Being a part of a Board of Directors is a LOT of work and a lot of responsibility. There is an entire body of literature about board memberships and responsibilities but I like to summarize down to a handful that I have been teaching for more than 35 years. . . I have always called these the “dirty dozen” Ideas and Suggestions of Board Guidance.
1. The Board governs while the staff manages. . . Many people join a Board and think they are now the “boss” of things going on. That is not true at all! The only official capacity of the relationship between Board Members and staff is through the executive director. You join a Board and become one part of a multiple-part body that gives guidance to and hires an Executive Director to manage the policies of the Board.
Leadership: Volunteer Board leaders are responsible for the direction of the organization. The Board governs, develops policy, develops a budget and sets the course for the future among other things. The Board maintains a focus on the mission and strategic goals of the larger organization—then, avoids micro-managing the organization and staff. The Board has four primary functions:
--govern the organization by guiding and directing decisions through the Executive Director.
--policy--consider and develop policy and position as it relates to the organization accomplishing its’ purposes.
--vision—future focus and guidance toward major accomplishments over time in the future.
--fiduciary—develop a budget to accomplish its’ purposes and assure staff follow it.
Management: Paid and/or designated staff and/or contractors are responsible for the administration of the organization. Staff act as partners to the board advancing goals and strategies, while taking care of the daily administrative needs unique to their nonprofit organization.
2.Specific Primary Board Responsibilities: The Board should meet a minimum of twice each year—preferably a minimum of 6 times or as described in Bylaws.
1. Determine and advance the organization’s mission and purposes consistent with Articles and Bylaws.
2. Select the paid executive or Executive Director (not Board nor staff) as well as a CPA and/or attorney if needed.
3. Support the paid executive or Executive Director and assess the performance regularly—usually measured against the strategic plan and/or community impact value determined by goals and objectives assigned.
4. Ensure effective organizational planning and development.
5. Ensure adequate resources (funds, time, volunteers, staff, technology, etc.) are available to the executive to accomplish their assignments from the Board.
6. Provide resources necessary and financial oversight and accountability to accomplish purposes.
7. Determine, monitor and enhance programs and services.
8. Positively promote the organization’s image and advance it in the community.
9. Ensure legal and ethical integrity and maintain accountability.
10. Recruit and orient new Board Members and assess Board performance regularly.
3.Principles and Overarching Concepts as to Minimal Care and Guidance of Wisdom:
a) Minimal Care requires leaders to use reasonable care and good judgement in making their decisions on behalf of the interests of the organization. The “duty of care” of an organization’s Board Member is simple yet justified.
b) Duty of Loyalty requires leaders to be faithful to the organization avoiding conflicts of interest and follow the conflict of interest policies in the Bylaws and on their own. A Board Member should always speak positively of the organization and give a united-front of unity even when there are periodic struggles.
c) Duty of Obedience requires leaders to comply with governing documents (Bylaws, Articles of Incorporation, etc.). Most people “don’t know what they don’t know” so each Board Member should receive a Notebook od essential Board Tools that contains basic information and most recent copies of items essential to the organization. These things include:
--Copies of the original Articles of Incorporation filed at the State level and should be renewed EVERY year.
--Statements of Mission, Vision and Purpose.
--Copy of the most recent Bylaws (these should be revisited and amended as needed every 3 years).
--Policy Manual or Guidelines (modified as needed).
--Strategic Plan (these should be revisited every other year by the Board).
--Financial Statement and Budget (Budget and expenditures should be examined and voted on at every Board meeting).
--Minutes of the Meetings (should be read and voted on for previous meeting every meeting).
--Organizational Charts and Reports (modified as needed).
--IRS Forms (should be examined and voted on each year). Should file something with the IRS annually.
--Frequently Asked Questions (should be addressed and posted ongoing).
--Board Members should treat ALL Information with confidentiality and privacy as much as is possible.
d) Board Members should review all documents and policies annually, bi-annually or tri-annually as needed on a rotating basis and make amendments, corrections, additions or adjustments when necessary.
4.Regular Meeting Rules, Order and Concepts:
Prepared Agenda. The Chief Operating or Executive Director should prepare an Agenda that ensures that important business is covered and discussions are on topic and stay on track.
--Motions. Motions are proposals for action and/or approval and should always begin with, “I move that we. . .” Meeting minutes should reflect which Board Member made the motion and what the motion was.
--A Second. Seconds are required on all motions and should be reflected in the minutes, too. Seconds are required for motion to be discussed or discarded appropriately.
--Amendments may be made to most motions if they improve the intent or clarify the original motion.
--Tabling. Tabling a motion, after motioned, seconded and passed appropriately, lays the motion aside.
--Calling the question refers to ending the discussion and voting on the motion.
--Voting is the official action after discussion to adopt, amend, kill or table the motion.
--Minutes. Minutes are the recording of the meeting and protect the organization by recording the time, location of the meeting, participants, and the outcome of all voting and other motions.
--Quorum is the number of directors required to be present to conduct the business affairs of the organization.
5.Use of Committees. Remember, Committees makes recommendations and then, Board approves—staff and volunteers implement. Organizations are streamlining and eliminating all but essential committees and aligning committee work with strategic goals.
--Standing committees are usually identified in the Bylaws or organizational papers and are appointed annually for ongoing committee work.
--Ad Hoc committees are generally formed for specific or immediate needs and disbanded upon completion of the work, the event or whatever the focus was. All committee work should positively support the organization, staff and other Board Members.
It is becoming more and more common for nonprofits to use ad-hoc committees focused on events, banquets, golf tournaments, etc.
6. High Performing Boards are mission-driven and other-focused.
--they are accountable, follow up and follow through on commitments.
--they uphold governing documents and expectations.
--they determine to be successful and envision success.
--they work as a team. No individual has an agenda more important than anyone else NOR for the whole.
--they value their other Board Members and the differences each share.
--they are not condescending towards each other, value each other and seek harmony through differences.
--they value and build relationships and respect diversity.
--they focus on outcomes and the community impact the organization can have on the target population.
7. Some common-sense statements about healthy, high-performing Board Members. . .
--They respect the Chair/President and their leadership—whomever is leading the meetings.
--Respect and follow the Agenda.
--Respect and follow the rules of order.
--Be kind and respectful. Don’t roll your eyes at others or other disrespectful behavior.
--They prepare for meetings. They read and seek to understand what the concepts and strategies are and how it impacts other people in the community—staff, clients and others.
--Bring your calendar for reference and planning.
--Be punctual, concise, and thorough--start and end on time but address major points.
--KNOW the mission and goals and engage in accomplishing the larger picture efforts.
--Listen more than you speak and see to understand others and their opinions/positions.
--Leave all personal, political and religious agendas at the door.
--Respect and follow confidentiality.
--Realize that individual Board Members do NOT speak for the organization without authority.
--Support the Board and the other Members. Don’t bad mouth any action or person. Note dissenting votes in the minutes BUT not outside the meeting.
8.Other related definitions. . .
--A strategic plan focuses the Board on mission and goals for 3 to 5 years. It serves as a roadmap. Great Board Members can think beyond themselves and their terms of services and outside of their specific area of expertise.
--An environmental scan is a review of internal and external influences (social, financial, community, etc.) on the organization as well as strengths, weaknesses, opportunities and threats.
--Mission is a statement about what the organization is, whom it serves, services provided and what it does every day. Short—35 to 40 words or less with PR value.
--Vision is the inspiring, long-term desired outcome that you are shooting for but will likely not accomplish.
--Values of the organization—Guiding principles of the Board and staff.
--Goals and Objectives are the broader actions or competencies to advance the mission of the organization. Generally, 3 to 5 (never more than 7) so as to not exhaust resources, volunteers and staff.
--Strategies—overarching ways to advance the goals of the organization, creative efforts to achieve the mission and serve the stakeholders and members in the larger picture.
--Action Steps—smaller points of focus and action that align within the strategies of what you are attempting to accomplish. The actions, assignments, deadlines, outcomes, etc. When complete, these are also known as an “operating plan” or “business plan.”
9. Board Members should constantly be learning and helping their organization! They should make themselves available to help the executive officer and staff as needed.
10. Good Boards always look for ways to replicate themselves into other communities and be willing and able to “graft” into other communities and be replicated to serve.
11.Insurance and Volunteer Immunity:
State and Federal governments afford certain protection to Volunteer leaders. Know and understand “Good Samaritan” laws for your state. While the volunteer may have some protection, the organization could still be open to and liable for legal suits and/or claims. There are multiple avenues to insurance coverages and ways to add additional coverage and protection for volunteers, people receiving services and the organization. For example:
--Directors and Officers Liability Insurance: may cover legal defense, employment, copyright and antitrust claims.
--General Liability insurance covers property damages and injuries relating to the organization.
--Fidelity Bond covers losses resulting from fraudulent or dishonest acts committed by an employee or Board Member.
--Meeting Cancellation covers the loss of revenue due to a cancellation, curtailment, postponement or other because of weather, strikes, etc.
I have found American Family Insurance to be an affordable carrier for most policies in their most simple forms so talk to an agent near you. Kim Ream, American Family Insurance in Warrensburg, Missouri has always helped me with a couple of policies including an “Honesty Policy” and Board Member insurance.
12.What you can expect--Scrutiny of Nonprofits from the IRS:
Every nonprofit must register at the Secretary of State’s office in the State in which they are incorporated. This includes updating the list of Board of Directors and is usually required to be done between May and August.
At the Federal level, in response to corporate scandals and the misuse of not-for-profit statuses, the government has increased scrutiny of Board of Directors on nonprofits. Sarbanes Oxley was adopted by Congress in 2002 and in 2008, the Sarbanes Oxley principles were applied to nonprofit organizations. Boards are expected to maintain their accountability, independence and transparency while governing. Every nonprofit—regardless of size must file something for the tax requirement after year end. If a nonprofit has brought in or spent under a certain amount of money (currently $20,000), they can file a 990-EZ which is simple information filed by a postcard. Over that, it depends upon several variable whether you file a 990 OR something else. Although most of the reports are financial, they include policy questions in the IRS Form 990, too. They include items such as:
--List of staff and list of Board Members?
--Number of Volunteers and approximate number of hours from those?
--Income and Expenses by various categories and major receivers?
--Several other variables.
In addition, the Federal interests will likely also be including the following:
--Audit, audit committee and general Board financial oversight?
--Compensation—salary and benefits, work condition, etc.?
--Document destruction and maintenance?
--Conflict of interest and exclusion of services?
--Public records and appropriate conducting of regular meetings?