Agreeing to serve on the board of directors of a nonprofit organization is a serious undertaking accompanied by a number of legal, ethical and financial responsibilities.
Most executives understand these duties in theory, but in practice may not follow through. When their work and personal schedules get busy, they may decide to skip several board meetings in a row or may not thoroughly review reports and financial statements.
A survey conducted by Stanford University’s Graduate School of Business found that 27 percent of nonprofit directors did not have a thorough understanding of the organization’s mission, and a majority did not believe their fellow board members are experienced or engaged enough to appropriately manage the organization.
Many of the boards lacked formal governance processes, with 42 percent saying they had no audit committee and that they relied on monthly bank statements to monitor their financial situation.
Many nonprofits can get along for a long time with lax governance from the board, particularly if they have a high-performing chief executive officer or executive director. But it’s almost inevitable that such loose procedures will eventually create an opening for financial fraud and organizational mismanagement that could create serious legal trouble for the organization.
A member of the board of directors of a nonprofit organization must be prepared to fulfill the following responsibilities:
— Regularly attend board meetings
— Be informed on organizational issues and exercise oversight of organizational decisions
— Use independent judgment
— Avoid conflicts of interest
— Observe the board and organization’s confidentiality obligations
Without question, serving on a nonprofit board is an excellent way for professionals to give back to society and network among peers. But board members need to seriously consider the time and effort they must give before making a commitment.
- Patricia Farrell, Meyer, Unkovic & Scott, firstname.lastname@example.org
Business Workshop is a weekly feature from local experts offering updates on matters affecting business. To contribute, contact Business editor Teresa Lindeman at email@example.com.