1. The Keys to Board Service Success © 2010 BoardSource. Not to be distributed or reproduced without the express permission of BoardSource – www.boardsource.org

2. What is Governance? (p. 1) From Greek word “kubernan,” to steer To govern is to steer, to control, and to influence from a position of authority Governance deals with the legitimate distribution of authority throughout a system – whether a country or an organization

3. Governing Boards… Come in a variety of structures, compositions, etc., but are always where the proverbial “buck stops”: –Granted authority by state and supporters to represent public trust and ensure the organization carries out the purposes for which it was established in a responsible and accountable fashion –Where organization’s legal responsibilities rest

4. Policy vs. Management Board’s role often described as “policy- making” while staff’s is “management” However, this is too simplistic: –A policy is a “guiding principle” –Staff can establish policies

5. “Board vs. Staff Policies” Board Policies Staff Policies

6. Board Roles (p. 2) 1.Establish direction 2.Ensure resources 3.Provide oversight

7. Primary Board Responsibilities 1. Establish Strategic Direction Determine mission and purpose Ensure effective planning 2. Ensure the Necessary Resources Ensure adequate financial resources Select the chief executive Build a competent board Enhance the organization’s public standing 3. Provide Oversight Monitor and strengthen programs and services Protect assets and provide financial oversight Ensure legal and ethical integrity Support and evaluate the chief executive

8. Board Role 1: Establish Strategic Direction Determine mission and purpose –What is our mission and vision? Ensure effective planning –Philosophical and strategic (long-term) planning –Not necessarily tactical (annual) planning –Monitor the plan, ensure impact –Engage in strategic thinking

9. Board Role 2: Ensure the Necessary Resources Ensure adequate financial resources Select the executive director Build a competent board Enhance the organization’s public standing

10. Adequate Financial Resources Ensure adequate resources for the organization to remain financially viable Establish policies related to income generation Consider the organization’s funding sources –Grants –Fundraising –Other

11. Adequate Financial Resources (cont’d) Determine how board members will participate –Identify donors, share networks, solicit donations, thank donors –Make a personal contribution

12. Adequate Financial Resources (cont’d) Fundraising is #1 area boards say they need help Common for boards to fear fundraising –Few come to board service with resource development skills –Some are even surprised to find out that resource development is part of being a board member No Money = No Mission Mission is the key to successful fundraising

13. Select the Executive Director Hire the executive director Ensure the organization has the right leader Develop an executive director succession plan

14. Build a Competent Board Identify Cultivate Recruit Orient Involve Educate Evaluate Rotate Celebrate Source: Berit M. Lakey, The Board Building Cycle: Nine Steps to Finding, Recruiting, and Engaging Nonprofit Board Members, Second Edition (BoardSource, 2007).

15. Board Structure – Trends (p. 3) Movement away from a “one-size-fits- all” view of nonprofit governance This does not mean that “anything goes”

16. Board Size Size: Whatever is needed to facilitate both active participation and effective decision making Average board size = 16 voting members Generally want the board to be big enough to incorporate a diversity of perspectives and small enough to facilitate both active participation and effective decision making

17. Board Size (cont’d) Sweet Spot = 15 to 22 More effective More policies in place Attendance matters Better governance practices

18. Boards and Diversity Diverse boards are in a better position to remain relevant, effective, and grounded in the needs of the community Diverse boards can prevent group think Diverse boards are more likely to attract diverse donors and volunteers

19. Enhance the Organization’s Public Standing An accurate image and positive reputation will influence organizational resources Success of most organizations depends on external relations Board needs to ascertain that stakeholders are kept informed

20. Board Role 3: Provide Oversight Monitor and strengthen programs and services Protect assets and provide financial oversight –Approve the budget –Review monthly or quarterly financial statements –Ensure adequate financial controls and that financial reports are in accordance with acceptable accounting practices –Approve and review reserve and investment policies –Oversee the audit –Review the Form 990 before it is filed (US-specific)

21. Board Role 3: Provide Oversight (cont’d) Support and evaluate the executive director annually –Include the full board in the evaluation –Ensure the evaluation is in writing Ensure legal and ethical integrity –Ensure important policies are in place such as Conflicts of interest (with annual disclosure) Code of ethics Whistleblower Document retention and destruction

22. IRS 990 (p. 4) 990-PF: As of now there have been no changes to the 990 for private foundations Form 990--Revised for the 2008 tax year Why revised (according to the IRS)? 1.Enhancing transparency to provide the IRS and the public with a realistic picture of the organization 2.Promoting compliance by accurately reflecting the organization’s operations so the IRS may efficiently assess the risk of noncompliance; and 3.Minimizing the burden on filing organizations

23. Other Important Changes to the 990 Governance Related Questions: –Does the organization have independent directors? –Does the organization have a conflict-of-interest policy? –Does the organization have written documentation and records of governing body meetings? –Does the organization have a written document retention and destruction policy? Organizational Policy Questions: –Does the organization have a whistleblower policy? –Does the organization have a policy regarding the compensation of key employees?

24. Other Important Changes to the 990 (cont’d) Compensation –Expanded focus on alternative compensation –The listing of compensation for all current and former officers, directors, trustees, as well as key employees are now combined in one list –The “key employee” definition has been broadened and includes any employee who receives more than $150,000 or who “manages a discrete segment or activity of the organization that represents 5% or more of the activities, assets, income or expenses of the organization” –The organization must report on former “key employees” or officers who received over $100,000 in reportable compensation

25. Chief Executive Compensation Boards should be familiar with safe harbor measures and intermediate sanctions Rely on appropriate, objective comparability data when establishing chief executive compensation Chief executive compensation should be approved by disinterested board members Decisions regarding chief executive pay should be adequately documented

26. SUMMARY: The Board as a Collective Body (p. 5) Establishing Strategic Direction –Planning Ensuring the Necessary Resources –Human Resources –Financial Stability –Community Relations Providing Oversight –Organizational Operations –Financial Management

27. Importance of Board-Executive Director Relationship “Exceptional boards govern in constructive partnership with the chief executive, recognizing that the effectiveness of the board and the chief executive are interdependent.” - BoardSource’s The Source: Twelve Principles of Governance That Power Exceptional Boards

28. Ensure CEO & Board Engagement Board Engagement CEO → Is Displacing Board GOVERNANCE AS OBSERVATION CEO → Is In Constructive Partnership with Board GOVERNANCE AS LEADERSHIP CEO → Is Going Through the Motions with Board GOVERNANCE AS ATTENDANCE CEO → Is Displaced by Board GOVERNANCE AS MICROMANGEMENT CEO Engagement Source: Richard Chair, et.al, “Governance as Leadership”

29. Characteristics of Effective Board - Executive Director Partnerships 1.Shared understanding of mission and vision 2.Clear roles and responsibilities 3.Open and honest communication 4.Mutual respect 5.Two-way evaluation

30. Shared Understanding of Mission and Vision

32. Clear Roles and Responsibilities Generally, the board governs the organization Sets organizational direction, ensures the necessary resources, and provides oversight Retains ultimate responsibility and power Is accountable to the public and to the organization’s constituency Hires/fires chief executive Generally, the staff conducts operations There are many exceptions, and this can vary by organization

33. What Should a Board Expect from its Executive Director? Strategic, accurate, and relevant information that will assist the board in its governance roles Proposals for policy changes Identification of issues that need board attention No surprises

34. What Should an Executive Director Expect from the Board? Timely and clear decisions with one voice Directors who keep informed and prepared –Read circulated materials and ask questions to ensure accurate understanding Mutual Accountability –Up-to-date job description –Regular performance reviews and fair salary No micro-managing Appreciation

35. Board Chair - Chief Executive Communication When/how does communication most often fail? When/how is communication most often effective? What might be helpful for the other party to know in order to promote effective communication?

36. Final Two Characteristics of Effective Board-Staff Partnerships Mutual Respect Two-Way Evaluation

37. Legal Hat = The 3 “D’s” –Duty of Care –Duty of Loyalty –Duty of Obedience Ambassador Hat for the Organization Volunteer Hat for the Organization Three “Hats” of Individual Board Member (p. 7)

38. Governance: Legal Obligations Duty of Care –Using your best judgment –Actively participating, paying attention –Asking pertinent questions Duty of Loyalty –Avoiding conflicts of interest –Putting aside personal and professional interests Duty of Obedience –Staying true to the organization’s mission –Obeying the law, both public and organizational

39. Ambassador for the Organization Secondary importance to governance But, strongly recommended since: –Board members are in a better position to do this than others (more authority / clout) –Organizational sustainability is critical Examples might include giving presentations about the cause / organization, educating elected officials, and writing newspaper editorials

40. Volunteer for the Organization Least important of board member responsibilities But, can help: –Board members understand the organization –Build a positive organizational culture Board members are merely volunteers in this role, NOT in charge, NOT possessing higher authority, NOT acting on behalf of the board

41. SUMMARY: Roles and Responsibilities of Individual Board Members Members of the governing body: duty of care, duty of loyalty, and duty of obedience –Having ultimate responsibility for the organization –Only during board meetings when developing policy and acting collectively Ambassadors for the organization –Represent organization externally Volunteers for the organization –When participating in all other organizational activities, NO special privileges

42. Board Member Responsibilities (p. 8) Actively Participate –Provide time, talent, and treasure –Attend meetings/events –Serve on committees, carry out assignments –Help raise money Be Informed –About mission, programs –Prepare for meetings –Stay current with related issues and organizations –Ask questions

43. Board Member Responsibilities (cont’d) Promote the Organization –Spread the word –Recruit board members and other volunteers Safeguard Ethics and Values –Follow conflict-of-interest and confidentiality policies –Refrain from asking special favors from staff

44. Roles and Responsibilities: Important Tools Board job description Individual board member agreement

45. Your Turn  Questions  Issues  Concerns  Observations

46. “A good board is a victory, not a gift.” ~ Cyril O. Houle Governing Boards

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