Governance
The board of directors is the cornerstone of a nonprofit’s success. Here are links to information on selection of board members, drafting bylaws, running board committees, board retreats, and other important board issues.
V. Board of Directors
A. Principle - Board Responsibilities
Each charitable nonprofit must have a board. Except as otherwise provided (by law and the government document), all corporate powers shall be exercised by or under the authority of, and the affairs of the charitable nonprofit managed under the direction of its board. (See Iowa Code section 504.801 for nonprofit corporations, Iowa Code section 633.A4101 et seq. for trusts). The board should be active.
Practices
- A board of directors’ primary responsibilities are to determine the organization’s mission and its policies, to set the organization’s overall program for the year and engage in long range planning, establish the fiscal policy, provide adqeuate resources for the activities of the organization; select, evaluate and if necessary, terminate the appointment of the chief executive, and develop and maintain communication links to its constituencies and the community.
- The board should avoid involvement in day-to-day operations of the charitable nonprofit, although it is recognized that for smaller nonprofits, with no paid staff, this is not possible.
- The board sets organizational policies and monitors compliance with them. In making policies for a charitable nonprofit, a board is setting objectives against which to measure the organization. Setting and monitoring policy protect directors from liability where they act in good faith and with due care.
The Governing Board for Iowa Charitable Nonprofits by Willard Boyd.
Doing Good Better by Edgar Stoesz.
Frequently Asked Questions about Governance
The fact that most board members are not compensated and serve out of a sense of civic duty does not absolve them from accountability. Board members have an obligation to always act responsibly and with the organization’s best interests in mind. Board members are held to certain standards of conduct most commonly known as the following:
- Duty of Care--Board members have an obligation to perform their responsibilities “in good faith and with a certain degree of diligence, attention, care, and skill.” This is not to say, however, that directors must always make correct decisions. As long the director fulfills his or her duty of care, a court will not review the action, even if the action is harmful to the organization.
- Duty of Loyalty--Board members have an obligation to act in the organization’s best interests. Included in this obligation is a prohibition against using one’s position as a director to improperly obtain a personal benefit. The director is to place the interests of the organization above his or her own interests.
- Duty of Obedience--Board members must remain true to the organization’s mission. They must carry out the purpose of the organization as it is expressed in the articles of incorporation or the certificate of incorporation. If the directors desire to depart from the purpose in a substantial way, the articles and bylaws must be amended.
For more, see The Principles and Practices, section V.F.
The term "political subdivision" denotes any division of any state or local governmental unit which is a municipal corporation or which has been delegated the right to exercise part of the sovereign power of the unit.
Find a detailed discussion of "political subdivision" and related issues here.
The board of directors of your organization can decide what outcomes to create. To do this, they must first identify the intended beneficiaries of your organization's programs and what services your programs can provide to them. The members of the board should ask themselves, "what do we want to be true of our program's participants during and after the program?” The answers to this question will be the outcomes that you want. It is helpful to put the answers into written statements with your program's participants as the subjects of the statements. An example of an outcome statement would be, "adults completing [our] literacy program are able to read at the sixth-grade level."
Learn more: United Way Outcome Measurement Resource Network
Minutes are more than just a convenient record of what was discussed at the last meeting—they are legal documents. Courts will hold directors to certain standards of reasonableness, so it is important that enough information is provided in the minutes to indicate that the board came to its decisions reasonably. The secretary of the board is usually responsible for taking minutes during meetings. Minutes from the previous meeting should be approved at the next meeting, and copies should be filed and kept with the governing documents.
If not diligently kept on track, board meetings may be boring and even worse, ineffective. Some common reasons for ineffective meetings are: 1) board members did not have sufficient time to review materials before the meeting; 2) poor participation at the meetings; 3) time is not properly managed at the meeting. A well-written agenda that is distributed to members two to three weeks before the meeting can go a long way to remedy these problems. Rather than simply listing committee reports on the agenda, the reports should be incorporated into the context of the main discussion. The agenda should be organized by topic or project with supporting reports included at the appropriate time. This format is sometimes referred to as a strategic agenda. It is important to stay on time. If it appears that a discussion will exceed the allotted meeting time, then fifteen or twenty minutes before the scheduled end of the meeting the chair should have the group decide if it wants to stay later. If staying later is not an option, then the current discussion should be ended in favor of any issues that must be resolved in that particular meeting.
Learn more: The Free Management Library: Sample Board of Directors Meeting Agenda
The board of directors serves the organization; it does not own it. The organization is really owned by those who have a stake in its operation: employees, members, donors, beneficiaries, and so on. Directors serve as proxies for the true owners. Thus, the board is truly a collection of stewards in whom the rights and duties of ownership have been vested and the authority to make strategic decisions has been given.