Nonprofits Cautioned to Select Board Members Carefully
Expert Urges Jindal School Conference Attendees to Focus on Competence and Skills
For homeless shelters, food banks and other charities to thrive, the nonprofit boards that serve them must be effective.
The prescription for improving corporate governance in the past has focused on the structure of boards – their size, composition and independence. The emphasis instead should be on recruiting directors who are competent, and who have the right skill and behavior, an expert recently told a conference for nonprofit board members at UT Dallas.
Dr. Richard Leblanc
“The requirements to be a director of a publicly traded company are minimal,” said Dr. Richard Leblanc, author and professor of law, governance and ethics at York University in Toronto. “You have to be over 18, not bankrupt and not insane. … So how do we move from not bankrupt, not found insane and over 18 to a more rigorous expectation?”
Co-author of Inside the Boardroom: How Boards Really Work and the Coming Revolution in Corporate Governance, Leblanc shared insights from his research and hundreds of interviews he has conducted with sitting board members at “How to Create Effective Nonprofit Boards: The Necessity of Governance and Leadership.” The conference was held by the Naveen Jindal School of Management and hosted by the Institute for Excellence in Corporate Governance (IECG).
Without proper governance, donors are less likely to give, directors are less inclined to serve and the mission or the organization is less likely to be achieved, Leblanc said.
“The assumption for not-for-profit boards has been since they’re not paid as directors, governance is less important, and that couldn’t be further from the truth,”Leblance said. “As we’ve seen with Penn State and others, if your house is not in order governance-wise because of the lack of resources, people are stretched and it’s a volunteer position, you’re going to have problems,” Leblanc said.
To help ensure there are no problems down the road, Leblanc suggests three elements for building an effective nonprofit board. They are: director recruitment, development and assessment.
“When you look at award-winning boards in a not-for-profit and for-profit context and you look at the boards that have experienced problems, the award-winning boards really focus a lot of time, energy and effort on the behaviors, the board membership and the board process and particularly the recruitment and succession planning of individual directors,” Leblanc said.
Leblanc suggested that boards adopt formalized board roles, which includes charters for the board, committees, the chair, executive director and committee chairs. When he asked for a show of hands of the 160 nonprofit directors in the room who had formalized descriptions, very few hands went up.
“This gets everybody on the same page and establishes standards and the right tone at the top,” he said.
Boards should also address vision, mission, strategy and operational plans. Program delivery, risk identification and management, finances, government reporting, ethics, integrity and communication and accountability to members and stakeholders should all bekey, he said.
Leblanc also suggests that board adopt a succession planning process. “Consider graduate terms of two years and three renewals, or three years and two renewals, contingent on performance to promote renewal and diversity and allow fit and interest determination,” he said.
The event, “How to Create Effective Nonprofit Boards: The Necessity of Governance and Leadership,” was co-sponsored by the Center for Nonprofit Management, Communities Foundation of Texas and Dallas Social Venture Partners.
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