Giving Compass’ Take:
• Herrington J. Bryce, writing for Nonprofit Quarterly, discusses the essential tasks of a nonprofit board of directors and other expectations of board members.
• How can donors get involved on nonprofit boards? What expectations do funders have for these positions?
• Read about how nonprofit board diversity is lacking.
A board is needed to incorporate a nonprofit, to get it tax exemption, to apply for a bank account, to properly file annual reports, and to do most important transactions. This is so because the principal roles of the board of directors are to represent the public (or membership) interests in the organization and to represent the organization as its legal voice.
The logic goes as follows: Nonprofit and for-profit corporations are not natural persons, meaning that they have rights and responsibilities but cannot read, write, think, or execute for themselves; corporations need a human group or person to do so and to guide decisions so that they positively influence the organization and the commitments it has made, including the choice of its chief executive and how it will carry out its mission.
What specific actions are required of the board to demonstrate and exercise its roles in guiding and representing the best for the organization?
To fulfill these roles, the board must be able to accomplish at least the following essential tasks:
- Approve the budget.
- Review, sign, and assure submission of annual reports.
- Review and authorize personnel policies relevant to hiring, promotion, dismissal, compensation, whistleblowers, independent contractors, key employees, sexual harassment, and fairness to the disabled and other groups.
- Meet annually and as needed, even if only electronically.
- Review and approve plans of reorganization, growth, and contraction.
- Review and approve plans for major asset sales and acquisition.
- Review and approve major gifts, including the terms of the gifts.
- Review and approve the organization’s plans to do major borrowing.
- Review and approve the organization’s investment policy and plans to open banking and other financial accounts.
- Review and approve major changes in retirement, benefits, and compensation for all employees, with special focus on reasonableness for top executives.
A board of directors or trustees of a nonprofit organization is an essential part of the design of the organization and how well it abides by its mission, the expectations of its members, its clients, and state, local, and federal governments. The way a board is constructed is important because it affects the representation of various interests and the efficacy of the board.
Read the full article about nonprofit boards by Herrington J. Bryce at Nonprofit Quarterly.
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