A Board of Directors must be in place in order for a nonprofit organization to be a corporation.  That same corporation must meet additional criteria in order to become a 501(c)(3) tax exempt organization.  There are Boards of Directors in the for-profit industry as well as the nonprofit sector.  The Board of Directors of a for-profit entity represent the best interest of the shareholders of the corporation.  Boards of Directors of nonprofit organizations represent the best interest of stakeholders in the community such as clients, donors, community members, other service agencies etc.

Boards of Directors are in positions of responsibility and authority in the governance structure of the nonprofit agency and have a fiduciary duty to the organization; specifically the

• Duty of care
• Duty of loyalty
• Duty of obedience

In other words the Board of Directors is required to act reasonably and prudently in the best interest of the nonprofit and to avoid negligence, fraud and conflict of interest.  For the purpose of this discussion I want to focus on the duty of loyalty, also known as conflict of interest.

The duty of loyalty refers to a board member’s  responsibility to avoid conflict of interest and to provide undivided allegiance to the non-profit’s mission.   A conflict of interest can refer to a conflict arising when a board member participates in the deliberation of a decision of importance to the agency while that same decision can be of personal or professional benefit to the board member.

There are no absolute rules on how a Board of Directors should handle conflicts of interest between the agency and a board member.  At minimal the agency should ask the following questions:

• Is it enough for the board member to be aware of the conflict or is full disclosure required to the board?
• Are there any agency documents already in existence that address how agency and board conflict should be resolved?
• Should the board member recuse themselves from all conversations related to the conflict?
• At what point is it warranted for the board member to relinquish their position on the Board of Directors?
• How should the agency handle conflict of interest?
• Are there any internal or external factors that you should consider when analyzing this incident of conflict of interest?

 If you participated in the CALCASA webinar “Are you ready for the new 990“  ;you are well aware of the IRS requirement for an nonprofit agency to have a conflict of interest policy.  The facilitator for that webinar, Steve Zimmerman of Spectrum Nonprofit Services, provided an Conflict of Interest template as well as other requirements of the IRS 990.

Also the California Corporations Code has statue related to nonprofit benefit corporations as well as other corporate related statues.

There are many ways in which the Executive Director  and or Board of Directors may choose to address conflict of interest between the agency and a board member; some may error on the side of being conservative while others may have a more liberal approach to the matter.  If you have a conflict of interest policy, have questions regarding this issue and or can provide insight to others dealing with this issue; please comment in the box below. 

For more information on this topic and or additional resources regarding board development, please contact Kavin Black  at CALCASA.

Some people have a fear of public speaking, others fear snakes , some are apprehensive about traveling in an airplane; but for the board member the greatest fear of them all may be fundraising.  Not so much a fear of asking someone or a foundation for a gift but not knowing how to effectively fund raise.  How is fundraising accomplished by your board?  Is it assigned to a subcommittee of the board or does the entire board take an active role in fundraising?  Does your board have a fund development plan or strategy or do you just fund raise when the Executive Director informs you that a program has to end  or the agency cannot make payroll next month?

Looking at what policies and procedures are in place at your agency regarding fundraising can help you identify why your agency is or is not successful at fundraising.   Fundraising should not be done in isolation or independent of the rest of the agency.  Identifying what resources are needed now and in the future can go a long way in helping you determine a fund development plan.  Providing board members with the tools to be more effective fundraisers as well as talking about fundraising and its relation to the agency and survivors in the community can help change the climate of the board of directors regarding fund development.  Fundraising is not all that a board does, but it require some attention if the board is to be successful in furthering the mission of the agency.

To contribute to this discussion please provide your comments below.

Positioning Your Board For Effective Fundraising

Fundraising Success

Prepare Your Board For Fundraising

Fundraising Mistakes We Make With Our Boards

Energize Your Board For Fundraising Success

Build A Fundraising Board Today

Every organization will experience some amount of turnover with staff.  In 2008 Compdata Surveys indicated that non-profits had a 16.8% staff turnover rate.  Depending on the position, the staff’s experience and their connection to the community; the void they leave  can be difficult to fill.  This is especially evident when the personnel that departs is the Executive Director.  Regardless of if the Executive Director relinquishes their position on good terms or in a chaotic event; without a succession plan the board of directors, management and staff can be left with increased levels of stress and mounting questions of agency viability, all while trying to accomplish their basic daily duties.  This will be the first of a monthly series dedicated to topics related to board members titled Dear Board Member

One of the key characteristics that successful businesses have in common is their ability to plan for various situations.  They have a plan for a worst case scenario as well as a growth plan when things are going great.  Planning gives you the luxury of time to work on a protocol for an event before it actually occurs.  When an Executive Director leaves and you are forced to look at a critical situation very quickly; sometimes the solution you come up with is not the best solution.

As a board member you can use this as an opportunity to start a conversation with other board members regarding what you will need to do in order to have a succession plan in place at your organization.  You are probably aware of agencies who have had a successful succession plan and those who had no plan at all.  Organizations without a transition plan after an Executive Director has vacated their position are in danger of losing staff and volunteers and trust from constituents and the community.  Not having a succession plan can be very costly to your organization.

Whether transition in leadership is already a challenge for your organization or you are being proactive and have time to develop a plan, CALCASA can provide you with resources to be of assistance.  If you have experience or insight that can be beneficial to your peers regarding transition in leadership, please included the information in the comment box below.

Additional Resources

Leadership In Transition

Board Member Guide to Transition

Building Leaderful Organizations

Emergency Succession Planning

Succession Planning & Sustainability