By Linda Ferm, CAE
NYSAE’s Executive Women in Nonprofits SIG explored the basics of nonprofit governance and how it defines the role of the board, as well as the role of each board director. The September 18 session, Getting Your Board on Board, was hosted by the International Council of Shopping Centers. So what is governance when it comes to a nonprofit, whether it be an association, professional society, or charitable organization? Simply put, it is the system by which a group organizes itself and defines how it will perform and monitor its form of organization, often referred to as its governance system.
Governance is a function of a Board of Directors. Effective governance encompasses all of the aspects of board work, including:
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What does it mean to be in compliance? Are your Board members engaged? NYSAE’s Executive Women in Nonprofits SIG members discuss Getting Your Board on Board.
- Board responsibilities;
- Board meetings;
- Board size and structure;
- Board diversity;
- Board independence;
- CEO evaluation and compensation;
- Separation of CEO, board chair and board treasurer roles;
- Board education and communication;
- Evaluation of board performance;
- Board member term limits;
- Review of governing documents;
- Review of mission and goals; and
- Board compensation.
Since to govern really means to steer, influence, and control, the nonprofit board has three major roles in the life of the organization:
- To establish mission and direction;
- To ensure that the organization has the necessary resources of funds and leadership to implement the mission; and
- To provide legal and fiduciary oversight on behalf of the people served, the organization members and supporters, and the public.
When a nonprofit receives its nonprofit tax designation as a 501(c)3, (c)4 or (c)6 and is registered in a state within the US, it agrees that to keep its tax status it will comply with the laws of the state concerning how it operates. Last year, New York put into law the Nonprofit Revitalization Act. A main feature of the law is its commitment to transparency. To become transparent, an organization will need to adopt certain policies to demonstrate that it stays true to its mission, represents its cause or purpose to its members, volunteers and the public, and provides both legal and fiduciary oversight.
The group agreed that best practices of governance suggest that an organization review specific aspects of its governance every three years to make sure the governance reflects any recent changes in the composition of committees and incorporates the latest strategic plan, board practice and amended policies. It is also suggests a group perform a comprehensive review of its governance practices every five years.
A good board of directors does not just happen. Ideally, the bylaws of an organization will have guidelines concerning how the nominating committee works, qualifications to be considered before approaching a potential board director, how a board member or officer is elected and the term limits of board service. Bringing on board a new board member is all about adequately introducing that director to the work ahead through effective orientation, not just limited to an hour, but by speaking or meeting with him or her one on one, discovering his or her strengths and what he or she can contribute to the board, as well as creating opportunities for the board directors to get to know each other and learn how to work together.
Finally, the chief staff executive is key to motivating the board and keeping it on track, instilling in it a desire to be more of a strategic board, rather than an operational board only.
Linda Ferm, CAE, is President of Ferm Strategies, a consulting group that works with nonprofit CEOs and Boards. In addition to serving as Chair of NYSAE’s Executive Women in Nonprofits SIG, she is a member of the Awards and Membership Committees. She can be reached at 212.799.7014 or lferm@fermstrategies.com.