The Nonprofit CEO–How Much Board-CEO Trust Is Involved?

By; Eugene Fram   Free Digital Image

The title, CEO for the operating head of a nonprofit, clearly signals to the public who has the final authority in all operating matters and can speak for the organization.*  .

The CEO designation calls for an unwritten trusting contact with the board based on mutual respect, drawing from the symbolism that he or she is the manager of the operating link between board and staff. It is a partnership culture. However, a solid partnership does not allow the board to vacate its fiduciary and overview obligations. The board has moral and legal obligations to “trust but verify” and to conduct a rigorous annual evaluation of outcomes and impacts CEO has generated for the organization.

While the trust the board has in its chief operating officer can’t be described in exact quantitative terms, viewing it through the lens of a set of behaviors can give an idea of whether it is excellent, good or nonexistent.

Following are some of the behaviors that signify a trusting partnership is in place:

The CEO:

• Has authority to initiate short-term loans from a bank for emergency funding. The board has established a limit on the amount to be borrowed.
• Sees himself/her as an equal partner in fundraising efforts. Knows how to effectively interact with donors and top managers in donor organizations.
• Is comfortable in interfacing with senior executives of other NFP organizations, especially those to which the organization wishes to emulate.
• Is confident about his/h management experiences and expertise.
• Has good professional relationships with board members.
• Does not view the job as being in jeopardy.
• Feels comfortable in disagreeing with board members when appropriate.
• Feels comfortable with the processes the board uses to have executive sessions without management present.
• Feels comfortable with a rigorous, but fair, examination of CEO performance.

Board Members:

• View CEO as a peer who deserves respect, not seen as a “board servant.”
• Do not discuss the CEO’s professional limitations outside of the boardroom meetings.
• View the CEO as an effective manager and staff leader.
• Accept modest management missteps by the CEO in a proper perspective. 
• Look to the CEO to be have state-of-art knowledge and vision for the areas in which the mission has been defined.
• Expect the CEO to grow professorially and try to support that growth within the financial means of the organization.

“In order for a trust-based governance system to work, companies (and nonprofits) must first develop a culture that discourages self-interest.” ** In the nonprofit environment, many work to achieve a mission at the expense of self-interest.   A “high-trust” culture should be easier to establish between nonprofit board and CEO.

* Note Well: In many states a volunteers who carry the title of president /CEO can accrue personal liabilities not incumbent on other board members.
** https://law.stanford.edu/publications/trust-the-unwritten-contract-in-corporate-governance/