advocacy

Nonprofit Board Members Must Be Vigilant

By: Eugene Fram

Based on the outcome of the Lemington Homes case precedent cited below, not being rigorous about their due care evaluation responsibilities can be peronally costly to nonprofit board mmbers.

The personal cost of director inattentiveness is made painfully clear in an important federal appeals court decision. The U.S. Court of Appeals decided the decision, in re Lemington Homes, on January 26, 2015 for the Third Circuit. … [T]hese difficult facts arose from a small, nonprofit organization. … Yet the standards for board members applied by the appeals court are quite clear.* (The case results) also addresses the appropriateness of punitive damages against officers and board members…).

The court determined that (15 of 17) board members took no action, despite clear evidence of deficient care to the institution’s residents. …[T]his breach of care, (led to) $2,250,000 in joint and several compensatory damages. As such, the decision offers a particularly valuable — and practical — board education opportunity.

The lack of nonprofit director and officer care is not unusual, possibly because board members are part-time volunteers, sometimes not understanding their potential liabilities.

Following are some examples of board laxity that I have encountered over the decades that I have been involved with nonprofits that might lead to personal liabilikty.

• Failure to assess staff realities – A social work staff became concerned with the authoritarian style of a newly appointed ED. The community style board felt that to avoid negatively publicity about the agency it needed to give the ED a second chance to improve relations. In the meantime a local electrical workers union heard about the problem and, without the board’s knowledge, began to take steps to unionize the agency’s social work staff. At the end of six difficult months, the staff voted to be unionized, and the ED was fired for failing to develop positive staff relationships. The organization’s United Way funding was temporarily placed in jeopardy — a reputation loss to the board members and management.

• Lacks an effective audit committee — I have encountered many nonprofit boards that don’t have an audit committee, even when it is a state requirement. This is especially prevalent when nonprofit boards feel too rigorous an examination indicates that the board does not trust management and staff. The other extreme that has been reported in the press is where the ED is clearly guilty of an offense, but the board refuses to take proper action and state authorities have to replace the board members.

• Board members don’t protect each other — I have encountered situations where the board has refused to purchase D&O insurance for its directors and managers. The faulty rationale was that the board is very close to the finances, and “(fraud) can’t happen here.” At the time, the board had responsibilities for a $400K annual budget, a $700K reserve fund and $24 million in real estate assets. Note, if a $1 million D&O policy only covered theboard member fines in the Lemington Homes case, the 15 directors together would be personally responsible for the balance, an aver each plus a reputation loss.

• Boards are not attentive to compliance basics such as: —
1. Making certain that all directors are thoroughly familiar with duties of due care; their responsibilities related to the IRS Form 990, the Intermediate Sanctions Act and the basics of fund accounting for financial reports
2. Requiring all persons involved with finances take two weeks vacation each year.
3. Making certain that the board and top management are serious about punishing those who use organizational resources for themselves.
4. Requiring board members to sign a conflict of interest statement each year.
5. Making certain that all non-routine expenditures over XX have signatures of two board members.
6. Making certain all persons with access to cash are covered by a surety bond policy.
7. Changing auditing firms or the partner in charge of the account every three to five years.

CEOs Need To Develop Partnering Relationships With Board Members

By Eugene Fram              

When a CEO publicly introduces a board member as “my boss,” (as I have overheard more than once) there is a problem. It’s true that both parties—CEO and board member—have specific roles in the success of a nonprofit organization. But the hierarchy of authority should be deemphasized when it comes to interpersonal connections. The most effective mindset for CEO and board members is to view each other as partners in working to achieve the organization’s mission and their impacts.

The CEO’s efforts to cultivate such relationships are key. The following are some initiatives that he/she can utilize: *

• Partners need to know each other as individuals: With overcrowded meeting agendas, rambling debates and hurried exits, there is often not enough time to know the person’s name who sits next to you, let alone anything about his life outside the boardroom. Even off-site meetings for informal exchange are hard to schedule and poorly attended. This lack of human connection is a real deficit in internal board relationships. The CEO can help in a number of ways.

1. Take a few minutes at the beginning or end of the meeting to allow board members, if they choose, to report something new or important in their personal or professional lives.
2. The CEO and/or board members should try to meet with individual board members or small groups to suggest new or unique ideas for improvement within the organization. Show professional regard for their responses even if it is not actionable.
3. Create social occasions by inviting board members and their significant others to participate informally. Or ask some board members to plan gatherings that could be as casual as afternoon wine and cheese or self paid dinners out together.

• Connect partner directors to the CEO’s real work: Since most nonprofit board members’ full-time interests and professions are not directly related to the organization’s mission, it’s important for CEOs to educate board members more deeply about what goes on routinely to achieve the mission, especially in those areas (e.g. human resources) in which the decision-making information is quite ambiguous.

For partner board members wanting deeper organization knowledge, the CEO needs to invite them to accompany him/h to local, regional or national professional meetings. Not only do these offer professional benefits, such as understanding accrediting processes, but it also offers the CEO an opportunity to solidify partnerships. Example: As a young faculty person at a university, the senior VP of Finance occasionally would invite me to accompany him to professional meetings. He would use travel time to orient me on macro issues facing the university.

• Energize board meetings: In recent years business meetings have been described as “death by power point.” Many presentations ranges from 20 to 30 power point cells when 8-10 can highlight the story. There are many actions the CEO, with the concurrence of the board chair, can take to develop these into partnership relations.
1. Keep minutiae off the agenda. If it crops up because a few directors find a small topic of tangential interest, the chair has a leadership obligation to take action by saying, “How does the X issue contribute directly to achieving our mission? Let’s set up a process where those interested in this issue can discuss it after the meeting.”
2. Place the boilerplate topics at the end of the meeting.
3. Staff reports on their operations are necessary at every other board meeting. While the CEO has an obligation to make certain they are brief and well presented, the chair has to make certain that board member questions are precise so that the staff person can stay within allotted time.
4. Use a “consent agenda” process for items about which there appears to be substantial agreement.
5. Make certain that every new chair is reasonably familiar with Robert’s Rules of Order to encourage civil discussion and conduct an orderly meeting process. It also can be helpful to appoint a parliamentarian should the rule-book need interpretation.
6. Focus on action items. “Send board members out the door with a clear idea of what they need to do between now and the next board meeting”** (and with the feeling that he/s has met with a group of high energy partners.)

• Meaningful Work: As much as possible, the CEO, with the board chair, has to make certain that every director views his/h efforts as meaningful to achieving the mission: Example: A CEO devoted an entire meeting to reviewing a powerpoint presentation he was planning to make. This was the final straw for a board member, who felt his time was being squandered. He immediately resigned his position with the usual excuse of increased work responsibilities.

A Leadership Challenge: Bonding with the board and encouraging board member connections is a tall order for a CEO with full operational responsibilities. As board members’ terms expire and new people step up to the plate, the challenge to build relationships is continuous. Even some termed-out board members need meaningful contact and must be kept interested and invested in the nonprofit’s development. The CEO, with the strong support of the board chair, should provide leadership in these important tasks—it will help the organization to move forward while maximizing the benefits to its clients.

*http://boardassist.org/blog/bored-blazing-7-steps-get-board-reconnected-re-engaged-enth

**Ibid

How A Nonprofit Board Member Can Initiate Positive Change

How A Nonprofit Board Member Can Initiate Positive Change 

By: Eugene Fram             

A nonprofit board member comes up with an idea that he thinks will do wonders for the organization. He is convinced that establishing a for-profit subsidiary will not only be compatible with the group’s mission but may even bring in new sources of revenue. It’s his ball–now what’s the best route to run with it? All too often in the nonprofit environment, initiating change can be as daunting as trying to get consensus in the US Congress! There are, however, certain interpersonal levers, which, if pushed, can accelerate the process–although one hopes that not all the levers will be needed in any specific situation.

  • Board Colleagues – Quietly enlist as many board colleagues as possible to support the idea.  Enlisting support from board opinion leaders is critical — then open up the discussion to others in informal conversations. Premature presentation to the entire board could stall the process.
  • The CEO – Either before or during conversations with board colleagues, be certain to review the proposed change with the CEO.  He/S will voice acceptance, rejection, or asks to consider it.  If s/he is opposed to the change, the board member only has these alternatives – wait until a new CEO is engaged; seek board termination of the CEO that is generally not a good move; or wait for better timing and board support.  It is foolhardy to seek the change in face of the full opposition of the CEO. If the CEO will support the change, it may be a good idea for the board member to step back and make the CEO the leading change agent.
  • Revenues – No matter how good the change, implementation will likely require financing beyond current budget allocations.   Consequently, a plan for fund  development from foundations and individuals will be needed for the final proposal.
  • Other Organizations—Other organizations with similar situations could serve as useful models. An on-site visit will provide information and enable the nonprofit to develop benchmarks that will reassure those that remain skeptical.
  • Measurement–Establish measurement metrics before the change is launched.  Do not hesitate to use imperfect metrics to track progress and drive change during the development period.  (http://bit.ly/OvF4ri)

Nonprofit board members have relatively short tenures—typically four to six years or less– and are often regarded as temporary overseers. There are opportunities to be much more than that if the board operates in a 21st century generative manner. The board climate should be open to ideas of positive change, and the creative board member must appropriately adapt or adopt the above levers to ensure effective acceptance and implementation

Can a 9-Year Tenure Promote Nonprofit Board Member Effectiveness?

Can a 9-Year Tenure Promote Nonprofit Board Member Effectiveness?

Having served on two nonprofit boards for a period of ten consecutive years, I was interested to read a study of the optimal tenure for business board directors. * The business study found that a board member’s effectiveness peaked at nine years, after which it falls off.* If a parallel study were to be run with nonprofits, what conclusions might be drawn given that the usual nonprofit board tenure is two three-year terms? What, if any, might be the impact on nonprofits by extending a board member’s term of office? Although there are differences in their missions, nonprofit and for-profit boards should be able learn from each other., As a result, it is fair to ask, what impact would the study’s data have if applied to a nonprofit?

As might be expected, in the for-profit environment as in the nonprofit environment, one size did not fit all in the study results. Those firms that had complex operations required a longer learning time curve for new directors, and the optimal time was 11 years for maximum director effectiveness. This contrasts with about seven years if the directors required greater monitoring efforts. If nonprofits were to follow these conclusions, it suggests that the traditional two three-year director terms are desirable for start-ups but not for those nonprofit boards that have matured.

Another overall conclusion was that high average board tenure did not impact the board’s ability to attract new directors, whether they are high performing or poorly performing firms. In other words, those boards with high tenure boards records would have little problems attracting new directors.

To replicate this study in the nonprofit environment would be difficult because the stock performance measures used by the for-profit researcher are not appropriate. Consequently, highly creative, well-accepted measures would need to be developed. The study does raises some questions that nonprofits need to ponder:

• What are the core characteristics of nonprofit board membersby which to judge effectiveness? How can they be defined and how can they be measured?
• Is a board with a large group of long tenured members a detriment to nonprofit progress, as commonly believed, or a board with human resource experiences to be admired?
• Should nonprofits experiment with offering directors three three-year terms, renewable each in three-year increments? After all it is not unusual to encounter nonprofit directors who have served for 10 or more years, by using some “escape clauses,” in the bylaws such as the member first filling an unexpired term of another member or a director after six years being able to stay on as board chair for another two years plus an additional year as past board chair.

*Ben Haimowitz (2013) “Why 9 Years is a Lucky Number for Board Director Tenure and Effectiveness,” CEO Briefing Newsletter, September 13th. Please note that tenure can be significant problem in the for-profit arena. Some boards can have several directors with 50 year of voting tenure
See: Richard LeBlanc (2013) “How Long Should a Board Director Serve?” Huffington Post, September 19th.

Do Nonprofit Boards Proactively Engage Their Stakeholders?

Do Nonprofit Boards Proactively Engage Their Stakeholders?

By: Eugene H. Fram

Nonprofit directors and trustees need to take overview responsibility for engaging all of the organization’s stakeholders.

The first step must involve defining the term“stakeholder” in the broadest action oriented terms. Most boards will quickly agreethat clients and board members are stakeholders, but what about others such as external auditors and significant vendors. For example, if a charity is depending on one vendor for a substantial part of its grocery supplies, that vendor needs to be viewed as a stakeholder—its failure to delivery properly affects the efficiency and effectiveness of the organization.

Following are some guidelines for engaging all types of stakeholders. Don’t marginalize, dismiss or ignore any stakeholder: Nonprofits do this with termed-out board members. * After six active years, a typical tenure, many former board members only received boilerplate materials or development solicitations. The board’s rationale is that they have served welland there is a downside on more frequent communication.This tactic assumes all board members want such a communications approach.

However, for board members who have been very active, it maybe counterproductive from development and future interest viewpoints. The ED and Board Chair need to keep a list of name of this special group and see that they keep in personal touch with the members once or twice a year.

I have observed several cases in which this unintentional marginalized has resulted in losing substantial financial gifts and needed talent. In both cases,the termed-out board members have declined with the excuse that they have been too far away from the activities of the organization. Using members of this group in advisory capacities can avoid such marginalization by forming them in alumni groups or including them insocial occasions and celebrations.

Recognize who may be a true partner: Such a partner can range a vendor that has supplied the organization or a volunteer whose interests have moved to another nonprofit. “ It is generally easier to build consensus,request help and engender trust when those who support you are well-informed, candidly an truthfully.” *

If stakeholders don’t know about the nonprofit’s challenges and needs, even the best-managed nonprofits have their ups and downs. During the latter periods, having stakeholders knowledgeable about the issues can help to dissuade some to avoid protesting job cuts and other receactions. Self–perpetuating boards can became insular and lose touch with other stakeholders: “These boards tend to retreat into a silo-or bunker-mentality that only serves to intensify bad habits and practices, as well as preclude consideration of other that only serves to intensify bad habits and practices, as well as preclude consideration of other perspectives.” * At difficult times, the board can tend to lose trust in the ED even when the problem is beyond the EDs control. If the board is at fault, it may look for a scapegoat on which to hang the the problem, often people in senior management.*

http://www.huffingtonpost.com/eugene-fram/how-does-your-nonprofit-r_b_5393736.html* https://www.linkedin.com/pulse/what-sweet-briar-reminded-us-alumni-engagement-mark-w-jones

Is Your Nonprofit Recruiting & Retaining by Using a Mission-Driven Approach?
Is Your Nonprofit Recruiting & Retaining by Using a Mission-Driven Approach?

By: Eugene Fram     

Recruiting and retaining able people for nonprofit careers has always been a challenge.  Salary levels have not been comparable to business organizations and some government posts. Many small and medium sized nonprofits have frontline personnel organizationally located only two levels below the Board of Directors.  Consequently, career paths can appear stymied.

The employment situation has changed for two population cohorts.  They are: some millennials (born between 1981 and 1996) and those in the Generation Z cohort (born between 1997 and 2012).

(more…)

The “Compliant” Nonprofit Board—A CEO Takes Charge Like a Founder!

The “Compliant” Nonprofit Board—A CEO Takes Charge Like a Founder!

By Eugene Fram             

According to BoardSource, “ ‘Founderitis’ and ‘founder’s syndrome’ are terms often used to describe a founder’s resistance to change. When founderitis surfaces, the source of the dilemma often is a founder’s misunderstanding of his or her role in an evolving organization.” * I would like to suggest that a nonprofit CEO also might suffer from the “founderitis illness,” sometimes with the board only being mildly or completely unaware of it.

Board Member Tenure versus CEO

The average board member tenure is six years (e.g., two three year terms) as compared with the average almost 13-year CEO tenure. ** The CEO has twice as longer period to influence polices and strategies. More importantly, she/h has more opportunity and time to acquire background knowledge and influence the organization’s culture.

“CEO Founderitis”—Typical Board Members & CEO Behaviors

  • The board is a dependent one, cancels or reschedules major committee/board meeting when the CEO can’t attend.
  • The CEO is overly verbose in presenting background information at meetings.
  • Concurrently, the number of board member comments is limited at most meetings.
  • The CEO places limits on the types of contacts the staff can have with board members, in the name of avoiding staff “end runs. “
  • The CEO carefully covets outside relationships and donor relationships. Board members are only marginally involved in fund development.
  • The Executive Committee does not challenge the CEO when setting the agenda.
  • The nonprofit board is satisfied with marginal gains each year, without seeking broader challenges to provide enhanced client services.
  • The CEO’s performance isn’t rigorously assessed.
  • The board rarely, if ever, overviews CEO and staff talent successions.
  • Board actions and activities are not rigorously reviewed or discussed.
  • Led by the CEO, Board resistance to change is substantial.

What should the board do if the CEO takes charge like a founder?

Three Options:

Does Nothing: This assumes the CEO is performing reasonably well in developing positive program impacts, not outcomes. (i.e, Program objectives can be achieved, but they can have little impacts on clients.)

The CEO and Board are satisfied with program outcomes as performance measures. As a result, the organization inadvertently may not be innovative. In addition, long-term organizational sustainability may be compromised. There may be long-term challenges on the horizon that go beyond the typical three to five year planning cycles.

A majority of board members may feel comfortable with this option because the CEO acts strongly, even though he/s occasionally may encroach on a board’s perogrative.

Makes Changes: This will probably require the CEO & Board to change, modifying some of the behaviors listed above. The CEO then forms a partnership with a changing independent board.

Some board members will be satisfied the status quo, little is required of them. But others may want to remove a CEO who leads like a founder. Internal conflict will likely arise on both sides to delay or abort change.

A Solution? Don’t rock the boat. Only when the CEO, especially one with long tenure, suffering from “founderitis” makes a graceful exit will there be opportunity for change. Hopefully, the new CEO will develop a partnership culture with the board.

* https://boardsource.org/resources/founders-syndrome/

** See: “Average tenure of nonprofit CEO Nonprofit Times”

When Nonprofit Missions Get Muddled

 

By: Eugene Fram  

It happens over time. A passionately conceived mission starts to drift from its original intentions. Stakeholders begin to view a nonprofit’s purposes from a different angle. There is a discrepancy between how the organization is committed to act and external perceptions of its current actions. Nonprofit boards need to be on the alert to such misalignments that can go unnoticed in the perceptual “fog” of daily challenges. It can limp along for years without acknowledging the impact of the client reality by which the nonprofit is being judged.   

A good start would be a five year review of how others see the organization, i.e. volunteers, funders, clients, members, etc. The study can be conducted by an outside firm or developed internally by analyzing imperfect metrics. (See this article: http://bit.ly/OvF4ri). Based on those findings, nonprofits can either be assured that the perceptual status quo is congruent with the mission as stated– or, if there are material inside/outside differences, take steps to begin to rectify the discrepancies. These can range from mission modifications to a complete mission overhaul. Here are some considerations:

• Is the name of your organization confusing? Take the Family Service organization, for example, multipurpose human services agencies that, in some cases, were being perceived as resources for family planning. A few organizations’ first move to reinforce their stated mission was to change their names to Families First.

• Is your mission statement clear and concise? Does the wording represent your core objectives? Is it targeted to the right clients? Has it been highlighted in both written and digital output? A university’s mission may be to develop its students’ intellectual growth over a college time period. Conversely, the student/parent perception may see a degree as a conduit to a good job. The school, in this instance, is obliged to better represent its mission statement to convey its rationale—or modify its mission to redirect its academic trajectory.

• Societal and demographic needs are constantly evolving. The former Elderhostel changed its direction significantly when it sought to attract a younger population and renamed itself “Road Scholar.” Although it’s important to accommodate a variety of new initiatives, the question is– do they fit within the organization’s framework? It’s obvious that a nonprofit can’t be all things to all people. It may be difficult to accept a new perceptual reality, but growth and survival may be dependent on accommodating it.

Is Your Nonprofit Forward-Focused or a Prisoner of the Past?

Is Your Nonprofit Forward-Focused or a Prisoner of the Past?

By: Eugene Fram           

Governance arguably suffers most … when boards spend too much time looking in the rear view mirror and not enough scanning the road ahead. *

It has been my experience that nonprofits rarely address the possibilities and perils of “…the road ahead.” An endless stream of current and pressing issues can cause both Board and CEO to take a myopic view of their nonprofit responsibilities — either totally ignoring strategic issues or procrastinating a discussion of the subject. The results can be damaging to the organization. Here are some “prompts” that might guide nonprofit board members and CEOs as they attempt to provide leadership in this important but neglected area:

Balanced Agendas — Include and highlight strategic issues on every board meeting agenda (not just when a committee report is presented) until they are resolved with action plans, policy development or thoroughly discussed and removed. This constant emphasis on planning can go a long way towards achieving concrete actions on topics of future concern. A discussion of immediate issues juxtaposed with ongoing strategic concerns will provide a balanced meeting format that may possibly discourage board member’s attempts to micromanage, a very common tendency in nonprofit boards!

Short Term Focus — In a BoardSource report,  “…only 33 percent of nonprofits report that their board members are actively involved in advocating for their missions, and many organizations aren’t advocating at all.”** To inspire and challenge board leaders to actively serve as ambassadors.  The explanation for weak performance in this area is often attributed to the fact that the directors’ terms of service on the board are usually three to six years during which time people’s interest in the long-term future of the organization may be compromised. Some boards may be disproportionately represented by “millennials” whose participation comes with heavy time constraints. Problems of this type can be mitigated by seeking board members who are partially or fully retired. They are likely to be better equipped to focus on the important governance functions and the fundamentals in which the nonprofit operates. Boards need to look to look further out than anyone else in the organization… There are times when CEOs (those operationally concerned with strategy) are the last ones to see (environmental) changes coming.

Board Recruiting — Nonprofit recruiting can be a hit-or-miss process, often producing candidates who are readily available and familiar to the current board. Rarely will the committee seek out people who have strong track records as strategists and/or competent visionaries. This is a real challenge, but a forward focused board should make every effort to identify potential directors who have these types of experience and skills. The topic of recruitment is a challenging one and the process should have continual annual evaluation.

Can Nonprofit Boards Work Smarter Not Harder?
As noted earlier, nonprofit board people are often limited in the amount of time they can devote to board participation. Given these constraints, the board chair and CEO can choose from a range of options that will help orient directors to better understand the external landscape in which the organization operates. These initiatives can include visits to comparable facilities, opportunities to attend field related conferences or inviting experts in the same or similar organizations to interact with board members. The purpose is to infuse each member of the board with an informed view of the organization’s long-term future and prepare them to take the appropriate action. The CEO and board chair must address this question with a viable plan: What actually helps… (to develop) a board environment that encourages participation and allows board members to derive meaning, inspiration and satisfaction from their (board) work?

Talent: The Key to Nonprofit Success — A nonprofit board has one hiring decision to make: the engagement of the CEO. But it also has a significant responsibility to overview long-term talent development in the staff and management. The board of a family service agency needs to assure that its counselors are up to date on current modalities of counseling. A recreational organization must be operating in the context of accepted fitness practices. Annual talent reviews need to be scheduled with CEOs and the appropriate staff. In addition, individual board members, with the concurrence of the CEO, may want to have occasional professional contact with key people below the senior management.

Make strategy part of the board’s DNA — (Many nonprofit) … CEOs present their strategic vision once a year, the directors discuss and tweak it at a single board meeting (or a short retreat), and the plan is then adopted. The board’s input is minimal and there’s not enough in-depth information to underpin proper consideration of the alternatives.

An educated nonprofit board will have the depth of understanding to be alert to the future needs and problems of its organization. Typically there is usually an unanticipated “fork” in the road ahead. Status quo, “minding the store,” participation by rote are all too easy mindsets that will only hobble the progress of an organization. Board chairs and CEOs are key actors in turning an existing board environment into one that is focused on moving forward.

*Christian Casa and Christian Caspar (2014) “Building a forward-looking board,” McKinsey Quarterly, February. Note: Quotations from this article are presented in italics.

**https://boardsource.org/research-critical-issues/

 

How Seriously Does Your Nonprofit Board Take the Matter of Ethics?

How Seriously Does Your Nonprofit Board Take the Matter of Ethics?

By Eugene Fram                          

Most board members are aware of their obligation to ensure their nonprofit’s compliance with certain standard regulations e.g. making tax payments, submitting IRS Form 990s and/or avoiding potential fraud. But what I have found missing in the nonprofit environment is a sense of board member responsibility to provide for and sustain a viable ethics program.

Board members, as representatives of a community, profession or industry, have a significant responsibility to mitigate risks for their supporting constituencies. To ensure their integrity and prevent tainting the organization’s reputation, an internal ethical culture must prevail. An emphasis on ethical conduct should cover everyone from board members to the lowest ranking employee, and address issues that range from personal use of facilities to various types of harassment.

Following are some thoughts on putting ethics in their rightful place:

• The Audit Committee in responsible-business organizations often have a full-time corporate counsel or compliance officer who are charged with seeking evidence of unethical behavior. On the other hand, nonprofits must vest significant ethics responsibilities in the audit committee. As a base approach, the audit committee should have the CEO investigate installing a hotline system that can surface questionable behaviors and issues. 

• Ethical Behaviors Start with the Board – A review of existing ethical standards should be included in the orientation process of every new board member or employee– and reinforced briefly each year. Potential conflict of interest in board members can skew decision-making and jeopardize outcomes. Engaging in “sleight of hand” decisions can reverberate throughout the organization. For example: it is not unusual for nonprofit boards to seek grant dollars that support programs that are not directly related to the organization’s mission. Similar relaxation of standards can propel an organization down the slippery slopes of ethical boundaries. This also applies to senior managers whose behavior or actions are perceived to be inappropriate.

• Seeking Information – Although the Sarbanes-Oxley act suggests that board directors are obliged to seek information from persons below top management, this can sometimes become controversial in the nonprofit environment.

The bottom line is that (ethics) compliance must be pervasive, ongoing and actively tested, experts say, in order to maintain a healthy culture throughout the organization. By rewarding ethical behavior and mitigating risk, nonprofit board members will be doing all they can to protect themselves and preserve values for shareholders (and help to assure ethical actions in a mission-centrist nonprofit.)*

* Boardmember.com (2014), “Compliance Oversights Starts and Ends with the Board,” May 14th.