Nonprofit Board Responsibility Social Media – What Needs To Be Done? Revised & Updated
By: Eugene Fram
Nonprofit boards, for several years, have been struggling to find proper uses for social media. Many of the decisions on this issue will become strategic board decisions because they will require using alternative promotional strategies, experimental trials and infusion of capital and human resources. The December 8, 2012 issue of the NACD Directorship* cites a Stanford study concluding that for-profit boards should develop a better understanding of this new phenomenon. Following are how I think the steps should be applied to smaller and medium sized nonprofit board decisions: Assess current capabilities.(more…)
Are Powerful CEOs Right for Nonprofit Organizations?
By: Eugene Fram
David Larcker and Brian Tanya, Stanford University Professors, have come to the following conclusions about CEO power and raise some pertinent questions the role of the board, based on research mainly centered on for-profit organizations.*
The research literature clearly shows that having a powerful CEO creates the potential for him or her to abuse this position to extract personal benefits or engage in excessive risks activities. At the same time, the research also shows that (CE0) power is often critical to the successful completion of tasks and the achievement of corporate objectives (and missions). To this end, powerful CEOs can ultimately be a success or a failure. Are shareholders (stakeholders of nonprofits) better or worse off with a powerful CEO?
While it is the role of the board of directors to oversee management, at some point the board must empower management to make decisions. Where should it “draw the line” between giving its CEO discretion and providing appropriate oversight? How much power is too much power?
My Response Related to Nonprofit Organizations:** (more…)
For several years, I have suggested that some NFP boards experiment with the addition of a Lead Director to their rosters, just as for-profit boards successfully have since 2002. This blog is divided into two sections. First is an abstract of an article published I published on the topic in the Chronicle of Philanthropy (June 2, 2011, p.34). This will help the viewer understand how I am adapting a business board process to a nonprofit board. Following that is a field critique of my proposal provided by Mark Soundie. Mark is uniquely qualified to comment. He provides counsel to boards for the following types of nonprofits: social housing providers, voluntary & social enterprise organizations from all sectors and all sizes & types of charities, His essay below provides an excellent summary of the pros and cons. Also, I have noted from a current study that about 37% of a small subgroup of 420 nonprofit directors responding to an NACD study have designated directors on their nonprofit boards. In addition, 88% of the group concluded that their lead directors enhanced board effectiveness.* These nascent results are encouraging news. Finally, a link follows to a comprehensive article on lead directors that appeared in April, 2012 in The International Journal of Not-For-Profit Law, Vol.14, Numbers 1-2.pages 52-57. Lead director article: bit.ly/15s4eVv (more…)
I thought my followers would like to know I am going to be interviewed by Tony Martignetti on Nonprofit Radio from 1 to 2 pm eastern on Friday, APRIL 26TH. If you would like to listen to the interview later at any time, starting next Monday April 29th, you can find it on iTunes (free), or the same link below will take you to the archive listing of the program.
Do Today’s Business Leaders Make Effective Nonprofit Directors?
By: Eugene H. Fram
The names of the new board nominees have been announced. They include several outstanding recruits from the business community. Will these new formidable directors perform well in the nonprofit environment? William G. Bowen, a veteran director in both the for-profit and nonprofit environments, raised the following questions about such beginnings in a 1994 article:*
Is it true that well-regarded representatives of the business world are often surprisingly ineffective as members of nonprofit boards? Do they seem to have checked their analytical skills and their “toughness” at the door? If this is true in some considerable number of cases, what is the explanation? (more…)
Management Knows All: What’s A Nonprofit Director To Do?
Your nonprofit board has a management ‘dream team” in place. The team collective has superior knowledge and in-depth understandings of internal processes and issues. Without attempting to micromanage the nonprofit, what role should a director play … assuming h/she serves on the board for a purpose.
Nonprofit boards provide critical policy compliance & financial overviews of organizational issues and actions. Regardless of the board’s overview actions and perceived excellence of management personnel, board members also must be poised and positioned to:* (more…)
According to a 2012 BoardSource study, nearly half of over 1300 nonprofit chief executives gave their boards a C, D or F grade in strategic development efforts. This is further evidenced in the frequent absence of long range planning items on nonprofit board agendas. What are the root causes of such a deficit in an area that is of critical importance to the future of the organization? One or more of the following challenges may apply: (more…)
Nonprofit Directors & Trustees: Are You Aware of the IRS 990 Form?
By Eugene Fram
The Form 990 Part VI, required of every nonprofit 501 (c)(3) organization gives the IRS a great deal of information about organization’s governance practices.* However, I have noticed that many nonprofit directors and trustees are not involved with the development of this important federal report, nor have some ever reviewed its contents. Part VI contains some critical qualitative questions, which, if results are audited, might negatively impact the existence of the organization. For example: <!–more–>
Prior to the filing, was the Form 990 reviewed by the full board or a designated committee?
Does the organization have a written mission statement that articulates its current 501 (c) (3) purposes?
Are there systems or procedures in place intended to make sure assets are properly used consistent with the organization’s mission.
To date, the IRS is an initial analysis stage of 990 results because many of the questions require qualitative responses, looking to see if the board has allowed a significant diversion of assets. The initial analysis has found a statically significant correlation between questions related to governance practice and tax compliance:
Organizations with a written mission statement are more likely to be complaint.
Organizations that always use comparability data when making compensation decisions are more likely to be compliant.
Organizations with procedures in place for the proper use of charitable assets are more likely to be complaint.
Organizations where the 990 was reviewed by the entire board of directors are more likely to be complaint. This indicates that having the entire board engaged in what is being reported on the 990 is not only helpful, but correlates to better compliance.
Items not correlating with tax compliance are:
Conflict of interest policies.
Organizations that never or only occasionally use comparability data to set compensation.
Voting member having a family relationship and/or outside business relationship with any other non-voting board member, officer, trustee or key employee.
NONPROFIT DIRECTORS & TRUSTEES ALERT: If you have not had significant involvement with the development of the organization’s annual Form 990, it is about time you raise a question about it at the next meeting.