Trustee Boards

Corporate Governance Principles Make Sense to Nonprofits

Corporate Governance Principles Make Sense to Nonprofits

A blue-ribbon group of public directors, people like Warren Buffett, has developed a nine page “manifesto” that presents  commonsense operating principles for boards of publicly traded companies. Their objective is, “To provide a basic framework for sound, long-term oriented governance.” * My immediate response to the document was that about half of the guidelines can be easily translated into useful advice and/or caveats for nonprofit boards. The benefits as suggested by a Chinese proverb are, “A wise man learns from his own experiences, a wiser man learns from the experiences of others.”

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The Devil’s Advocate on a Nonprofit Board: Asset or Liability?

The Devil’s Advocate on a Nonprofit Board: Asset or Liability?

By: Eugene Fram

Viewer Favorite Updated and Enhanced

An unwritten rule for nonprofit board membership is that it is best to “go along to get along.” But sometimes a nonprofit director’s “no” vote to an action that has had inadequate discussion can allow him/h to avoid tax penalties that have been levied on other board members for lack of due care.

Stanford University research results indicate that groups with a lone minority dissenter outperform other groups where all members agree. In addition, these groups…”are more successful than (groups) in which all members disagree and fall prey to escalated emotional, difficult-to resolve (group) brawls “ *

The key to success, according to these data, is to,” … have a devil’s advocate (DA) on the nonprofit board. … This is a person or a small board minority that “has the sensitivity to see the differences, perceives them as conflict, and then communicates about the differences in non-confrontational ways.” **

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Nonprofit Board/Staff Relationships: An Uncomfortable Partnership?

Nonprofit Board/Staff Relationships: An Uncomfortable Partnership?

By: Eugene Fram

I have always been of the opinion that nonprofit directors don’t give sufficient consideration to the relationships between the board and staff. The following passage reasserts the complexity of such relationships and why misunderstandings might occur on either side of the fence. (more…)

Should Mature Nonprofits Allow Board Micromanagement?

Should Mature Nonprofits Allow Board Micromanagement?

By: Eugene Fram

Viewer Favorite:  Updated and Enhanced

Accepted View of Micromanagement: “…Directors spend more time with the details of the operations instead of planning its short-term and long-term growth strategies. …
(http://linkd.in/1q84pMm)

The Need for a Micromanaging Board
Board micromanagement is an appropriate approach when a nonprofit is in a start-up stage. Financial and human resources are modest, and the volunteer directors must assume some responsibilities normally executed by compensated staff. The chief executive often has managerial responsibilities as well as a list of clients to service. It is not unusual to promote a person who is only familiar with direct service to become the first chief executive of the organization. In turn , this neophyte manager has to depend on board members for managerial counsel and direction. A culture of board dependency is created out of necessity.

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Identify Nonprofit Staff Groups To Help Drive Organizational Change

Identify Nonprofit Staff Groups To Help Drive Organizational Change

By Eugene Fram

Nonprofit executive directors tend to think of the staff professionals as individual contributors. These individuals are persons who mainly work on their own and not as team players – for instance, counselors, health care professionals, curators and university faculty. However, many executive directors fail to recognize that these individual contributors can be grouped according to identifiable types, with differing work value outlooks. Each group needs to be managed differently to drive change in today’s fast moving social, political and technological environments. Nonprofit board members need to use these groupings in their responsibilities for  overseeing promotable staff members.    (more…)

Once Again! What Does Nonprofit Board Oversight Mean?

Once Again! What Does Nonprofit Board Oversight Mean?

By: Eugene Fram

Updated & Revised

I have a daily (7 days a week) subscription to Google Alerts on “Nonprofit Management” and “Nonprofit Governance.” Every week, three or four nonprofit case stories surface, in these listings, related to inadequate oversight by nonprofit boards of directors.  Many of the cases result six or seven figure dollar losses to the nonprofits. Following is my personal list of what reasonable board oversight means to attempt to help nonprofit boards of directors to avoid such losses. (more…)

What are the most productive types of relationships between board & staff?

What are the most productive types of relationships between board & staff?

By: Eugene Fram

In the 21st century, building transparency and trust are two critical elements for good governance. In nonprofit organizations, these elements take on additional importance because organizationally staff members may only be or two levels below the board. Consequently, nonprofit staffs are probably more attuned to board changes and directives than their counterparts in a business setting. With more frequent rotations of nonprofit board members, many staff members can feel insecure. They have observed some nonprofits at which new board members sometimes can quickly bring about detrimental changes–it is not unusual for community boards to limit vetting new board members to friends and family. (more…)

A Nonprofit Boards Must Focus On Its Organization’s Impacts

A Nonprofit Board Must Focus On Its Organization’s Impacts

By: Eugene Fram

“One of the key functions of a (nonprofit) board of directors is to oversee (not micromanage) the CEO, ensuring that (stakeholders) are getting the most from their investments.” * State and Federal compliance regulations have been developed to make certain that boards have an obligation to represent stakeholders. These include the community, donors, foundations and clients, but not the staff as some nonprofit boards have come to believe. The failure of nonprofit boards, as reported almost daily by one blog site, ** shows something is wrong.  (Also see: : http://amzn.to/1OUV8J9)  Following are some inherent problems. (more…)

Good News for Nonprofit Board Members & CEOs—

 

Good News for Nonprofit Board Members & CEOs—Examples For The Behvorial Sciences

By Eugene Fram

Behavioral economics, finance and marketing apparently are making significant strides in helping nonprofits to understand how to maximize their development efforts. Following are two studies that appear to have significant nonprofit interest.

(http://www.behaviouralinsights.co.uk/bx2015/rounding-up-the-latest-insights-from-behavioural-exchange-2016/)  (more…)

WHAT NONPROFIT BOARD MEMBERS AND MANAGERS DON’T KNOW CAN HURT THEM FINANCIALLY: IRS FORM 990 AND THE INTERMEDIATE SANCTIONS ACT

International Journal of Not-for-Profit Law / vol. 18, no. 1, February 2016 / 78
Article
WHAT NONPROFIT BOARD MEMBERS AND MANAGERS
DON’T KNOW CAN HURT THEM FINANCIALLY:
IRS FORM 990 AND THE INTERMEDIATE SANCTIONS ACT
EUGENE H. FRAM, ED.D1
Nonprofit 501(C)(3) charitable organizations and 501(C)(4) social welfare organizations
fall under two IRS regulations—the extended annual Form 990 and the Intermediate
Sanctions Act (Act). Form 990 requires answers to 38 corporate questions on corporate
governance operations. The Act covers prohibitions related to providing or seeking
excess benefits. Most board members know about the Form 990, but few know about its
board obligations; and few board members and managers know the Act exists. With the
IRS aggressively enforcing the Act to eliminate faux nonprofits, unwitting nonprofit
board directors and managers can become ensnared financially.
Two classes of nonprofit organizations, 501(C)(3) charitable organizations and 501(C)(4)
social welfare organizations, are covered by two IRS regulations not applicable to for-profit
corporations. One regulation requires the organization to file an IRS Form 990 each year, including
financial data plus answers to 38 questions related to corporate governance. Many board
members may be unaware of their obligations to be involved in preparation of the form each
year. If there were an audit involving the 38 board questions, further, board members might be
expected to know about any exceptions to be reported, such as conflicts of interest. For example,
any board member whose firm or employing firm has a business relationship with the nonprofit
must specify it as a conflict of interest on Form 990 and probably abstain from voting on related
issues. Also, if the report is late, the nonprofit must file an IRS form, and the board needs to be
advised of the situation.
If the organization ignores any of the requirements, it can lose its tax-exempt status—a
penalty already imposed on thousands of smaller nonprofits. In some instances, moreover, failure
to heed the requirements might leave nonprofit board members open to personal liability for
failing in their corporate duties for “due care.” (more…)