The Nonprofit CEO Exceeds His/Hers Authority – What Happens Then?

The Nonprofit CEO Exceeds His/Hers Authority –  What Happens Then?

By: Eugene Fram

It happens!  When it does, it’s the board’s job to inform the CEO that he or she has taken on too much authority.  As a board chair of a human service nonprofit, I encountered such a situation. The CEO signed a long-term lease contract on his own that should first have been approved by the board.   The financial obligations involved weren’t significant. <!–more–>  When the CEO recognized his error, I then asked for formal board ratification. None of us does out jobs perfectly.  But a CEO has to recognize  the board’s ultimate authority for long-term contracts and similar issues, even when the financial obligations are insignificant.

I don’t believe you need as much Board-CEO trust in the for-profit world as in the nonprofit world.  In the former, the “bottom Line” can give directors a reasonably clear (not exact) indication of how the CEO is performing.    In the nonprofit world, there is no organizational solid bottom line, except the one that says income must match expenses.  Also of importance, there are many qualitative outcomes, such as community impact, that are not part of the financial statements and must be considered in the evaluation.

Board directors must trust in the ability of the CEO they have selected to do the job, and clearly make the person accountable.  Since there is no complete long-term performance bottom line for many nonprofit organizations, and the costs of obtaining sold qualitative performance metrics is so high, most nonprofits have to rely on imperfect metrics to obtain a semblance of comprehensive long-term performance. *

For a nonprofit organization, it is necessary to hire a president/CEO or executive in whom the board can place a high degree of trust. But along with the trust, the board must ROBUSTLY annually evaluate the CEO and the organization’s performance.

  • See my blog: http://bit.ly/yfRZpz and my 2010 article “Using Imperfect Metrics Well: Tracking Progress and Driving Change.” I can send a copy of the article to those who request it.   eugenefram@yahoo.com

What’s in a Name? Benefits of the Nonprofit Executive Director Title.

What’s in a Name? Benefits of the Nonprofit Executive Director Title.

By Eugene Fram

The most viewed blog on my nonprofit governance site is an article I wrote in 2008, “What’s in a Name? Benefits of the President/CEO Title. This article has had a stream of national and international viewing, sometimes as many as 50 daily. (Note this is four years after original publication.)

Recently, I read a review of the article, suggesting I didn’t cover the benefits of the nonprofit Executive Director title, probably the more common title for the chief executive of nonprofits. Following is a brief listing when the title is useful. (more…)

Choosing the Right CEO: A Nonprofit Perspective

Choosing the Right CEO: A Nonprofit Perspective

By Eugene Fram

According to one well-known analyst, Ram Charon, there are five essential elements for-profit boards fail to consider in selecting CEO’s. Following are my interpretations of how these relate to nonprofit boards: (more…)

A 2012 Agenda for Nonprofit Audit Committees

A 2012 Agenda for Nonprofit Audit Committees

By: Eugene Fram

Nonprofit audit committee members might want to view a video presentation at the Corporate Board Member Website (June 9th) for a list of top issues being faced by for-profit audit committees.  Catherine Bromillow, PwC Center for Board Governance, presents the list. 

Following, in her order of importance (high to low), are those that I feel can apply to nonprofit organizations.

RISK MANAGEMENT – Focusing on the known risks and estimating the unknown ones.  For example, how will the greater use of psychiatric drugs impact nonprofit counseling organizations?

INCREASED USE BY REGULATORS – What use will the IRS make of the governance information now being collected annually via the expanded 990 Forms?  Do volunteer directors know the potential impact of the Intermediate Sanctions Act?

CHANGES IN REGULATIONS & ACCOUNTING STANDARDS – What impact, if any, will Dodd-Frank have on nonprofits?   (Although not directed to nonprofits, Sarbanes-Oxley has had some indirect impacts.)  What changes in accounting standards need to be reviewed by a nonprofit audit committee?

TURBULENT ECONOMIC CONDITIONS – What plans are in place to survive more turbulence in the world economy? 

INTERNAL CONTROL STRUCTURE – How does the internal control structure need to be changed after a merger or acquisition transaction between two nonprofits?

TAX COMPLEXITY- How do changes in state or federal tax regulations impact a nonprofit organization’s business plan?

OPERATION COMPLEXITY – For those nonprofits that operate from multiple sites, the audit committee needs to understand key issues for each site.  Visits to all sites by the committee or individual directors are important.

COMMITTEE EFFECTIVENESS – With frequent rotating membership, how do nonprofit audit committees go about improving their operations?

My Blog Site:  http://bit.ly/yfRZpz








Nonprofit CEO Board Chair Relationships – Anything Works

Nonprofit CEO Board Chair Relationships –Anything Works!!

A recent NPQ Nonprofit Newswire (March 13th 2012), report concludes, that to build good nonprofit CEO-board chair relationships, “Task lists and job descriptions often propose a “one size fits all” recipe for the CEO-Board chair relationship, (but the lists have little to do with real world effectiveness.)” (more…)

Nonprofit chief executives should have a title, President/CEO

Nonprofit chief executives should have a title, PRESIDENT/CEO

By Eugene Fram

When nonprofit organizations reach a budget level of over $1 million and have about 10 staff members it is time to offer the chief operating officer the title of PRESIDENT/CEO.  In addition, the title of the senior board volunteer should become CHAIRPERSON OF THE BOARD, and the title of EXECUTIVE DIRECTOR needs to be eliminated.   Experience has shown that with a reasonably talented PRESIDENT/CEO at the helm, he/she can provide the following benefits:

  • Build a trust culture between board, management and staff.
  • (more…)

Assessing Nonprofit CEO Performance

Assessing Nonprofit CEO Performance

By Eugene Fram

CEO assessment should be very thorough and take place annually.  That doesn’t mean that it always has to take place at one time.  In some situations, assessment occurs throughout the year, depending on how the committee members decide to divide their tasks.

After completing the entire review, the assessment committee should make its report to the full board.   If the review takes place periodically throughout the year, board updates follow a similar pattern.