Board of Directors Responsibilities
Meetings
Regular meetings provide the chief venue for board members to review their organization’s financial situation and program activities, establish and monitor compliance with key organizational policies and procedures, and address issues that affect the organization’s ability to fulfill its charitable mission.
Nonprofits must make sure that their legal criteria for governing documents are clear. Setting quorum requirements and other guidelines for board activities is essential.
Boards frequently create permanent and temporary committees, giving them the authority to handle responsibilities between full board meetings. A nonprofit organization’s board should determine its size and structure and periodically review it. In addition, the board should be sufficiently populated to permit thorough discussion and a range of viewpoints on organizational issues, including governance. This indicates that the board should include at least five members, except for very small organizations.
Diversity
A philanthropic organization’s board should have representatives from various backgrounds (including but not limited to ethnicity, color, religious experience, gender-based perspectives, and financial and organizational skills) to help further the organization’s purpose.
Nonprofit boards typically work with individuals with knowledge of budgeting and management of finances, investments, and personnel fundraising, marketing, and public relations, including leadership, advocacy, and governance as participants who are informed about the charitable programs or specialties of the organization or have a unique relationship with its supporters.
To compensate or not to compensate
A substantial majority of the board of a public charity, usually meaning at least two-thirds of its members, should be independent. Independent can be defined as not:
- Being paid by the organization as employees or independent contractors.
- Having their compensation decided by those whom the organization pays
- Receive, directly or indirectly, material financial benefits from the organization unless they are a part of the charitable class served by the organization.
- Being related to anyone described above (spouse, sibling, parent, or child), or residing with any such person.
Board members who are not encumbered by having a personal financial interest in the organizations they oversee will generally find it easier to exercise their “duty of loyalty” that requires that they put the interests of the organization above their personal interests and make decisions they believe are in the best interest of the organization. Organizations are expected to make a reasonable effort to determine which of their board members are “independent” based on the IRS definition, and to report the number of such members on the annual information returns they file with the IRS. In addition, most nonprofits are required to report whether any of their officers, directors, trustees, or key employees had a family or business relationship with another individual in one of those leadership positions.
Oversight of the Chief Executive Officer
The organization’s board should appoint, supervise, and assess the chief executive officer’s performance yearly. In the absence of a multi-year contract or a change that involves regular inflation or cost of living adjustments, it should carry out such a review before changing the officer’s pay.
Organizations must be ready to provide thorough documentation of the amount and justification for such compensation, including the duties of board members and the services they provide. When they decide it is appropriate to compensate board members due to the nature, time, or professional competencies involved in the work, there are strict procedures for evaluating board members and removing those unable to carry out their governance responsibilities effectively. The amount of compensation for each board member as well as whether a board member received a grant or other assistance from the organization must be reported on the organization’s IRS Form 990.
Training
Members must always be made aware of their obligations to actively prepare for and participate in board meetings, their responsibility for the board’s decisions (or inaction), and the safeguards that are in place for them. Charitable organizations should offer board members the chance to receive specialized training or advice on legal and financial duties if necessary and funds permit. It is also advisable for an attorney or insurance specialist with an understanding of board responsibility to discuss insurance choices and the legal defenses available to board members.
Evaluations
Regularly assessing the board’s performance can aid in identifying the processes and procedures’ strengths and weaknesses, offer guidance for improving orientation and educational programs, how the board and committee meetings are run and point out ways to enhance communication between the board and staff leadership. Most boards will find it beneficial to carry out such annual self-evaluations. However, others may prefer a schedule that coincides with the terms of board service or frequent long-range planning. Every nonprofit organization should assess if putting a time limit on how long a person can sit on the board is in its best interests. Some organizations have discovered that these restrictions aid in recruiting new members to the board who can bring fresh ideas, skills, and energy.
Mission and goals
Every board should establish strategic objectives, and evaluate the organization’s mission once a year, usually as part of the budget review process.
Nonprofit assessments should cover the needs and projected changes in the neighborhood or program areas where the organization operates that might impact our society. Board members should also consider the human and financial resources required to carry out the objectives and mission of the business. Include regular performance reviews and assessments on self-regulation, accreditation, and funding schemes in which nonprofit organizations participate.
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Source: Independentsector.org
https://independentsector.org/wp-content/uploads/2022/03/Principles2018-Final-Web.pdf#page=21
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