September 24, 2013

Nonprofit EssentialsInstitute for Public Engagement

Governance:What Makes for Bad Board Governance

What is bad governance?

Misunderstandings about roles, responsibilities, accountabilities and relationships that lead to dysfunctional organizational relationships, waste, missed opportunities and opportunities for inadvertent or active corruption.

Failure to Understand Fiduciary Duties

• Board members who don’t understand the duties that come with serving on a board.

• So….– See board service as volunteering time, not

much more– Serve for status– “Rubber stamp” decisions and

recommendations from executive

Failing to Provide Oversight

• Lack of effective oversight and appropriate policies and procedures.

– Board does not insure policies are well-suited to need

– Committees are not used effectively– Policies (Conflict of interest, record

retention, reimbursement, whistle blower) are not reviewed on a regular basis

Deference

• The board as a body defers to strong executives, founders or board president.

– Board does not govern as a body, accepts strong direction from founder or executive

– Abdicates responsibility– Organization becomes an extension of an

individual

Engaging in Management

• Board members engage in the day to day operations of the organization.

– Taking part in the work of the organization– Staff ask board members to participate in

tasks– Executive’s role becomes unclear

Avoiding the Challenges

• Board places too much value on consensus or reaching a unanimous decision instead of promoting an open, challenging consideration of an issue.

– Unanimous decisions are not always the best thing

– Promotes an atmosphere that makes hard decisions difficult.

Failing to Document Decisions

• Board minutes do not contain important decisions, contain a transcript of the meeting, or are not maintained in a minute book.

– Decisions can not be “found”– Institutional knowledge is lost

Ignoring Governance Structure

• As the organization’s work and mission adjusts over time, the board fails to make sure that board structure is appropriate.

– “Member” organizations that no longer have members

– New programs, but dated board structure and composition

Lack of Board Training

• Board members who have no sense of their role or obligations.

– Board members that do not recognize obligations to attend meetings, make informed decisions, or stay informed

Lack of Succession Plan

• Board has not developed a strategic succession plan that will maintain institutional knowledge, effective leadership or promote the organizations mission.

Not Maintaining Regular Audits

• Failure to regularly and systematically review programs and use of resources through legal, program and financial audits

– Board lacks information needed to assess program effectiveness

Accountability

• Chief executives are not regularly given performance reviews and lack any mechanism for holding staff accountable for outcomes

– Board has not integrated annual performance reviews

– Young staff, or staff new to the nonprofit sector, are not evaluated for impact

What does good governance look like?

• Leadership• Clear organizational

structure• Transparency• Accountability