We can only define the responsibilities of a board member when we know the type of board on which the director serves. For legal purposes, nonprofit organizations are corporations, just like their for-profit company counterparts. For governance purposes, nonprofit boards of directors have different responsibilities than those of for-profit corporations, because the organization has a different purpose.
Despite the differences in director responsibilities and in who receives the financial benefit from the organization, the responsibilities of nonprofits and corporations are more similar than they are different. Here’s a look at some similarities and differences in governance structures and board director responsibilities.
Responsibilities of All Board Members
First and foremost, all board members carry three basic responsibilities, which are also referred to as fiduciary responsibilities:
- Duty of care: to be diligent and careful regarding the organization’s best interests
- Duty of loyalty: to act in good faith and in a reasonable manner
- Duty of obedience: to act in ways that further the organization’s mission, vision and strategic plan, and also remain in compliance with the law
In making decisions, all corporations have to weigh risks alongside benefits. Directors need to make sure that any risks fall within the risk appetite of the organization. This means that they need to have foresight into how their decisions will affect their stakeholders or shareholders. It also means that they need to oversee the operations to make sure that their strategic planning is being implemented as they intended it.
Oversight duties include monitoring financial metrics to make sure the corporation remains fiscally healthy and that the corporation’s performance grows along with new revenue. Oversight responsibility extends to monitoring each committee or department so that planning is clear, and that parties have accountability for their responsibilities.
Communication is another thread that unites nonprofit and for-profit board directors. All boards need a spokesperson, who is usually the board chair, CEO or executive director, who can clearly communicate results to donors and investors. The spokesperson also makes public statements on behalf of the organization.
Responsibilities of Nonprofit Board Members
Board directors of nonprofit organizations have many responsibilities. Some of their responsibilities may vary based upon the type of organization or the unique needs that it has. Here’s a quick run-down of the top-10 responsibilities of a nonprofit board member:
- Defining the vision, mission, and purpose of the organization
- Selecting an executive director or president, and supporting, evaluating and overseeing the person in the role
- Ensuring that planning is effective and strategic
- Monitoring and strengthening programs and services
- Managing finances, including maintaining financial strength, having adequate reserves, protecting assets and overseeing personal giving
- Building and developing a competent board of directors
- Upholding a high standard of legal and ethical integrity
- Working in the community and advocating to enhance the organization’s reputation
- Giving their time, including attending meetings
- Serving on one or more board committees
Beyond the list of top-10 nonprofit board member responsibilities, most board members become involved in the organization because they have a personal connection to the nonprofit’s cause. Passion goes a long way toward motivating board members to be strongly invested in every area of the nonprofit’s work, even when they lack experience in leadership and corporate decision-making.
Many nonprofit organizations hire paid staff to run the day-to-day operations, but nearly all nonprofit organizations consider their volunteers to be the lifeblood of their operations. Nonprofit board members hold the responsibility for continually recruiting new volunteers and growing the membership. Board members need to give volunteers meaningful work to do and to oversee their efforts. Even though volunteers donate their time out of their commitment to the nonprofit’s cause, board members need to validate and show appreciation for volunteer service.
Responsibilities of Corporate Board Members
For-profit corporations hold the primary responsibility to sustain profitability and to grow the shareholders’ investments. Along with protecting their investors, corporate board members can also classify their responsibilities into 10 main duties:
- Determining the corporation’s mission, vision, and values
- Selecting, hiring, supporting, evaluating and overseeing a chief executive
- Setting organizational goals and setting the course for strategic planning
- Monitoring financial resources by making a careful review of financial reports
- Serving as the court of appeals
- Performing self-evaluations on each director and on the whole board
- Communicating goals, new projects, innovations and profits to shareholders
- Adhering to the corporate culture and using it to enhance the organization’s public image
- Approving the budget and approving policies for contracting with outside vendors
- Accepting responsibility for all decisions and actions of the board
It’s true that many of the responsibilities of corporate board members bear a great resemblance to those of nonprofit board members, but the profitability of the corporation guides the focus of their efforts.
Corporate executives are usually highly experienced and come with high expectations for stellar performance. The chief executive officer needs to have a multifaceted skill set, including board collaboration skills, leadership abilities, ability to implement programs and services, and ability to manage large numbers of departments and employees.
Similar to nonprofit organizations, corporations need to have a public spokesperson who takes responsibility for reporting good and bad news to the stockholders with regard to positive and negative financial trends and expenditures.
Corporations do not typically recruit volunteers, but they often hire paid or unpaid corporate interns. Internships benefit the company by providing then with a cadre of workers with fresh, new ideas, thought patterns and technological expertise. Successful interns can be invited to join the company as full-time employees.
It’s pertinent to note that corporate interns have a different motivation than their nonprofit volunteer counterparts. College interns are looking for job experience, network building and, sometimes, a little pay for their performance.
Board Member Responsibilities: Putting It All Together
Boards were never intended to be static. Term limits help boards to grow and evolve with our changing society and economic climate. It’s not healthy for any board when either a board director or an executive leader tries to exert too much control over the other. It’s healthy for boards to have regular robust discussions about the intrinsic operations of the organization. They also have a responsibility to maintain a spirit of respect, professionalism, and collaboration.