Nonprofit board governance serves two very important purposes – fulfilling your nonprofit’s mission and ensuring its sustainability. Separately and together, nonprofit boards and governance play essential roles in the nonprofit sector, and it’s important to note the distinction between them.
Simply put, the board is a structure while governance is a function. Nonprofit board governance ensures that the organization is truly working toward its mission and serving the members of society. The role of a nonprofit board member is to serve as an overseer for the nonprofit. In that role, board members are accountable for the decisions they make and the actions they take on behalf of the nonprofit.
Whether you’re new to the nonprofit sector or you simply need a refresher, we’re providing the basics and best practices for nonprofit board governance.
Basics of Nonprofit Board Governance
Much of a board member’s knowledge comes from the experience they gain in the boardroom. Nonprofit board training, education, and mentoring are good ways to help board members increase their knowledge about nonprofit board governance.
Here’s a list of the basics of nonprofit board governance your board members need to know about:
- Outlining board responsibilities – Board members have many responsibilities and most of them fall under fiduciary duties called the duty of care, duty of loyalty, and duty of obedience. Board members are also required to review the nonprofit’s mission, annual budget, compensation practices, policies, and ensure overall good governance.
- Setting expectations for board meeting attendance – Expect board members to attend all board meetings with few exceptions, participate in board discussions, record meeting minutes, and serve on committees if needed.
- Building a qualified board – There’s no simple answer to what size a nonprofit board should be. It needs to be large enough to allow for meaningful deliberation and discussion, yet the board shouldn’t be so large that discussions are unproductive.
- Considering diversity in board recruitment – Diverse boards bring various perspectives to your board discussions. Boards should strive to recruit members of different races, ethnicities, genders, expertise, and experience.
- Requiring board members to be independent – They shouldn’t be employees, independent contractors (or be related to such people), and board members should never materially benefit from their board service.
- Creating an executive compensation policy and reviewing the executive director’s performance annually – Compensation should be in line with that of similar nonprofits.
- Creating job descriptions to ensure a clear separation of roles – The positions of the Board President, Board Chair, and Treasurer should be held by different people.
- Developing a program for continuing board education – It’s essential for board members to be aware of their legal and ethical responsibilities and understand the nonprofit’s programs and activities so they can carry out their duties responsibly.
- Conducting annual self-assessments – Boards should establish a process to assess their performance as individuals and as a board.
- Outlining term limits – Boards should have a clear policy for board terms and the number of allowable consecutive terms.
- Reviewing governing documents and the mission on a regular basis – The needs of stakeholders change periodically, and it’s the board’s responsibility to ensure the mission and governing documents are relevant.
- Establishing a board compensation policy – Nonprofit board members serve without compensation. A compensation policy outlines the rules for reimbursing board members for board-related expenses.
Nonprofit Board Governance Models
Over the years, nonprofits have established and used various models of board governance.
We’re describing 7 of them to help you determine which governance model fits your nonprofit best.
- Voluntary Board Model – This is the most common type of model. Board members often work within the community. Paid employees and volunteers provide the labor for the nonprofit.
- Advisory Board Model – Some nonprofits begin with one person who becomes the CEO or executive director. Nonprofits must have a board to qualify for nonprofit status. In this case, an advisory board helps to fill in gaps in experience in areas like law, accounting, or marketing.
- Patron Model – With this model, board members have a heavy focus on fundraising and networking. Board members often give generously of their own wealth. Often, this model develops when a family member of a board member has a condition that drives the nonprofit’s cause.
- Cooperative Model– Rather than establishing roles and rankings, all board members work as a group where all have an equal voice, voting rights, and authority.
- Policy Governance Model – This model is the most similar to the Voluntary Board Model, except it creates various management committees that have responsibility for different areas of governance. A CEO or executive director runs the daily activities of the nonprofit.
- Community Engagement Governance Model – In this model, the board serves the community, although it’s not part of it. Stakeholders and the community accept responsibility for governance matters.
- Hybrid Board Governance Model – Two or more governance models may fit a nonprofit’s governance needs. Nonprofits get the best of both worlds by creating a customized hybrid model to meet their needs.
Regardless of which nonprofit board governance model your board follows, it’s crucial to create the appropriate governance documents and policies and keep them updated.
Nonprofit Board Governance Best Practices
Part of a board member’s responsibility is to learn about nonprofit board governance best practices and put them into practice. Best practices are in a continual state of evolution, and responsible boards stay in the loop of new information.
Here are some nonprofit best practices for your board to discuss and implement:
- Ensure that all programs and activities focus on the nonprofit’s mission.
- Create job descriptions for board members, officers, the board chair, and staff, and keep them updated.
- Create a succession plan for the executive director and board members.
- Conduct annual board assessments.
- Review the IRS Form 990, and approve it before submitting it.
- Schedule an annual strategic planning meeting.
- Ensure transparency in the finances, budget, and donations.
- Ensure confidentiality and security over data.
- Leverage digital tools such as a board management system for managing board activities and business.
- Stay current with nonprofit regulations and legislation.
- Encourage board participation in discussions, welcome diverse points of view, and maintain a collegial tone in the boardroom.
- Practice oversight without micromanaging staff.
BoardEffect considered the many basics and best practices of nonprofit board governance when designing a full-featured board management system. BoardEffect provides a highly secure platform for managing board meetings, schedules, meeting minutes, and much more. It’s a complete board management system that assists boards with every board activity and action.