Most commonly, people tend to connect the idea of governance with for-profit corporations. Governance has existed for decades, although there wasn’t much focus on it until the financial crisis hit in 2008. The reality is that practicing good governance principles is as important for nonprofit corporations as it is for for-profit corporations.
The financial debacles on Wall Street brought governance issues to the forefront. Much of the discussions centered around holding boards of directors more accountable for their actions, decision-making and oversight. While nonprofit boards hadn’t been considered in the same regard, the seriousness of the financial troubles in the corporate world cast a new light on the responsibilities of nonprofit boards as well.
Poor corporate governance results in wastefulness, poor management and corruption. These issues are no less tolerated in nonprofit governance than they are in governance for corporate businesses. Good governance places emphasis on the quality of policies and processes that help organizations to achieve their goals and to serve the best interests of their stakeholders.
Good corporate governance helps corporations succeed and ultimately sustains and strengthens democracies.
Benefits of Good Governance
Organizations and corporations that practice good principles of corporate governance get rewarded with a payoff in many areas of their business. Good governance forces organizations to develop sound organizational plans and strategies. In addition, good governance requires organizations to review their operations and delivery processes for effectiveness and efficiency. Stakeholders of nonprofit organizations have appreciated the effect of increased regulatory measures on for-profit corporations because they’re placing emphasis on ethics and accountability for nonprofit organizations as well.
The focus on governance provides nonprofit organizations with new opportunities to enhance engagement and communication with their stakeholders.
A Nonprofit’s Purpose Plays a Role in Good Governance
Nonprofits serve their members and the community. In general, nonprofits put a lot of time and thought into forming meaningful and long-lasting statements for their mission, vision and values. Board members of nonprofits may also have a vision for the culture of the organization. Culture plays out over time as board directors and other leaders communicate the tone of the culture from the top.
A nonprofit’s purpose plays a role in good governance, as it holds nonprofits accountable for honesty and ethical dealings. Good governance entails communicating the organization’s mission, vision, values and culture to their stakeholders, so the stakeholders can hold them accountable.
Governance Is for the Sake of All
Principles of good corporate governance follow the rule of law, which means that the law rules over all groups and individual actors, even those with great power. The rule of law requires organizations to observe basic human rights in the course of their operations. The rule of law requires nonprofits to manage their affairs justly and to offer equal treatment for all groups and individuals in our society.
Good Governance Applies to Nonprofit Leaders
Good governance principles apply to board directors, officers, managers, employees, volunteers and anyone else who works with or for nonprofits. Nonprofits must balance the needs of everyone that works for and with them. It’s not an easy task because it requires everyone involved to be conscious about making sound judgments and being on their best behavior.
When everyone practices principles of good governance, it creates an honest and open environment that holds everyone accountable and keeps them all on track.
Board Composition Greatly Influences Good Governance
While public companies must obey certain regulations regarding board composition, it’s one area in which nonprofits have some flexibility. At the same time, nonprofit boards have recently been influenced by many of the same principles behind what makes for a well-qualified and well-composed board. Recent governance standards require almost the same degree of accountability for nonprofit boards as businesses, so it makes sense for nonprofit boards to be diverse and to take their responsibilities just as seriously. It’s vitally important for all nonprofit board directors to be fully committed and to actively engage in board discussions.
All boards have much leverage in choosing members for their boards. Good governance requires boards to have as much diversity as possible. Nonprofit boards usually try to form diverse boards by taking into consideration age, gender, race, ethnicity, religion, background, skills and experience, just as corporate boards do.
Nonprofit boards can support good governance by adding clear descriptions and expectations for board directors, officers, managers and their standing committees to their bylaws. Not all corporate boards participate in succession planning, but they should, and so should nonprofits.
Public boards must evaluate themselves. Some public boards take it a step further and evaluate individual board directors’ performances either regularly or periodically to ensure that they’re performing as well as they can. This is another area in which nonprofit boards can mirror their counterparts and shine in the area of governance.
Board Management Software as a Tool to Ensure Excellence in Nonprofit Governance
Good governance isn’t something that nonprofit boards can take for granted. Nonprofit boards are more likely than corporate boards to have board directors who have less experience, and they must discharge their duties and responsibilities with equal diligence.
Board management software is an instrumental tool for nonprofit boards to help ensure good corporate governance. It’s ultra-important for nonprofit boards to operate as efficiently and as effectively as possible. A board portal is an essential tool to help the board fulfill its duties responsibly.
A board portal offers strong security for developing the board’s agenda and recording board meeting minutes. The portal affords boards the ability to communicate and collaborate on their board business during meetings as well as using mobile devices. Using BoardEffect board management software, nonprofit boards can do their annual self-evaluations right online and get the results quickly. Board portal software assists nonprofit boards in their development cycle, so they can continually build a qualified, competent board of directors from recruitment through succession planning. Board portal software also helps boards stay current with all of their compliance and regulatory requirements and track cycles for donations and events.
Governance encompasses the various rights and responsibilities of people, processes and structures to make the best decisions for tending to nonprofit duties responsibly. A board portal is a centralized platform that brings all components of governance under one electronic roof to manage every aspect of nonprofit board business for every size nonprofit board.