What You Need to Know Before Accepting a Position as a Nonprofit Board Member

You've been asked to serve on the board of a nonprofit organization. Should you accept? Membership on a nonprofit board is a rewarding experience for many CEOs whose skills and experience running a company make them especially valuable to the organizations they serve. CEOs should, however, conduct due diligence regarding the organization and understand the duties of board membership prior to accepting a board seat.

First and foremost, a board member must attend board meetings and read materials provided at, or in advance of, meetings. On average, nonprofit board members spend eight to 10 hours per month on board activities, including meetings. CEOs should ask themselves whether they have the time and inclination to meet this threshold requirement before signing on.

CEOs should also be prepared to make personal financial contributions to the organizations whose boards they join, as this is an expectation of most public charities.

“CEOs should be prepared to make personal financial contributions to the organizations whose boards they join.”

Recent, publicized scandals—such as those involving Karen Alameddine (Hereditary Disease Foundation) and Clarke Howatt (Finance Authority for Nonprofit Corporations)—remind us that nonprofits can be ripe for embezzlement and other financial improprieties. This may cause CEOs to wonder whether board members may be subject to personal liability. The short answer is: in some cases, yes.

Board members can minimize their risk of personal liability by making deliberate decisions, creating a “paper trail” to show due diligence, avoiding conflicts of interest, and engaging legal counsel and other professionals as necessary. Insurance can also offer protection. In 2014, 96% of nonprofits carried directors and officers liability insurance, up from 87% in 2007.

Look before you leap
Here are some things to consider in determining whether you want to become a member of a nonprofit organization’s board:

  • Is the organization registered and in good standing in all jurisdictions where it is operating?
  • Who are the current board members and what are their affiliations?
  • When, where and how often are board meetings held? How long do they last? What is a typical agenda?
  • Is there a formal orientation and manual for board members?
  • What are the standing committees and what do they do? How are committee members elected or appointed? Will you be expected or able to serve on a committee at some point?
  • Are there any conflicts of interest that you think you might have?

The organization should supply you with the following documentation pertaining to the operations of the nonprofit:

  • IRS 501(c)(3) Tax Exemption Determination Letter
  • Statement of Mission or Purpose
  • Bylaws, or other internal governance rules
  • Federal Information Returns (e.g., Form 990)
  • Most recent financial statement and annual report, if one exists
  • Minutes of the three or four most recent board meetings
  • Current, board-approved budget
  • Conflict of interest, whistleblower and document retention policies

If the organization does not want to give you these materials, or says it does not have them when it should, that is a warning sign and you should think carefully before joining the board.

 


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.