Top 3 Takeaways – Common Governance Mistakes and How to Avoid Them

Moderated by Claire Rosenzweig, CAE
President & CEO
BBB Serving Metropolitan New York

August 09, 2017
Presented in collaboration with The Foundation Center New York

Laura Abel
Senior Policy Counsel
Lawyers Alliance for New York

Alice Antonelli
Director, Advisory Services
Nonprofit Finance Fund

Frederick Shack
Chief Executive Officer
Urban Pathways, Inc.

Jenny Way
Associate Director
Mayor’s Office of Contract Services

Claire Rosenzweig, CAE
President & CEO
BBB Serving Metropolitan New York

During this program, five seasoned leaders with varied perspectives discussed reasons why nonprofits develop governance troubles, how we can avoid them, and what we can learn from such problems. For starters, panelists recommended that board members have defined job descriptions and be informed about the board’s fiduciary Duties of Care, Loyalty and Obedience as well as the nonprofit’s bylaws. An organization’s bylaws spell out how the board will be structured and operate; they should be clearly written, reviewed periodically, and updated as needed to stay compliant with laws and to address governance issues. In addition, it was suggested that the board have term limits for members, to ensure that the board can be refreshed with members who bring new perspectives.

Having an engaged board and committee members was noted as being key to fulfilling the board’s critical Duty of Care. Board members need to understand the organization’s budget and financial statements, know how to interpret them, and be aware of the implications of their financial decisions. Engagement includes participating in strategic planning, risk assessment and oversight. Hiring a competent executive to manage the organization is important. An organization’s CFO is also an important adviser for the board.

Conflicts of interest were mentioned as an area to evaluate and monitor, in order to avoid problems related to the Duty of Loyalty. Board members and staff need to ensure that the organization is in compliance with New York’s Nonprofit Revitalization Act (NPRA) regarding Conflict of Interest and Whistleblower policies and procedures.

Nonprofit boards are charged with protecting and advancing their organization’s mission. Preventing mission drift can be addressed by educating the board about the organization’s mission and how to stay on track with it. Being sure the board and executive director understand and comply with all applicable laws and policies that affect them and their nonprofit is important under the Duty of Obedience.

Effective nonprofit governance requires partnership between the executive, whether hired or volunteer, and the board leaders. A regular evaluation of the executive as well as the board can be helpful to keep everyone focused and team-oriented. Succession planning can also help the board understand what it takes to run the nonprofit, and lead to a better transition and hire when that becomes necessary. Together, the board and executive leader will shape the culture, strategies and policies of the organization. A nonprofit will function best when board members work amicably with each other and with the staff.

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