Boards change; they grow; they evolve. Whether it is a founding board or a multimillion-dollar institutional board, throughout this evolution every board is accountable for its action to its owners. So, who are their owners? It is accepted principle that nonprofits have two owners, their legal owner which is the the Attorney General of the State, and their moral or ethical owners, which is their clientele that is defined and served through their mission statement.
Maintaining this dual level of ownership requires thoughtful intention on the part of each board member. For the Board to maintain legal accountability, the primary underlying commitment of every board member is to the Fiduciary duties and the basic roles and responsibilities of each board member.
All board members are considered fiduciaries because they have legal responsibility for the assets of the nonprofit, with a focus on the proper handling of the funds that are raised to perform the agency’s programs. There are three fiduciary duties:
§ Duty of Care
§ Exercise independent judgment in handling corporate affairs. Be prudent in your decision-making.
§ Duty of Loyalty
§ Act to further the organization’s interests and don’t act to further your interests.
§ Duty of Obedience
§ Act in good faith, following all state and local laws to carry out the mission of the agency.
Beyond the three fiduciary duties, there are the ten basic roles and responsibilities of each board member. They are commonly recognized within the nonprofit sector and can be broken out this way:
Maintain the Identity of the Nonprofit
Determine the mission, purpose and vision
Maintain planning for the ongoing future of the agency
Ensure Resources
Provide financial planning and oversight
Select the Executive Director
Hire, review, fire (if necessary) an Executive Director
Build a capable and proficient board
Deliver Oversight of Agency actions
Strengthen and oversee programs
Protect assets
Formant Ethical and legal integrity
Support the Executive Director
Maintaining a proper structure, with policies and procedures that are dutifully followed and filing annual and bi-annual reports in a timely fashion, keeps a board of directors in good standing with the state Attorney General.
The ancillary accountability of a board of directors is to the clients that the agency serves. John Carver, the gentleman who created the Policy Method of Governance® called this “moral ownership” and defined it as “a special class of stakeholders on whose behalf the board is accountable to others.” Based on this, as a board operates on a daily and annual basis it must remain faithful to serving those that are the reason for the nonprofit to exist. As long as a board has a clear, concise mission statement that defines its clientele along with ‘by’ statements, ways in which the organization will meet that mission, they can make decisions while keeping the clientele foremost in mind.
The bottom line is that there is dual ownership, one legal and one ethical. Owners are those invested with matters and benefits the board is legally and ethically obligated to acknowledge.
The balancing of the two requires intent and a serious recognition of your role as a board member. It also requires a reminder of a board member’s role annually or bi-annually through a board assessment. This allows board members to remain aware of these legal and ethical obligations and their need to work together to ensure that their agency is accountable to their “owners”. Always recognizing that this dual ownership is a constant throughout the growth and evolution of a nonprofit.