January 13, 2014 | Read Time: 4 minutes
Nonprofit board members will be asked to work harder, faster, and longer in 2014—and keep a far sharper eye on operations, performance, and mission.
That’s because of increasing economic and competitive pressures, donor concerns, closer regulatory scrutiny, and a broader perception that nonprofit boards should no longer be given the benefit of the doubt when it comes to allocating accountability for breakdowns, missteps, and failures.
But these are challenges that board members can readily meet as long as they keep their focus on the mission.
Here are the top trends every trustee should think about:
Scandals cause concerns to bubble up. Close media scrutiny of scandals and controversies involving nonprofit organizations and their leaders has caused everyone to be more skeptical of even the best-run charities. Boards will be called upon to do more to protect the reputation of their organizations and to show they are vigorously enforcing ethical and legal standards.
Overseeing a nonprofit is more challenging than ever. Economic and competitive pressures intensify, as do the challenges posed by regulations.
To ensure that boards use their time well to focus on meeting these challenges, it’s important to develop committees that specialize in oversight of specific duties, such as finances and ethics, and to adopt technological tools that make it easier for trustees to monitor the organization’s progress and keep up with board deliberations. It’s also worth looking at governance structure and board size to be sure they are well suited to handling today’s challenges, something that’s often not possible with boards that still operate the way they did a decade or more ago.
Strategic planning deserves the lion’s share of a board’s attention. While the actual preparation of the plan is the responsibility of the chief executive and other leaders, the board has a vital role to play in influencing it and monitoring the way it is put in place. Board members should see this duty as a key part of preserving the long-term sustainability of the organization.
New skills are essential for every boardroom. The board’s nominating committee should be asked to look for candidates with the backgrounds needed to ensure that the nonprofit can meet its strategic goals. The board’s ability to do an effective job of oversight and decision making depends on attracting board members with experience handling the kinds of issues that have come to dominate agendas.
Complying with government regulations must be a priority. Every nonprofit—no matter what its cause—must follow a broad range of federal, state, and local rules. Most groups will want to designate a qualified staff member responsible for ensuring all regulations are followed. Board members need to understand the regulations well enough to be able to provide oversight to that staff member and make good decisions about what actions might fall outside of legal bounds.
All relevant information, even bad news, needs to flow to the board. Trustees should be clear about what they need, what level of detail they want, and how much context is appropriate. They also must create an environment that makes executives feel comfortable talking to the board about tough issues.
Boards and leaders need to share responsibility for big bets. Some of the changes nonprofits need to make to meet their missions are so ambitious and wide ranging that it would be wrong to delegate all the decisions solely to the chief executive and other senior staff members. The extraordinary level of involvement needed shouldn’t be seen as a lack of confidence in the staff but as an acknowledgment that the board needs to step up in connection with major efforts. Managing projects is not solely an executive responsibility.
The potential for conflicts of interest abounds. Nonprofits are engaging in new ventures, business arrangements, and other efforts with a wide variety of partners. These projects and relationships are prone to creating new types of conflicts between board members and the nonprofit, and among the board members themselves. Stronger policies and vetting procedures may be required.
Ethical quandaries could arise as the role of the nonprofit’s general counsel changes. The growing complexity of nonprofit organizations has led to a shift in the role of the general counsel at many nonprofits. Increasingly, the general counsel is asked not only to insure that laws are followed but also to become a chief executive’s business partner. That is a tricky relationship, and it’s important for the board to be alert to the problems that dual responsibilities pose.
Many of the standards nonprofit boards must meet today are more like those in corporate America. Courts, regulators, and the public all expect greater rigor and attention from the trustees in charge of ensuring that charitable gifts, government money, and other assets are used to benefit society as fully as possible. The first board meeting of 2014 should start with the question: Are we ready to handle all these challenges?
Michael Peregrine is a lawyer who specializes in working with nonprofits at McDermott Will & Emery’s Chicago office.
