For years on end, there has been huge misunderstandings in non-profit board governance. These misunderstandings have ultimately metamorphosed into mistakes that are nonetheless damaging. This report seeks to analyze and extract the most important elements of the recognized list that highlights 15 of the mistakes that non-profit board governance make but they should not. The list was started as an inaugural post to CharityLawyer Blog and has since been modified to add more insight to it.
There are many mistakes that have been highlighted in the list but this report will just give a brief overview of some of the mistakes that are pretty much overlooked. The first one is the blatant disregard for fiduciary duties by volunteer directors who think that they could abscond responsibility of acting with good faith, due care and loyalty as well as accepting liability whenever authority comes calling for actions taken against the law. Failure to provide effective oversight is also a mistake that if not addressed could result in massive irregularities in non-profit organizations’ finances.
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Micro-managing staff who report to the chief executive by board members is also detrimental to the well-being of the non-profit and is symptomatic of an ailing organization that does not trust its structures. In addition, avoiding hard questions in board meetings but not giving room for discourse and open-mindedness by board members could also negatively affect the entire non-profit as creativity and better solutions are kicked under the table. Poor conflict management by the board members could also implicate the non-profit especially if the conflict of interest is not handled following laid procedures set by the organization itself.
The assumption by directors from for-profit organizations that non-profits operate in less regulated environment is a mistake that can also lead the non-profit into turmoil. To make up for tax-exemptions and other tax benefits by non-profits, legal requirements have been imposed by congress and local governments which all directors should be aware of. Furthermore, airing boardroom disagreements outside the boardroom is a practice that should be avoided at all cost and instead find solutionsfor the matter within the confines of the boardroom.
Cultivating board diversity is an action that is more often than not ignored by board members. The board should be made up of individuals that are fundamentally different and do not share from a common educational background; well, at least, half the board. The board should encourage diversity by inculcating people with the necessary skills required to ensure that the board is functioning well. Motivating and educating board members is also often overlooked but should be given priority not only to increase the knowledge base of the board members in understanding the mission of the non-profit but also to ensure that they know their individual duties and responsibilities.
Board’s failure to review the effectiveness of non-profits’ programmes is also a setback that can also be damaging to the organization. The board should be able to offer programmatic oversight and in addition to financial oversight so as to ensure that the programmes undertaken by the organization are indeed beneficial to the society and in line with the organization’s mission. Documenting actions appropriately should also be given a serious consideration. A balance should be made that ensures that not all discussions are documented exposing the organization to liability but enough is documented to ensure that there is no loss of institutional knowledge.
