Research Friday: Lessons in board governance
Welcome to Research Friday! As part of a continuing series, we invite a nonprofit scholar or practitioner to highlight current nonprofit research reports or studies and discuss how they can inform and improve day-to-day practice. We welcome your comments and feedback.
In April of 2011, a story broke regarding The Central Asia Institute, a nonprofit organization. Although it had been in existence for 13 years, the organization had no audited financial statements, had only three board members (including the executive director), was not clear about how donor money was being spent, and had a clear conflict of interest with the executive director promoting personal book sales through the nonprofit. The truth about the Central Asia Institute was revealed in several high-profile journals and newspapers such as the Harvard Business Review, The Chronicle of Philanthropy and the Wall Street Journal, with articles titled “Lessons from the ‘Three Cups of Tea’ Controversy,” “‘Three Cups of Tea’ Scandal Offers Lessons for Charities and Trustees,” and “Lessons for Donors from ‘Three Cups of Tea’,” respectively.
The Central Asia Institute is only one nonprofit organization that has fallen from grace due to poor nonprofit governance. The United Way and the American Red Cross are two well-known, large organizations that have also experienced controversy in recent years1.
Thankfully, a recent survey conducted by BoardSource in 2012 shows signs of increased governance among nonprofits2. Through surveying chief executive officers from all 50 states, BoardSource reported the following key findings:
- Increased attendance at board meetings, with 88% of respondents reporting 75% or higher attendance.
- Increased use of productive meeting tools, such as consent agendas (60%), web-based board portals (37%), and telecommunications (47%).
- Increased accountability and self-assessment
- Boards continue to adopt conflict-of-interest policies, whistleblower, and document-retention policies. In addition, more boards are conducting board self-assessments, with self-assessments increasing 5% from 50% to 55%.
- Increased understanding of their legal and governance responsibilities. Sixty-two percent of respondents felt that the board was ‘well informed” or “very well informed” of its responsibilities” as compared to 58% in 2010.
Despite the positive increases from 2010, the above numbers demonstrate that in most areas, there is still significant room for improvement for many nonprofits across America. One large local organization that has made tremendous strides in their governance is the Arizona Sports Foundation, which operates the Fiesta and Buffalo Wild Wings bowl games.
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In the past two years, The Fiesta Bowl has implemented many of these policies in order to increase and strengthen its governance. Conflict-of-interest, whistleblower, and document-retention policies are all available on the Fiesta Bowl website. A web-based board portal has been developed and more board members are adapting to using it before each meeting. Consent agendas have been implemented at board of directors meetings in order to increase productivity.
However, as the BoardSource report states: “having policies doesn’t guarantee strong governance. Approving recommended policies is only the first step and needs to be followed by the board’s dedication to implementation and strong oversight.” It is imperative that every board have a thorough understanding of their legal and governance responsibilities in order to first create sound policies, and secondly implement these policies.
To that end, job descriptions that clearly state the responsibilities of the board of directors are critical. The Fiesta Bowl recently approved a board of directors job description that states the responsibilities of the board with regard to leadership, governance, oversight, operations, audit, participation, and fundraising.
Resources to create these documents and policies are available through many sources. Below are a few examples to help you get started.
- Example conflict of interest policies, whistle-blower, and document retention policies:
- Example board self-assessment tools:
- Sample nonprofit job descriptions:
The IRS website reads: “Good governance is important to increase the likelihood that organizations will comply with the tax law, protect their charitable assets, and thereby, best serve their charitable beneficiaries.”
The vast majority of nonprofits desire to serve their charitable beneficiaries, whether that is through the arts, health and human services, or grant-making. Although creating more policies and procedures can seem like a tedious and time-consuming task, it ultimately leads to being able to fulfill your mission more fully.
Sharon assists the chief of compliance and the chief of staff at the Tostitos Fiesta Bowl and Buffalo Wild Wings Bowl. She graduated from Arizona State University in 2011 with a Master’s of Nonprofit Studies and from Northwestern University in 2008 with a bachelor’s degree in communication. A long-time Arizona resident, she is passionate about increasing efficacy and the capacity of the local nonprofit sector.
1. Dede, M. (2009). Ethics and Nonprofit Governance. Journal of Academy and Business Economics, 9 (1), 70-78.
2. Nonprofit Governance Index 2012: CEO Survey of BoardSource Members. 3 October 2012. BoardSource. Retrieved from: http://www.philanthropyjournal.org/resources/special-reports/volunteers-...