Governance for Nonprofit Organizations

From Little Leagues to Big Universities

BOARD OF DIRECTORS/TRUSTEES:
BOARD STRUCTURE AND OPERATIONS

ONLINE VERSION: TABLE OF CONTENTS Introduction Governance Documents Board of Directors/Trustees: Board Responsibilities Legal Obligations of the Board Personal Qualities of Effective Board Members Board Structure and Operation Effective Meetings Building and Maintaining an Effective Board Making Board Service Fulfilling Guides and Tips Sample Meeting Rules Agenda Suggestions Tips for Basic Minutes and Reports Governance for Nonprofits: From Little Leagues to Big Universities is also available as a free download in PDF form. Right-click here to download.

The size and sophistication of the organization and the size and function of the board (i.e. governing/oversight board or operating/hands-on board) tend to determine how often a board meets and whether a majority of the work is done at board meetings or through committees of the board.

In the corporate for-profit arena, the trend has been to reduce the size of boards to allow for greater discussion and interchange and to increase efficiency and accountability. However, in the nonprofit world, particularly with respect to educational and arts organizations where directors play a major role in fundraising and the desire to engage a wide variety of constituencies is common, it is not unusual to have boards with 30 or more members, and sometimes as many as 75-100 members. Boards of this size clearly must rely on committees to do much of the work on behalf of the board, either with delegated authority to act on behalf of the board, or with a mandate to present well-vetted recommendations to the board to facilitate full board action.

Committees vary with the needs of each organization. Smaller boards may not need committees and may perform many of the functions mentioned below at the board level itself. However, fairly typical standing committees (i.e., committees which stay in existence year after year) would include:

• The Executive Committee - empowered to act between board meetings if necessary, and sometimes with specifically delegated authority to act in particular areas on behalf of the full board. The make-up of executive committees will vary with the organization, but many such committees are made up of the board officers and committee chairs.
  
  
• The Finance Committee - typically assigned to provide detailed review of financial statements and issues, including budget, accounting, tax and investment issues, and, if there is no separate audit committee, audit issues.
  
  
• The Nominating/Governance Committee - typically charged with finding and recommending new directors for board approval, but sometimes also charged with recommending officer and committee appointments, establishing criteria for board service, reviewing performance of existing directors, and providing orientation for new directors. Some nonprofit nominating committees have taken on the additional role of reviewing and making recommendations on governance issues and otherwise playing a leadership role in shaping the nonprofit's corporate governance.
  
  
• The Development Committee - typically oversees the fund raising process of the organization.

Larger boards and organizations may also have additional committees, such as:

• The Audit Committee - responsible for oversight of the independent audit process and for overseeing the financial integrity and finance/accounting controls of the organization. The trend is for members of audit committees to be "independent" board members (i.e., with no significant financial or other relationship to the organization), and to have substantial financial expertise (i.e., experience in reading financial statements and at least one member with an understanding of accounting principles and practices). Audit committees and their membership may be legislatively mandated in certain states for organizations of a certain size.
  
  
• Personnel Committee - typically charged with overseeing the development of compensation and benefit programs and guidelines for any paid staff. In some cases, this committee actually approves salaries of the top executives, reviews their expenses, and oversees their formal evaluation. Committee or board approval of the executive/managing director's (i.e. CEO-equivalent) salary and expenses may be legislatively mandated in certain states for organizations of a certain size.
  
  
• Investment Committee - responsible for oversight of the investment of funds, typically endowment funds, of the organization and for creating or recommending investment policies.
  
  

In addition to standing committees, many boards create ad hoc committees for particular, short term projects. Typical examples would include a strategic planning committee when the organization's strategic plan needs updating, or a facilities committee when new premises are needed, or a search committee when a new executive director is sought.

Regardless of the role of standing or ad hoc committees, their effectiveness can be improved by making sure that each one understands its mandate. An excellent way to achieve this is to create written charters for each committee. Some organizations include these charters in their bylaws. (The Society has sample charters.) Effective staffing of committees by management can also help committees function more efficiently.

Committees also need to report all their activities to the full board, so that body is aware of their work. Depending on the size of the board, or the tradition of the organization, reports can be oral or written.

Nonprofit boards frequently add non-board members to committees, either to broaden the expertise of the committee or to provide an opportunity for getting to know potential board candidates before nominating them for a director role. State law varies on whether such non-director members can actually participate as voting members.

Governance for Nonprofits - Home Page

Society of Corporate Secretaries and Governance Professionals
521 Fifth Avenue New York NY 10175
212-681-2000 - Fax 212-681-2005

membership | search | help | site map | contact us
Copyright & Privacy Statement