Nonprofit Boards

A Texas nonprofit is a corporation that is managed by a minimum three-member board. This means that in Texas you can’t just start a nonprofit on your own. You need at least two others to form the board that will manage the corporation.

Here are the three duties of a board member, which are legal responsibilities:

• Duty of Care — Board members must actively participate in making decisions on behalf of the organization and to exercise his or her best judgment while doing so.

• Duty of Loyalty — Board members must put the interests of the organization before their personal and professional interests when acting on behalf of the organization in a decision-making capacity. Beware conflicts of interest.

• Duty of Obedience — Board members have a legal responsibility to ensure the organization complies with the applicable federal, state, and local laws and adheres to its mission.

As a founder, you should notice that "raising funds" and "attending events" are not listed as duties.

So, when you are choosing a board, do your prospective members understand their duties?

The board owns the mission of the organization. This means that the board decides what the organization will do to further the mission. For example, a pet rescue board may decide whether to operate a physical shelter or use fosters. The decision on how to operate is probably at the board level.

The board manages the organization. In reality, many boards hire someone to manage the organization for them – in a for-profit, it’s the CEO, in a nonprofit, the same person is usually called an Executive Director. The Executive Director implements the board’s decisions and reports on progress to the board. (He is also hired, fired and paid by the board. The “paid” part is not usually immediate – the organization has to build up capital and an income stream first.)

In the early days of a nonprofit, the founder is probably a board member, the President and the acting Executive Director. He or she wears many hats. The reason it is important to keep track of the hats is because if the nonprofit flourishes and the board decides to hire an Executive Director, the founder needs to know what actions to delegate to the Executive Director or the President and the Executive Director will end up at cross-purposes.

The other reason hats are important is because in many small nonprofits, the board ends up working for the Executive Director, instead of the other way around. If the founder who is acting Executive Director wants to build a shelter or adopt 200 animals or buy a Maserati, the board must have the freedom (and the sense) to say “No” if the plan is not fiscally possible or if it is not in line with the mission. This often does not happen.

The original board is critical to the survival of the nonprofit. It has to consist of people that the founder trusts, but the members also need to trust the founder. They also have to believe in the mission. They also have to know something about running a business. Since the board owns the mission and employs the executive director, some founders have seen their nonprofit change missions because a majority of the board decided that was proper. Founders have been pushed out of their own nonprofits by boards that didn’t want the founder around any longer. If this is in the best interests of the organization, that’s what the board should do.

The challenge many organizations have is that the board is a “working board" (there is no such thing) which is made up of super volunteers who just rubber-stamp the founder’s wishes. There is no financial oversight, there is no discussing what actions are taken. This is not a board. That is a fan club.

Board members are not just “super-volunteers.” It is a completely different job. If you look to the for-profit world for guidance, the board is usually not involved in the day-to-day operations of the organization. The company’s CEO and officers run the organization and report to the board.

In a small nonprofit, the challenge is that the board and the volunteers are probably the same people. They are not acting as board members while they are doing day-to-day operations, they are volunteers, and they probably work for the Executive Director, who is also a board member. When they meet as the board, they own the mission, and the Executive Director works for them. This is a huge conflict of interest. The board appoints people to implement the mission. The board reviews reports on how the implementation is progressing. The board approves the funding and budget required to implement the mission – and the implementation plan is proposed by the Executive Director.