Blog: Boards of Directors

Company directors on not-for-profit boards are often required to make substantial donations to the cause, or to elicit substantial donations from their network. Those that can’t or won’t become major benefactors are, more or less subtly, removed from the boardroom. But does this model sit well with current notions of directors’ responsibility and the professionalization of the role.

All around the world there are stories (often in the form of court case judgements) about boards of charitable organisations who were found to have been inappropriately focussed on only a few aspects of governance – or worse still, operations – and to have neglected their governance role to the point where they were found personally liable for corporate losses or other faults. Discussions with CEOs in the sector reveal a deep frustration that not all boards are living up to current expectations but that ‘it is hard to demand more’ given that the board members are unpaid volunteers.

Prime among the CEOs lists of grievances is the inability of the board to contribute at a strategic level to the company or to provide the CEO with meaningful mentoring. Even when boards are contributing to financial oversight it is often at a superficial level such as checking expenditures against budgets rather than at a strategic level such as determining the appropriate amount of financial reserves and investment strategies. Many boards leave the financial oversight entirely to the executives or concentrate only on the aspects that they can influence such as donations, fund raisers, etc.

Then there are the ‘two tier boards’ not, alas, the carefully designed and culturally appropriate management and governing boards that prevail in some jurisdictions, but those where some board members are ‘more equal than others’. On these boards there is an inner circle of members who take a strong interest in the governance, often chairing committees whose membership excludes their ‘outer circle’ board colleagues and assuming responsibility in line with modern expectations of the director role. The ‘outer circle’ members frequently provide funding or host fundraising activities or otherwise use their personal networks to support the aims of the organisation. These boards are frequently characterised by high levels of mistrust and occasionally by mutual loathing amongst the board members. Each circle can easily resent the other as having a role that excludes the other.

Some organisations are restructuring their boards to allow for a proper governance function and creating specific committees or communities for volunteers, donors and supporters. These organisations manage to achieve a ‘best of both worlds’ solution with fit for purpose membership of societies of friends, councils of patrons or boards of directors. The result is an organisation that knows where to look for board leadership and is not disappointed when it does look there. The CEOs of these organisations report that they are better able to design engagement strategies for each group, and that they benefit greatly from the increased input of a governing board that takes on all the aspects of its professional role.

Perhaps the day of the professional director is dawning in our not-for-profits. With increased director liability, greater demands for transparency, more rigorous regulation it is certainly time for directors to play a bigger role in governance.

What do you think?

———————————————————————————————————-
Julie Garland-McLellan has been internationally acclaimed as a leading expert on board governance.  See her website and LinkedIn profiles, and get her book Dilemmas, Dilemmas: Practical Case Studies for Company Directors.