External Compliance: Legal and Essential
The expectations that you must demand of your board without fail are the duty of obedience, the duty of care and the duty of loyalty. These duties ensure acting within the “business judgment rule.” This will result in a board of directors that is protected from liability for their actions on the board. In effect, there is a presumption that, in making a business decision, the directors acted on an informed basis, in good faith and in the honest belief that the action was taken in the best interest of the nonprofit.
- The duty of obedience requires that the directors of the Corporation must not engage in acts that the corporation, under its mission and applicable law, cannot perform because such acts are prohibited or beyond the scope of the mission.
The duty of care or the “duty to be informed” – a director has the responsibility to be informed about an issue before making a business decision relating to the issue.
The duty of loyalty requires a director to act solely in the best interests of the Corporation rather than in his or her own interests, or those of his or her associates.
Internal Compliance: Value Creation
You need to define your own organizational board benchmarks. In order to create these benchmarks, a Committee on Trustees should be created to help define the most helpful characteristics to the board. At the same time, the Committee on Trustees should define board expectations in terms of time, giving and attendance. Then the committee on trustees should evaluate the board.
Make change where needed. When a member is underperforming, communication from the board chair describing the opportunity to improve or eventually move on should be made clear. When a committee is underperforming, evaluate and change the committee meeting process or realign membership to strengthen the committee, if needed. Finally, when a board as a whole is underperforming, the Committee on Trustees and Chair need to address fully and thoroughly the commitment necessary to meet the mission and perhaps transition out many members if necessary.
Engaging the Board in Strategic Conversation
The organization needs to have a Strategic set of goals. These goals are often the result of a strategic planning process that absolutely needs to include the board. If you don’t have strategic goals, then it becomes impossible to engage the board on strategic issues. Each year the Strategic Goals should be reviewed by a committee of the board and key staff. During this meeting, each committee of the board should be assigned relevant strategic goals as a point of focus for the year.
At the annual meeting, each committee should evaluate the level of success of each strategy based on the sub-goals that each committee was focused on. This evaluation helps ensure that the focus and work of the board is predominately around assuring the success and implementation of the strategic plan.
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