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Building a new not-for-profit organization: What to expect from your board of directors
By Paulette Vinette, CAE
March 16, 2009

This is the second in a series of articles focusing on key steps in building a solid organization. Click here to view the first article, which suggests how to create the plans for the organization.
This article focuses on what to expect from a new board of directors. Once again, we have relied on the excellent information offered in the Government of Canada's Primer for Directors of not-for-profit corporations (Rights, Duties and Practices). As they explain, "Board of directors" or "board" refers to the governing body of the corporation. Some institutions or organizations may use different terms or titles to identify those overseeing the corporation's management. Examples include "Board of Governors," "Council," "Board of Trustees," or "Executive Board." However, "Board of Directors" is the most widely recognized and accepted term. We have provided links to free Internet resources related to the subjects discussed in this article, but want to be clear that we are not endorsing any of the sources provided.
Typical duties of boards of directors include:

governing the organization by establishing broad policies and objectives;

selecting, appointing, supporting and reviewing the performance of the chief executive;

ensuring the availability of adequate financial resources;

approving annual budgets that support a strategic plan;

accounting to the stakeholders for the organization's performance.

The legal responsibilities of boards and board members vary with the nature of the organization, and with the jurisdiction within which it operates. A very important fact to always keep in mind is that the board is accountable to the membership.

The members vote for directors and give them the authority to run the organization. While the board can delegate work to staff and committees, it cannot delegate its accountability. The individuals, working as a board team, remain accountable to the members for what happens to the organization.
Ex officio board members
Ex officio board members are defined in most basic procedural texts, such as Robert's Rules of Order. They are individuals who qualify as board members because they hold an office, such as the presidency of the organization or of another, usually affiliated or related, group or organization. They may also qualify because they hold a certain public office.
An ex officio member of the board generally has the same rights as other directors, but may or may not have the right to vote. This should be specified in the governing documents of the corporation.
The duties of directors
Directors are required to exercise their power with competence (or skill) and diligence in the best interests of the corporation. They owe what is called a "fiduciary duty" to the corporation. The duty is a "fiduciary" duty because the obligation to act in the best interests of the organization, at its core, is an obligation of loyalty, honesty, and good faith. High performing organizations ensure that the individuals chosen to serve satisfy the required skill sets of board members; key skill sets can include:

financial skills (understanding financial statements, budgeting and money management)

management skills (understanding how not-for-profit organizations should function)

marketing skills (understanding how to position the organization and its offerings)

public relations skills (understanding how to communicate effectively internally and externally)

fund development skills (understanding how to find money for the organization)

lobbying skills (understanding how to work with governments)

technology skills (understanding how to use technology to render the organization efficient)
The duty of loyalty requires that a director act honestly and in good faith in the best interests of the corporation. The duty of loyalty is a personal duty and cannot be delegated (the "no delegation rule"). Among other implications, it means that a director is not allowed to profit from his or her office (the "no profit rule") and must avoid all situations in which his or her duty to the organization conflicts with his or her interests (the "no conflict rule").
We have tried to keep the topic of directors' duties simple, but it is not a simple topic. Directors should be required to read the section of the Government Primer on Duties of Directors to become familiar with their obligations. In the same vein, Liabilities of Directors is not a simple topic and, again, directors should be required to read and understand their obligations. The same is true for the Rights and Powers of Directors. The type of governance your organization adopts can complicate this last topic. Governance is the set of processes, customs, policies, laws, and institutions affecting the way a corporation is directed, administered or controlled. Your governance model should set out directors' rights and powers.
The Policy Governance® Model is an example of a governance approach where directors' rights and powers are defined in a way that some consider "non traditional" for not-for-profit organizations. An Internet search on information about governance models may assist you to understand this area better; click here to get started.
The point of this article is to ensure that what you expect from your board is in writing, and clear to everyone involved. This is why we also recommend that directors have job descriptions. Visit this site to get started. In addition, you should also build in an evaluation process for your board. There are many ways to evaluate directors' performance (a popular method is a board self-evaluation exercise); search "board evaluation" and you will get many ideas to choose from.
Some make be thinking, "How can I evaluate someone who is donating their time?" You can. Not-for-profit organizations are legal businesses and transparency and accountability are very important to the members. Part of the responsibility one assumes when accepting a director position can be that one's performance will be evaluated. It is imperative that this is agreed upon upfront, and that the evaluation method is objective and known by the directors.
Next month we will focus on committees.
Paulette is President of Solution Studio Inc., a consulting practice that serves the not-for-profit association community. Paulette co-authored two manuscripts on risk management & not-for-profit organizations and regularly conducts risk management, strategic planning and board development workshops. She can be reached at 1-877-787-7714 or Paulette@solutionstudioinc.com.

Building a new not-for-profit organization: What to expect from your board of directors

Typical duties of boards of directors include:

Ex officio board members

The duties of directors