Forming effective board management remains one of the most discussed aspects of corporate governance of nonprofit companies. In this article, we will consider the board roles and responsibilities in such companies.
The corporate structure of nonprofit organizations
Regardless of what management structure is adopted in the nonprofit organization (NPO), it should have a single governing body that exercises constant and consistent control and has the authority to make decisions.
NPOs often have several governing bodies. They can cooperate quite productively if the main documents and regulations spell out the roles of each of them and establish a system of mutual accountability. These bodies may be named differently, but in essence, there are four types of bodies with different governing functions:
- Supreme governing body: the highest decision-making authority. In associations, the most important decisions are often taken at a general meeting.
- The main governing body: board (governance). As a rule, this is a separate structure that performs current management functions.
- A team of managers or the head of an organization: management. The executive body or the sole manager often executes the decisions of the supreme and main governing body, and also manages the daily life of the NPO.
- Supervisory body: control and audit. Sometimes an NPO has a separate structure that monitors how decisions are made and implemented, how funds are spent, and how legislation is observed. These oversight bodies are generally independent of the board.
How does the board work?
The separation of board and management functions implies both the division of responsibilities and restrictions on participation in different bodies. The usual rule is that management governs the day-to-day life of the organization, while the board determines the policy and strategy of the NPO and oversees its activities. Most governance models emphasize that the core responsibilities of the board are
- ensuring that the organization follows its mission;
- formation of values and standards;
- providing resources;
- expansion of the number of supporters.
These board decisions are key to the development of the organization and may relate to its mission or its demise. Responsibility for such decisions cannot be delegated. However, the supreme body may delegate other decisions to the main governing body.
Although the board members act as part of a common collegiate body, they also have personal responsibilities.
- participate regularly in board meetings;
- prepare in advance for meetings;
- respect confidentiality;
- offer informed and unbiased recommendations;
- avoid conflicts of interest and not impose your agenda;
- participate in committees and special events; support the leadership of the organization;
- participate in the development of the organization’s resources;
- promote the organization in the community.
The board has the authority to direct the work of NPOs and monitor the situation in it. But the board rarely meets, because its members are usually busy and in-demand people. Given these limitations, the board may transfer some of its duties and powers to the head. In doing so, the board does not abdicate responsibility for setting policy, choosing the strategic direction, or providing overall oversight. The board remains the main decision-making body, and the head is accountable to him for his actions. However, within certain restrictions and conditions imposed by the board, the head manages the organization to the extent of his vision, independently making almost all decisions on current issues.
Clarifying the hierarchical relationship between the board and the leader helps to improve cooperation between them and minimize the tension that is bound to arise from time to time even in the best of relationships. It also prevents the board from transferring too much responsibility to the manager or, at the other extreme, from wanting to control everything.