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Board Basics

by Mike Smith • July 20, 2015

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Do you desire a highly effective and operational board for your organization? I want to share with you some tips on board of director governance, based upon my experience of over 30 years serving on nonprofit boards.

What I’m sharing here is not based upon any training, mentorship, or books—it’s based purely on my own experiences. I do advocate that nonprofit boards seek training at seminars and workshops and in the many board governance resources available. However, I hope that some of my practical background will help you as you make decisions about joining a board, starting a nonprofit, or helping an existing board to sharpen its practice.

Make sure you have a clearly spelled-out mission or purpose statement. Obviously, this should be done at the initial incorporation. However, it is good practice to review your mission/purpose statement once a year at your strategic planning meeting to make sure you are meeting your purpose.

Determine upfront whether you want your board to be self-perpetuating (elected among the board members) or elected by a membership. My own recommendation is to stay away from election by membership. This does not mean you can’t have a membership; you simply have a nonvoting membership. (Some organizations have fallen victim to lots of acrimony within them because of the membership having the right to choose the board of directors.)

Figure out the exclusive versus nonexclusive issues regarding who may join your organization. The more exclusive your membership is, the more the need for clear statements of faith and membership requirements.

Determine what the makeup of your board should look like. For example, will all married couples serve together, and if so, will they each get one vote? You may want your board members to be qualified by their church elders; you may want only male or female members; or you may want a nice mixed bag.

Determine the number of board members. From my experience, the worst thing that can happen is to have too many board members to be able to assemble for board meetings. I can’t imagine any homeschool organization needing more than 10 board members.

Determine what kind of terms you want your board members to serve. The options are many, from lifetime service (subject to termination for cause or retirement) to the requirement that a board member can only serve x number of years before she must leave the board. One of the organizations I’m involved in as a board member is the Gideons International. The Gideons call their boards cabinets. For each camp (camps function like individual clubs), the cabinet is made up of 10 individuals—five elected by the camp and five appointed by the elected officers. The five elected officers can only serve three consecutive years. The appointed cabinet members do not have term limits. This works well because it rotates in fresh leadership but keeps some continuity on the board. If you choose an option like this, you can have the appointed members hold the important committee chair positions.

Determine the number of board meetings you want on an annual basis. Designate your requirements for the annual meeting, which should be a face-to-face meeting. With the advent of technology, more boards are meeting remotely, but I’ve noticed there is a dynamic in a face-to-face meeting that you don’t get any other way.

Determine what percentage of your board has to agree for an action to take place, e.g., unanimous, majority, or 75%. Also determine what constitutes a quorum (don’t make it so high that you will have trouble holding meetings—normally, 50% should be sufficient). HSLDA’s board operates with a unanimous board vote before taking action on proposals. This is really risky and I don’t usually advise it, but it has worked well for our organization. There have been times when we have not taken an action because one board member was hesitant, and later on we’ve seen the wisdom of that. In other situations where one or two board members held up action, they later changed their minds and we moved on with the proposal.

Be sure to keep good records, with good minutes being the minimum. Minutes can take many different forms, but a good practice is to remember that the minutes should record actions taken by the board. It is not necessary to record discussions, or who thought what or who said what. The minutes are to reflect the collective actions of the board.

Develop a conflict of interest policy for the board. This policy keeps the organization from giving favors to a board member that may not be in the organization’s best interest. For instance, suppose you need copying done from time to time and a board member owns a copy business. Before you could give him your business, you’d have to demonstrate that you weren’t paying him more than you would pay someone else based on a competitive bid process. This is called “self-dealing” and can get you in trouble with the IRS. The idea is to prevent the founders of an organization from using the organization as if it is a personal business that they own.

Develop confidentiality policies for board members and key staff such as executive directors. Have each person sign the policy, and strictly enforce it. It should state that any breach of the policy is grounds for removal from the board or employment.

You may want to consider a noncompete agreement as part of employment / board service. These are not favored in the law, but have been upheld when not excessive in time and distance. It must be accompanied by some consideration, which can be minimal (e.g. $100).

Think twice before becoming a compensating board. If your board members are not paid for service, you then have the benefit of a federal act that protects volunteers serving on nonprofit boards from civil liability except for gross misconduct. In this new age of people looking for someone to sue (maybe that’s not so new!), it’s nice to know you’re not going to lose your house and assets because you made a controversial decision while a board member. However, your board should have errors and admissions insurance to pay the litigation cost of defending you and the organization. (Remember, reasonable reimbursement for expenses incurred as a result of your service as a board member is not considered compensation. If you’re flying first-class round-trip to the board meeting and staying in a $500-a-night hotel, that may not be reasonable. You could do that, but you’d only be entitled to a coach ticket and a room in a non-premium hotel.)