Nonprofit Board Crisis

Does Community Engagement Governance Ensure Sustainability? #NonprofitBoards

Sweet Briar College continues having survived a rebound via its alumni who, when told, could not accept the closure, for economic reasons, of their alma mater.  Hampshire College is this year one of many small colleges facing the similar fate that threatened Sweet Briar and once again, alumni are to the rescue.  But can alumni, even if they are the likes of Ken Burns or Gary Hirsberg (Stoneyfield Yogurt) stave off and steer trustees away from imminent doom just because of their passion?  Well, it has worked for Sweet Briar who is now in a never-ending fundraising mode but they are after-all, nonprofit.  And perhaps its fate will be replicated for Hampshire College.  Clearly the business model for small colleges deserves examination.  It is of course too late for that exam in New Hampshire (no, Hampshire College is in Massachusetts) where three small colleges are closing their doors.  Could they not have combined and centralized operations to create a different economic model?  Perhaps but their alumni too, wanting a voice, might have objected and their fate would have been sealed.

So, I pose that the jury is out on what is exactly the optimal business model for a college that wants to preserve its history and culture and be sustainable.  Community voice matters and can change the path but community has to step-up no matter how small or large their income.

Click here to read the Wall Street Journal story on Hampshire College.

Board Diversity and CEO Diversity #NonprofitBoards

The following lessons were shared in The Conversation in an article researched by Young-Joo Lee Director of the Master's Program in Nonprofit Management, University of Central Florida.  I believe these findings would benefit boards struggling with understanding the impact of lack of diversity among their membership.

Although about three out of every four Americans working for nonprofits are women, men hold a disproportional share of the highest-paid nonprofit jobs.

What’s more, the share of women in top management jobs decreases as an organization’s budget increases. Feeding America CEO Claire Babineaux-Fontenot was the only woman named as being among the highest-paid executives leading one of the nation’s 10 top charities in 2018, according to a Forbes ranking. Men were running the rest, including Boys and Girls Clubs of America and Habitat for Humanity.

..... the likelihood of a woman being hired as a nonprofit CEO decreases by 0.2 percentage points with each million-dollar increase in its revenue.

A nonprofit with a $50 million budget, therefore, is 8 percentage points less likely to hire a woman as its CEO compared to an organization with a $10 million budget. An organization with a $100 million budget would be 18 percentage points less likely to hire a woman as CEO than a group with a $10 million budget.

I also found that an organization is 17 percentage points more likely to have a female CEO when between a third and half of the board’s voting members are women, compared with when less than a third are female. But when a majority of board members are women, the board is no more likely to hire a female CEO than organizations where women account for less than a third of the board.

This finding reinforces the results of several other studies that also indicated that when the share of women on boards reaches critical mass, these directors tend to become more apt to hire female leaders. Past research has also suggested that the most progress occurs when women on boards are a minority of members, as long as they aren’t tokens.

....board diversity is also a force for narrowing the gender gap among the leaders of the biggest nonprofits.

.... having equal numbers of men and women on the boards of big nonprofits is no cure-all. If it were, women-majority boards would be more likely to hire women as CEOs than boards where women are in the minority. And that was not the case at most of the organizations I researched.

A Fiduciary Duty #NonprofitBoards

I am thinking that most nonprofit board members rely solidly on their execs to ensure that all rules and regulations are met.  That reliance is good to a point but that same reliance doesn't eradicate board members' fiduciary responsibilities.  One of those fiduciary responsibilities focuses on obligations for the nonprofit to report to proper "authorities" and today, Mr. Trump signed a bill making "E-Filing of Charity Tax Forms Mandatory (next year)".  Presumably E-Filing will ensure higher levels of transparency although my regular review of 990's (the tax return) indicates there are often blanks where content should be.  Clearly, filing does not ensure quantity and quality of data and given the limited level of resources within the IRS, enforcement is not always possible.  

Oh, and for the nonprofits with revenue of less than $200,000 and assets of less than $500,00, you can delay your requirements if the burden to change is too cumbersome (although I would think these are the very groups that can easily accommodate this change).  Boards, you know what to do next?

 

Lessons from Association re Governance #NonprofitBoards

The American Hospital Association has just released its 2019 National Health Care Governance Survey Report and there are lessons, I believe, that apply to most nonprofits.  Going to the site will offer you the opportunity to download and review the whole report.  This is excellent fodder for those of you who have a Governance Committee.

Corporate Law & Governance Update - June 2019

Friday, June 28, 2019

AHA GOVERNANCE SURVEY

The governance and board development committee will benefit from an overview of the American Hospital Association (AHA) 2019 National Heath Care Governance Survey Report, which describes a governance field in transition.

“Positive trends” identified by the report:

• Consistent growth in use of routine executive sessions over the past three years, considered [by the report] a governance best practice

• Some growth in racial and ethnic diversity of board members

• A solid majority (about two-thirds) of all responding boards engaging in restructuring efforts to improve governance

• Increased use of board portals, also considered [by the report] a governance best practice

• Inclusion, by almost half of responding system boards, of board members from outside of communities served to add fresh perspectives to board deliberations

“Opportunities for improvement” identified by the report:

• Almost one-third of all respondents did not use term limits.

• More than 75% either did not replace board members during their terms or continued to reappoint them when eligible during the past three years, resulting in low levels of board turnover.

• More than 70% of responding boards did not have a continuing education requirement for their members.

• Some 31% did not conduct board, board member, or board or committee chair assessments in the past three years.

• Boards surveyed indicated a growing number of older members and fewer younger members.

• Almost half (49%) of respondents did not have a formal CEO succession plan.

The chief legal officer, chief compliance officer and chief governance officer may team to brief the board and its relevant committees on the AHA’s valuable new report.