Nonprofit Board Crisis

Nonprofit Board Term Limits #NonprofitBoards #NonprofitBoardTermLimits

I just need to say that I endorse everything stated in the following TechRepublic.com article.  I do not believe it can be said enough: term limits are one of the most healthy and productive tools for ensuring the health and welfare of a nonprofit board wholly and severally (as a group and individually)!  If term limits are not already in your nonprofit's by-laws, now is the time (rather than procrastinate) to start a discussion.  Yes, there are consequences many perceived as having bad results.  I would disagree.  How a board handles the consequences is on them.  There is a Buddist tenet: pain is inevitable, suffering is optional.

Here's the article:

The Free Software Foundation's Richard Stallman problem begins and ends with board tenure

 

by Matt Asay in CXO  on April 15, 2021, 3:47 PM PST

Commentary: It's hard for organizations to evolve to meet changing circumstances if its board composition remains static.

The Free Software Foundation (FSF) has a serious governance problem that goes beyond how they handled the return of Richard M. Stallman (RMS). For nonprofit boards, the overwhelming standard is to have term limits, and the most common arrangement is two terms of three years each. The FSF? According to Brian Fitzpatrick, with some help from Nathan Naze, the average tenure of FSF board members is a whopping 13.83 years, double the industry standard and well beyond what other open source boards typically see. This is a problem.

No evolution without revolution

There are many good reasons for a revolving door on nonprofit boards. According to BoardSource, which trains and supports nonprofit leadership, rotating board members makes it easier to increase board diversity, minimizes stagnation and guards against self-dealing by board members. Indeed, it's this last factor that the U.S. Internal Revenue Service indicates is a good reason to install term limits for nonprofit boards. The more entrenched a board member, the easier it is to see organization resources as their own.

SEE: 10 ways to prevent developer burnout (free PDF) (TechRepublic)

Unsurprisingly, then, most nonprofit boards have term limits. As detailed in the report, Leading with Intent: 2017 Index of Nonprofit Board Practices, 72% of nonprofit boards have term limits. What limits are common? To consecutive three-year terms.

As mentioned, Fitzpatrick crunched the data and found that the FSF board members serve for nearly 14 years on average. "Well, maybe that's just how it is in open source," you say? Well, no, it's not. He also showed the average tenure for the Open Source Initiative (disclosure that I brought the average down by staying just a year as a board member), Python Foundation and Apache Software Foundation, which Felipe Hoffa visualized (Figure A).

 

Figure A

 

Visualization: Felipe Hoffa (Data: Brian Fitzpatrick)

As is evident, other open source nonprofit board members serve, on average, for less than eight years, which is pretty typical of the nonprofit industry, generally. The FSF is the outlier, and not in a good way. 

You want some degree of permanence on a board, because you want the board to not only evolve an organization into the future, but also keep grounded in principles and practices of the past. Think of the current debates in open source licensing: There are some advocating for changes in open source licensing, whether for ethical licenses like the Hippocratic License or or business restrictions like the Server Side Public License. On the other hand, there are those advocating against these changes. Ideally, a board's membership would change often enough to be able to fairly consider these changes, even as it stays static enough to not shift with every call for novelty. 

The FSF, however, has hurt itself, and the interests it has long sought to serve, by calcifying around abnormally long-serving board members that seem incapable of responding to a changed industry. The easiest answer to solve this is term limits for FSF board members. Would this make the board immune from RMS influence? Of course not. But it should diminish the cult of personality that seems to consume the FSF board.

Nonprofit Board President and Voting #NonprofitBoards #NonprofitBoardPresidentVoting

The question as to if and when a board president can vote on a motion irregularly comes-up at nonprofit board meetings.  If the bylaws have not been thoughtful enough to include some reference to meeting rules of order and specifically this subject, Roberts Rules might be referred to for a solution given that Roberts Rules are accepted as the meeting management reference by the seated board.  And so, without further ado I present the following narrative on this subject posted in the Kokomo Tribune (Indiana):

During my tenure as president of one of the nonprofit boards I served on, there was a dispute between board members and the executive director over something the director proposed to do.

He thought — and about half the board agreed with him — that the action would be consistent with his duties under our bylaws. About half the board, including me, thought he was overstepping his authority.

As the board took action on his proposal, his side was feeling pretty confident. Their votes totaled one more than half, and since they knew I could not vote as president unless there was a tie, their wish would carry the day.

But what they thought they knew was wrong. I understood Robert’s Rules of Order, which our bylaws required us to use, better than they did, or at least had read it one page further than they had, and knew I was allowed to vote if that vote would change the outcome. I voted no, creating a tie, and the proposal failed.

I relate that incident to make a point beyond the obvious one of putting my humble bragging on display, a temptation to which I modestly admit succumbing on occasion:

The executive of an organization carries out the orders of board members, who must follow the bylaws of the organization in issuing those orders.

Nonprofit Board Recruitment #NonprofitBoards #NonprofitBoardRecruitment

Selected parts from  Associations Now offers hints about a nonprofit's board recruitment process, particularly the beginning of the process which should in my opinion and that of the article's author, include a deep analysis of "what" are the board's needs in terms of composition (presumably to fulfill its fiduciary duties.  I offer that that this is not an "out of the park" presentation but there are some kernels worth considering when gearing up for board recruitment.

Much of the article focuses on a board (presumably its Governance Committee) doing its homework in pursuing member diversity.  The article appropriately broadens the discussion of seeking diversity to seeking a board that is diverse and includes added values recognizing that the two MUST NOT BE MUTUALLY EXCLUSIVE.  The article does not explicitly make this statement but I am in recognition that there are two objectives, not one with diversifying a board.

But rather than make this point overtly the author offers that: Diversity is critical to board effectiveness, and the right representation doesn’t happen by accident. These tips can help you make an honest assessment of where your board stands now and whether you need to add new perspectives.  The author goes on to state that "Without a diverse board, your association will likely fall short of its full potential. There’s plenty of evidence that a homogeneous group is less likely to present fresh ideas, offer unique perspectives, and challenge traditional ways of thinking."

    The first step to building a more diverse board is to assess where the board stands today. But it can be difficult to identify your own board’s shortcomings     and know what your ideal board composition should be. Without an honest self-assessment, unconscious biases may remain.

    “It’s important to have diversity, and you have to go out of your way and work at it,” says Dennis C. Miller, founder of DCM Associates and expert in     nonprofit leadership search and board leadership coaching. “A good board will evaluate its CEO. A great board will evaluate itself.”  Um, I guess - yes I believe in a board's self-assessment, very much, but I believe there to be many more elements to what makes a great board.

Use these tips to guide you through the assessment process.

Step 2: identify core competencies

Ask yourself what core competencies your board should possess, and put together a list of skills its members need to have. From there, you can identify where your board is deficient and focus your recruitment efforts on candidates who fill those skills gaps. Miller recommends identifying candidates with particular skills instead of choosing board members based on their career history or occupation. This will expand your pool of candidates, as skills-based hiring is often more inclusive.

Key competencies for board success include group skills, interpersonal skills, personal leadership skills, technical skills, and personal attributes such as integrity.  Whew - how many boards really know what are all these skills never mind whether their members have them?

ASK WHETHER YOUR BOARD REFLECTS YOUR COMMUNITY

Your board’s composition should mirror the community it serves. This means representing not only your community’s racial, gender, and age diversity, but also its diversity in areas such as sexual orientation, nationality, experience, and geographic location.

The exception is for organizations that serve a specific demographic group. “I work with organizations that are associations for Hispanic business owners—they’re going to represent mostly Hispanic individuals, and [so a heavily Hispanic board is] acceptable,” Miller says. ?Maybe?

TAKE ADVANTAGE OF ONLINE ASSESSMENT TOOLS

Boards can more accurately assess their composition using tools such as online assessment surveys. These allow board members and executive leadership to provide feedback anonymously so that organizations receive honest insights into how they’re performing in certain areas, such as board diversity and representation.

From there, a third-party organization or consultant can collect those results, evaluate them, and provide next steps on how your organization can improve. Self-assessments come with limitations, so getting an outside perspective can help you identify a lack of diversity and inclusion that your board may not see or be unwilling to admit in a survey.

Miller also recommends that associations survey their members periodically to get their thoughts on the board’s performance and representativeness.

Fair enough but this is giving a lot of credit for what a Governance Committee may know.  Lots of homework.  But for sure, there are on-line surveys available but be very careful - not all fit every organization

EVALUATE MEMBER RETENTION 

If you see memberships lapsing more heavily among a certain segment of your community, it could be a sign that those members are not adequately represented at the highest levels of your organization, including on your board.

“If you are a state association—let’s say New York—and all your members are from Long Island and New York City, then you don’t have enough representation in Albany and Orange County,” Miller says.

Word of caution: this article is written from the lens of an association - this question may not be pertinent to every organization.

CONSULT WITH YOUR GOVERNANCE COMMITTEE

A governance committee’s purpose is to ensure that your organization’s board of directors is functioning appropriately and efficiently, and diversity and inclusion is part of that equation. The committee may have board recruitment guidelines you can follow to make sure your board is composed of a diverse group of individuals.

“It’s probably the most important committee of a trade association board,” Miller says. “Board recruitment is an effort. There are guidelines and practices one can follow, and it should not just be ‘Who do you know?’ but ‘What do you need?’”

UH, as I stated in the beginning, if board recruitment is not the purview (beginning to end) of the Governance Committee, what else is?  I recognize of course that just members of this Committee may not be enough to actually search or connect to potential members but overseeing the task and vetting certainly is.

 

SHARE THIS ARTICLE

MICHAEL HICKEY

Michael Hickey is a contributor to Associations Now. MORE »

#NonprofitBoardRecruitmentandGovernance #NonprofitBoards #NonprofitBoardAttentionSpan

While not singular to nonprofits, an article in the Peninsula Daily News addresses a couple of important processes and policies that can be applied to most nonprofits.

The nomination committee (I pose this committee be made a governance committee to address the wide ranging matters related to board recruitment, development, evaluation and governing)  the recommended candidates should “have the skills and experience to best manage, promote, develop, secure funding, and enhance the ____ as well as bring diverse viewpoints and backgrounds"

board members (should be required) to refrain from serving on other nonprofit boards that have the potential for conflict of interest with the ___ org. This is what is now an ordinary expectation but spelling this out is essential so it is clear to all.  I believe and it is common practice that members should annually sign a document that testifies to their understanding and commitment to this policy.  I also lean toward the idea that board members really should limit the number of boards on which they serve to enable giving full attention and time.  Too many boards (more that 2 or 3?) really can get demanding and also challenge loyalties in terms of time, talent and treasure.

board members must disclose membership on a nonprofit board that has economic interests with the ___ org due to business, city documents said. Again, this pretty much echoes the former statement.

 

Nonprofit Board Term Limit Pluses #NonprofitBoards #NonprofitBoardTermLimits

As much as I like to believe that nonprofit boards have received the memo to ensure and enforce term limits for board members, this is sadly not a common practice.  Daily I encounter this reality for boards with whom I work.  The argument that term limits is healthy for the board and for board members just doesn't seem to be enough of an incentive to install limits.  Well, that does appear to be the case so I found in the Marin Independent Journal one very simply put statement about the pluses of board term limits:

Term limits can be the incumbent’s friend. On nonprofit, corporate boards and even city councils or special purpose district boards, time-limiting tenure provides a polite way for governing boards to show the door to members who overstay their welcome. It also gives board members or trustees an easy way to depart when they’re burned out or become bored.

Common sense!

Board Fails while CEO Fails Bigger #Nonprofitboards #NonprofitBoardFails #NonprofitExecFailsBoard

The following Delmarva Now/Salisbury Daily Times (Maryland) story illustrates how bad this board fulfilled its fiduciary duty and how that failure contributed to the CEO's own ability to get away with the store.  Should the board be held accountable?  Absolutely! They failed the public and themselves.  I believe there to be no excuse.  This CEO failure was not just on the board's watch, it was facilitated by the board.  Ignorance, a common excuse, is certainly not blissful and this series of bad outcomes is as much due to the board's lack of oversight (asking common sense questions) as to the thievery of the CEO.  Thankfully the press is here to tell the story as a forewarning to other boards.

 

Former CEO of Salisbury broadband nonprofit indicted for bribery, 'embezzlement scheme'

 

William Patrick Mitchell has been indicted on federal bribery and embezzlement charges. 

Fired from his position as chief executive officer of Maryland Broadband Cooperative in 2019, the former head of the Salisbury-based cooperative now stands accused of using over $160,000 in company funds and kickbacks to pay for a boat, vacation and home improvements. 

The 13-count indictment was returned by a grand jury Thursday.

Maryland Broadband Cooperative was created in 2006 by the Maryland General Assembly, the 18-page indictment explains, with the purpose of working with internet providers to offer broadband internet services to underserved areas across the state. 

Governed by a board of directors, the cooperative would allow private entities to join and gain access to the fiber optic cable network that Maryland Broadband installed to provide stronger internet service throughout the Eastern Shore and beyond. 

Mitchell started in construction in 2006, but rose to CEO by 2009.

His salary swelled as well, court documents show, from about $167,532 in 2009 to $228,659 by 2018. And a typical annual bonus from his board of directors was 20% of his salary. 

The cooperative's primary source of income had been federal and state funding — but as it continued to grow, the cooperative began earning more private income from customers who paid to access the broadband infrastructure. 

By 2008, the U.S. Navy entered into an agreement with Maryland Broadband to build out fiber optic cable from Wallops Island to the Patuxent River base.

Mitchell was primarily responsible for submitting invoices to the Navy. 

And the project contract ballooned to $24 million.

The indictment alleges Mitchell directed some of the money to be paid to an unidentified subcontractor that would later be kicked back to him. Prosecutors also allege he abused his company credit card, while Maryland Broadband received federal and state funding.

He now faces counts of wire fraud, bribery concerning federal funds and embezzlement concerning programs receiving federal funds.

The alleged scheme

Prosecutors say Mitchell devised a scheme to defraud his cooperative through bribery, kickbacks and concealing information — using his official position to "enrich himself" by soliciting and accepting gifts, payments and other tactics. 

In one instance, while the cooperative continued to receive payment from the Navy and other sources, Maryland Broadband paid an unidentified company over $467,000 in October 2016, according to documents. On the same day, prosecutors allege, that company's owner paid the bill for a detached garage at Mitchell’s home in Cambridge.

According to the indictment, another payment from Maryland Broadband went to the company the next month. The company owner then paid for cabinets, new carpet flooring and an all-terrain vehicle for Mitchell, prosecutors say. 

Nonprofit Board Principles of Governance and Good Practice #NonprofitBoards #NonprofitBoardPrinciples

In 2004, the Australia Council and the Australian Federal Government arts funding and advisory body established eight principles of corporate governance and good practice for the Major Performing Arts Board. I propose that these are helpful "live by" principles for nonprofit boards everywhere to consider, use and possibly adopt, even in their bylaws toward describing the board's approach to fulfilling its fiduciary duties.

Principle 1 Lay solid foundations for management and oversight
Principle 2 Structure the board to add value
Principle 3 Promote ethical and responsible decision making
Principle 4 Safeguard integrity in financial reporting
Principle 5 Recognize and manage risk
Principle 6 Encourage enhanced performance

Principle 7 Remunerate fairly and responsibly
Principle 8 Recognize the legitimate interests of stakeholders

 

Nonprofit Board Onboarding #NonprofitBoards #NonprofitBoardOnboarding

It clearly can't be spelled out too often, the first step to bringing-on new board members (and reminding board members of their duties as well as everything they need to know about what is now "their" nonprofit) begins with an onboarding program.  And yes, on-boarding makes a difference as everyone you might ask about their experience, having or not having, will inform you.  I have written regularly about onboarding and you are welcome to look through my articles and blog to learn more. 

For the moment though, you might take a look at this possibly a bit-long overview of what a nonprofit should consider about onboarding.  I must admit that while I have focused on two of the three recommendations (onboarding content and a buddy/mentor) I have not thought about promoting the recruit publicly.  The offeror of this piece is principally a media communications person so that may explain why promoting the newbie is one of the three but I generally like it just the same as a way to promote the organization as well as the board member.  Anyway, take a look - should be useful for a Governance Committee.  

Nonprofit Board Oversight #Nonprofitboards #NonprofitBoardOversight #Nonprofitboardstaffrelations

The following statement caught my eye regarding nonprofit boards and what is reasonable to expect from them in terms of oversight:

Having worked with volunteer boards and having been a board member of a number of local nonprofit organizations I understand how difficult it is to be responsible for these organizations. So, I can’t be too hard on the members of the PDA board for believing what they were being told by the executive director(s) who are supposed to be professionals and responsible, given the salaries they drew. (from Letter to Editor, The Leader)

As I gathered from the letter, this statement refers to the reader's opinion about the behavior of a nonprofit board's oversight over failed executive directors.  This line was effectively giving "permission" or allowance or more importantly, excusing the board for not having fully grasped or understood or even known about the failings of the executive both financially and programmatically.

So, the big question: should a board be excused for its inability or failure to exercise its fiduciary duty simply because of its lack of expertise and/or information?  I argue "no".  This duty means that at minimum, common sense would dictate that the board inquire when there is even an instinct that "all" or something doesn't seem right and the equal responsibility that the board collect facts and even if necessary recruit other expertise to be fully informed toward action.  In my opinion, although boards are indeed excused, this does not mean it's ok - the board has still failed to fulfill its duty.

Nonprofit Board Equity and Inclusion #Nonprofitboards #NonprofitBoardEquity #NonprofitBoardMemberVoice #NonprofitBoardMemberInclusion

Dr. Fram's blog this week focuses on the subject of individual board members and their "voice".  Part of me wants to say: wait a minute, every board member has a voice equal to every other board member and they just have to say want they want or are thinking.  Ah but I wish this was true.  While I concur that all that Dr. Fram lists as to how a board member can initiate change is reasonable and in my own experience does indeed "work" at least some of the time. 

What is not being discussed at below the surface however is culture, equity and inclusion.  Sadly, not all board members are viewed as "equal" and the resulting 'handling' of members means that some board members are generally excluded, not valued and can even be 'shunned'.  Reasons of course vary recognizing first that boards are transactional in purpose but relational in getting to purpose.  But board members also come with varying sets of values and biases and it is these that ultimately, when no culture of behavior is established and corporate values are unclear, that individual members can be left out, intentionally and unintentionally.  All of this subsequently produces inequity and lack of inclusion.  On the contrary, only intentionality, good process and good leadership can alter these behaviors and culture and we circle back then to equity and inclusion and end with an additional driving variable: diversity.  

So, do acknowledge Dr. Fram's process approaches for letting a board member's voice rise-up while recognizing, there are institutional challenges that may make even these approaches null and void.

 

HOW A NONPROFIT BOARD MEMBER CAN INITIATE POSITIVE CHANGE 

By: Eugene Fram              

A nonprofit board member comes up with an idea that he thinks will do wonders for the organization. He is convinced that establishing a for-profit subsidiary will not only be compatible with the group’s mission but may even bring in new sources of revenue. It’s his ball–now what’s the best route to run with it? All too often in the nonprofit environment, initiating change can be as daunting as trying to get consensus in the US Congress! There are, however, certain interpersonal levers, which, if pushed, can accelerate the process–although one hopes that not all the levers will be needed in any specific situation.

• Board Colleagues – Quietly enlist as many board colleagues as possible to support the idea.  Enlisting support from board opinion leaders is critical — then open up the discussion to others in informal conversations. Premature presentation to the entire board could stall the process.
• The CEO – Either before or during conversations with board colleagues, be certain to review the proposed change with the CEO.  He/S will voice acceptance, rejection, or asks to consider it.  If s/he is opposed to the change, the board member only has these alternatives – wait until a new CEO is engaged; seek board termination of the CEO that is generally not a good move; or wait for better timing and board support.  It is foolhardy to seek the change in face of the full opposition of the CEO. If the CEO will support the change, it may be a good idea for the board member to step back and make the CEO the leading change agent.
• Revenues – No matter how good the change, implementation will likely require financing beyond current budget allocations.   Consequently, a plan for fund  development from foundations and individuals will be needed for the final proposal.
• Other Organizations—Other organizations with similar situations could serve as useful models. An on-site visit will provide information and enable the nonprofit to develop benchmarks that will reassure those that remain skeptical.
• Measurement–Establish measurement metrics before the change is launched.  Do not hesitate to use imperfect metrics to track progress and drive change during the development period.  (http://bit.ly/OvF4ri)

Nonprofit board members have relatively short tenures—typically four to six years or less– and are often regarded as temporary overseers. There are opportunities to be much more than that if the board operates in a 21^st century generative manner. The board climate should be open to ideas of positive change, and the creative board member must appropriately adapt or adopt the above levers to ensure effective acceptance and implementation.