Service is a cornerstone to leadership and part of the foundation for a well-lived life. As the cultural anthropologist and educator Margaret Mead said, “[N]ever doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.” Whether demonstrated by serving meals at a homeless shelter, tutoring young people, donating blood or helping the little old lady or man across the street, the service of and for others transcends race, religion, gender, sexuality, color, creed, national origin, political persuasion, age or education. Service exemplifies our humanity and, as Mead implied, a commitment to change the world for the better. This may be why many of us seek out opportunities to support causes near and dear to our hearts or step forward and participate when the need arises. Yet, even the best of intentions cannot be manifest without some guideline for ensuring ethical conduct, care, loyalty and fulfillment of one’s duty. This is especially true for those of us who fulfill our desire to serve through involvement on a board of a not-for-profit organization.
This article is focused on the uniqueness of not-for-profit board service, which is generally focused on the fulfillment and sustainability of meeting the altruistic ideas and mission of an organization. This typically involves serving the public or a public purpose. In many instances, the direction, strategic planning and continued existence of a not-for-profit organization is dependent on the strength of its board of directors (the board) – the small group of thoughtful, committed citizens. As a result, an organization’s success can be linked to the strength of its board, and how each board member acknowledges, understands and meets his or her fiduciary duty to the organization.
It can be difficult to understand one’s role as a board member of a not-for-profit organization. Misconceptions regarding corporate governance, duties, authority and obligations abound. Further, it is difficult to know whether a board member is a cheerleader, fundraiser, strategic planner or all three, or none. The key to answering these questions, and the key to an effective not-for-profit organization and its corporate governance, begins with its board members and their knowledge of their roles. The board’s role can be categorized threefold: first, oversight of the administration of the organization and the advancement of its mission statement; second, partnering with, enabling and supporting the chief executive senior management/leadership; and third, active participation in the organization’s goal and objectives.
Oversight of the administration of the organization and the advancement of its mission
The business affairs and mission of the organization are managed under the oversight of the board. The basic responsibility of the board is to exercise its good faith and reasonable judgment with the care that an ordinarily prudent person in a like position would use under similar circumstances to further the best interest of the organization. [See R.C. § 1702.30(A) and (B).] The board can satisfy its responsibility through exercising good faith, a duty of care, a duty of loyalty, knowledge and understanding of the organization’s programs and services, and maintaining its fiduciary duty. The primary manner in which the board demonstrates its good faith, demonstrates its knowledge and understanding, and fulfills its fiduciary duties is through advancing and sustaining the organization’s mission.
The advancement and sustainability of an organization’s mission begins with the board understanding the mission. This requires board members to read, learn and understand the mission of the organization both in its provision of services and/or programming, and in regard to its altruistic, philosophical and/or morale objectives. In addition to ensuring that the board knows and understands the organization’s mission, it is important for the board to periodically review the mission and ensure that it is meeting the needs of the clients that are served and the changing times of the community in which the organization functions. The mission, as manifest in the mission statement, should clearly express the organization’s goals, means and primary constituents served. An adequate statement of mission should serve as a guide to organizational planning, board and staff decision making, volunteer initiatives and setting priorities among competing demands for scarce resources. It sets the stage for developing fundraising strategies and strategic planning as well as the board’s many other responsibilities.
In addition to its mission, the board should read, understand, ask questions about and ensure viability and legality of the organization’s by-laws. The by-laws serve as the organization’s governing documents—its adopted regulations, ordinances, rules or law. The by-laws define the rights and obligations of the board, senior leadership (i.e., officers) and day-to-day operations, including, but not limited to, receipt, use and maintenance of funds, meetings, voting, incurring liabilities and termination. While Ohio not-for-profit corporations can be governed by R.C. § 1702 et seq., R.C. § 1702 provides a general exception to an organization’s regulations—when and where by-laws have been adopted and enacted. Therefore, it is vitally important for board members to adhere to the organization’s by-laws for guidance as to authority, conduct and corporate governance.
Oversight of the organization also requires that board members fulfill the mission through conduct performed in good faith, while maintaining their duty of care and loyalty. Good faith is not a per se independent duty; rather, it is a condition of the fundamental duty of loyalty. It is important for board members to remember that when they commit to serve, first and foremost they must do so with a commitment to the best interest of the organization. Each board member must exercise his/her independent judgment, vote and actions. [See R.C. § 1702.30(C).] This means avoiding controversies, conflicts and issues whether personal, economic or political. [See R.C. §§ 1702.30(D) and 1702.55 (under Ohio law, when a director breaches his or her duty of good faith, he or she can be subject to liability in damages).] “[I]n determining what a director reasonably believes to be in or not opposed to the best interest of the [not-for-profit] corporation, a director … may consider any of the following:
- [t]he interest of the employees, suppliers, creditors and customers of the corporation;
- [t]he economy of this state and of the nation;
- [c]ommunity and societal considerations;
- … long-term and short-term best interests of the [not-for-profit] corporation, including, but not limited to, the possibility that those interests may be best served by the continued independence of the [not-for-profit] corporation.
[R.C. § 1702.30(E) (Emphasis added).] A good rule of thumb is that if a board member must question his or her conduct, even for a second, then it is better to not engage in the conduct. The organization and its mission come first.
The duty of care involves a director’s responsibility to exercise appropriate diligence when making a decision and overseeing and guiding senior leadership. As part of a director satisfying his or her duty of care, the director can and should utilize, and when necessary rely upon, all the information, data, financial reports, expert testimony or opinion, statements and materials that permit the director to make informed decisions. This also requires a director to: attend meetings regularly; know the programs and services the organization provides as well as the full organization team and how funding and finances of the organization operate; read board materials; and invest time outside of board meetings to understand the organization’s marketplace, social, economic, political and cultural environment. The director must question and seek out answers to advance the organization’s cause and purpose. By exercising his or her duty of care, the board member can ensure that his or her actions and conduct are being performed in good faith.