Wednesday, December 21, 2011

Dear Board Member: Focus upon these responsibilities and you'll do well...

Lots of talk these days about what the Second Mile Board of Directors didn't do in fulfilling basic legal responsibility for governing the organization.The failure was catastrophic for the organization. I constantly tell Boards to keep your eye on the essentials.....these nine elements constitute what a Governing Board should bring laser focus to in their work together...

1. Ensure The Mission Is Still Relevant
What is the purpose of our organization…our reason for being?

2. Set The Strategy
How will we pursue our mission?

3. Hire, Supervise And Fire  The Executive Director
How do we demand excellence from our staff?

4. Monitor Outcomes
Are we effective?

5.Secure Resources
Find the money, people and partners we need in order  to pursue the mission.

6.Provide Financial Oversight
Ensure the resources are efficiently used.

7.Ensure Legality
Conduct oversight so that our organization conducts all our affairs in an ethical and legal manner.

8.Enhance The Brand
Network our organization to the outside community.

9.Develop The Leadership
Provide for the recruitment, orientation, mentoring and professional development of our fellow Board Members.


Voices said...

What's the origins of these points? They seem good, I want to show them to a board I serve on.

Michael Brand said...

This list is mine. It encompasses many themes found in various nonprofit literature.

What sets this apart from most of the nonprofit literature is my emphasis on #8 enhancing the brand by networking the org into the community, and #9 developing their current leaders as well as nurturing the next generation

Also I am very blunt about #3. It is apparent that in the Second Mile the roles got reversed where the Board was subservient to the Exec Dir.

Voices said...

Well, the board being subservient (not always the best word to use) or dependent on the executive director seems to be a common problem. On any given day the director/top employee has direct access to the information flow of the organization - the board doesn't - and the board is "supposed" to be somewhat hands off, concerned with governamce not operations.

In some ways that's the point, right? Directors are protected from liability because they are seperated.

Figuring out how to structure information flows so that the board has access to the right information at the right time isn't always easy. How do you tell when an organization is faltering, and more importantly, when the faltering represents a real danger and isn't just a seasonal or temporary blip?

Michael Brand said...

In a sense, the Board of Directors are the ‘owners’ of the nonprofit. So if someone takes action against Voices, the lawsuit will read Joe Smith vs. The Board Of Directors of Voices of Central PA.

Directors are not shielded. While every Board should have 'Directors and Officers' insurance as a general liability policy, it does not give the Board members total immunity from liability.

Here's where the insurance companies lawyers will be getting involved with The Second Mile. If the Board did not practice proper oversight of the Executive Director, then the insurance company can claim the Board did not fulfil their Duty Of Care which thus invalidates the coverage.

Other well known cases involve embezzlement by Executive Directors where they did not pay the organizations withholding taxes. In general D&O insurance does not cover tax liabilities so that the Board is on the hook with the IRS. That is not pretty.

Voices said...

What constitutes proper oversight of the executive director?

That seems to be the tricky part - how does an organization, especially a smaller organization with limited resources, model out, policy out, and implement oversight?

I've had a hard time getting usable information on that topic.

Yes, I've read about embezzlement cases, and was aware of that risk.

One gets the impression that D&O insurance is largely useless for a small organization, and may be merely cosmetic protection for larger organizations. It's expensive as well. And it's another topic that is difficult to get useful information about.

Michael Brand said...

I would never join a board that lacked D&O coverage.

Voices said...

Yes, I've heard you say that.

It's oddly difficult to get information about D&O insurance - I would think that would make for a topic that many small organization leaders might be searching for. You might write more about it.

Back to oversight of the executive director - what kinds of policies and methods should a board use to monitor the ED and how should they go about doing this on a day-to-day and meeting-to-meeting basis?

Michael Brand said...

try this..

They publish a small pamphlet titled D%O: Key facts about insurance and legal liability It's a good piece to step off and talk about getting coverage

Michael Brand said...

As for oversight of you have anyone with HR experience on your Board? The ED is your employee, which means at minimum regular evalaution, standard monitoring, employee handbook, etc. You have to show some basic oversight over the ED.