Becoming an Effective Not-For-Profit Board Member A guide for volunteers

Transcription

1 Becoming an Effective Not-For-Profit Board Member A guide for volunteers

2 2 Becoming an Effective Not-For-Profit Board Member Management 11 Background 14 Volunteering 17 FAQs 19 Resources Management Background Volunteering FAQs Resources

3 3 Serving on the board of an organization that serves your community can be an excellent way to enhance your leadership skills and dedicate time to an issue of interest to you. This material will provide you with a general understanding of the roles and responsibilities associated with serving on a community-based organization s board. In the United States and some other places these organizations are called nonprofits, since they are set up and run not to deliver a profit to owners but rather to serve their communities by promoting education or the arts, funding medical research, doing charitable work or in a variety of other ways. Elsewhere, museums, many hospitals and early childhood centers are considered separately, while in some countries the term Non-Governmental Organization (NGO) is used for private entities that promote the public good and civil society. Although the names vary from place to place, these agencies operate under similar principles worldwide and offer countless opportunities for IBMers everywhere to help their communities through On Demand Community. While the material presented here refers to not-for-profits and in places, how they are governed in the U.S. the principles guiding these agencies are similar in most of the world, as are the skills and knowledge you will need to volunteer your time effectively. If you are already on the board of a not-for-profit organization, some of this material will seem familiar. If you are considering service on a not-for-profit board, the material will help you determine if this level of investment of your time and expertise is right for you. Management Background Volunteering FAQs Resources

4 Becoming an Effective Not-For-Profit Board Member: 4 The content that follows includes information prepared by Board- Source and appears with permission. BoardSource is a U.S.- based resource for practical information, tools and best practices, training, and leadership development for individuals interested in not-for-profit organizations, and for board members of not-for-profit organizations. BoardSource offers an online tool to assess board effectiveness. On Demand Community volunteers may encourage their not-for-profit boards to use a Community Grant to implement this tool for their organizations. Please consult the BoardSource Web site for additional information and resources about not-for-profit boards. Management Background Volunteering FAQs Resources

5 5 Most not-for-profits are legal entities distinct from the individuals who founded them. Like their for-profit counterparts, not-for-profit corporations are governed by boards of directors with legal and ethical responsibilities that cannot be delegated. The board s responsibilities fall into the following broad categories: Legal and fiduciary. The board is responsible for ensuring that the organization meets any governing legal requirements and operates in accordance with its mission and the purpose for which it was founded; in many places, it will have been granted tax-exemption on this basis. Individual board members must exercise the duty of care: attend meetings, be prepared to make informed decisions by reading the information provided and requesting additional information if necessary, and carry out their duties in a reasonable and responsible manner. As safeguards of a public trust, board members are responsible for protecting the organization s assets. In the United States, the Sarbanes-Oxley Act has implications for not-for-profit organizations. While not required today, many not-for-profit boards are implementing independent audit committees and complying with Sarbanes-Oxley to ensure good fiscal management. Oversight. The board is responsible for ensuring that the organization is well-run. It moderates the power of management, and has the power to hire and remove the chief executive, usually called the executive director or president. Fundraising. As part of their fiduciary responsibility, many board members are actively involved in making sure the organization has the money it needs. This may include Management Background Volunteering FAQs Resources

6 Becoming an Effective Not-For-Profit Board Member: 6 making a personal contribution; serving as an advocate with a foundation, corporation, or government entity; organizing a fundraising event or hosting a benefit; or face-to-face solicitation of other individuals. Make sure you have a clear understanding of what financial commitment, if any, the organization expects from you (and IBM); some not-for-profit organizations require all board members to make a cash or in-kind donation. Before you agree to serve, understand what the organization s expectations are in terms of board member donations and determine if you will be able to meet those expectations. Representation of constituencies and viewpoints. Often, board members are chosen so that they can bring the experience or perspective of a particular group or segment of the organization s constituency. Boards are not inherently democratic institutions, but they do provide an opportunity for the groups and communities that a not-for-profit serves to have a voice in its governance. However, representing a constituency or viewpoint takes a back seat when voting all board members are expected to vote with the not-for-profit s best interest in mind. What are the 10 basic responsibilities of not-for-profit boards? 1. Determine the organization s mission and purpose. It is the board s responsibility to create and review a statement of mission and purpose that articulates the organization s goals, means, and primary constituents served. 2. Provide proper financial oversight. The board must assist in developing the annual budget and ensuring that proper financial controls are in place. 3. Ensure legal and ethical integrity and maintain accountability. The board is ultimately responsible for ensuring adherence to legal standards and ethical norms. 4. Enhance the organization s public standing. The board should clearly articulate the organization s mission, accomplishments, and goals to the public and garner support from the community. 5. Ensure adequate resources. One of the board s foremost responsibilities is to provide adequate resources for the organization to fulfill its mission. 6. Ensure effective organizational planning. Boards must actively participate in an overall planning process and assist in implementing, and monitoring progress towards, the plan s goals. 7. Determine, monitor, and strengthen the organization s programs and services. The board s responsibility is to determine which programs are consistent with the organization s mission and to monitor their effectiveness. 8. Recruit and orient new board members and assess board performance. All boards have a responsibility to articulate prerequisites for candidates, to orient new members, and periodically and comprehensively to evaluate its own performance. 9. Select the chief executive. Boards must reach consensus on the chief executive s responsibilities and undertake a careful search to find the most qualified individual for the position. 10. Support the chief executive and assess his or her performance. The board should ensure that the chief executive has the moral and professional support he or she needs to further the goals of the organization. Management Background Volunteering FAQs Resources

7 Becoming an Effective Not-For-Profit Board Member: 7 What are the responsibilities of individual board members? Not-for-profit organizations will have their own rules and governing bylaws as they relate to board members. However, here are general responsibilities board members might have: Attend all board and committee meetings and functions, such as special events. Be informed about the organization s mission, services, policies, and programs. Review agenda and supporting materials prior to board and committee meetings. Prepare for and attend board and committee meetings. Ask questions, take responsibility for and follow through on a given assignment. Contribute personal and financial resources in a generous way according to circumstances. Develop skills you may not already possess, such as: cultivating and soliciting funds, cultivating and recruiting board members and other volunteers, reading and understanding financial statements, or learning more about the substantive program area of the organization. Demonstrate sensitivity to and tolerance of differing views, as well as patience, community-building skills, personal integrity and concern for the organization s development. Serve on committees or task forces and offer to take on special assignments. Make a personal financial contribution to the organization. This is more often true in the U.S., and while it might not be expected elsewhere it s best to understand clearly any expectations before you sign up. Inform others about the organization. Suggest possible nominees to the board who can make significant contributions to the work of the board and the organization. Keep up-to-date on developments in the organization s field. Follow conflict-of-interest and confidentiality policies. Assist the board in carrying out its fiduciary responsibilities, such as reviewing the organization s annual financial statements. Management Background Volunteering FAQs Resources

8 8 Management Every board has a fundamental responsibility for self-management: creating the structure, policies, and procedures that support good governance. The term board organization encompasses a variety of tasks, from routine matters (such as preparing a schedule of board meetings) to actions with broader consequences (such as developing a policy about terms of service). Here are some of the most frequent questions board members ask about board organization: What should a board do to organize and manage itself effectively? To set the stage for efficient board and committee work: Prepare written job descriptions for individual board members Develop an annual schedule of meetings, determined a year in advance. Circulate clear and thorough information materials, including an agenda, to all members two to three weeks before each meeting. Maintain complete and accurate minutes of all meetings. Keep meetings brief and well-focused. Stimulate the broadest possible participation by members. Ask each board member to serve on at least one board committee. (For new members, one committee assignment is sufficient.) Acknowledge members accomplishments and contributions in a variety of ways in the organization s newsletter, at meetings, in minutes. Management Background Volunteering FAQs Resources

9 Becoming an Effective Not-For-Profit Board Member: Management 9 To encourage smoothly functioning committees, follow these additional steps: Prepare written statements of committee responsibilities, guidelines and goals. These organizational documents, which should be approved by the board chairperson, should be reviewed every one to two years and revised if necessary. Make committee work assignments according to the background, expertise, and schedule of each member. Distribute tasks among members so that everyone participates but no one is overloaded. Create a system of checks and balances to monitor committee members work and to ensure that tasks are completed on schedule. Assign an appropriate staff member to work with each committee. How large should our board be? The organization s structure and needs are among the factors that determine board size. In considering the size of the board, keep these points in mind: Every board needs a sufficient range of expertise to accomplish the organization s mission. If a board is too small, its members may be overworked and unproductive. If a board is too large, not every member may have the opportunity to participate actively. Should the chief staff executive be a member of the board? Some not-for-profits decide to make the chief staff executive an ex officio member of the board sometimes voting and sometimes nonvoting. This decision should be made carefully. On the one hand, some believe that board membership is a good idea because it enhances the executive s position of authority within the organization and strengthens the working partnership between the board and the executive. On the other hand, some feel that board membership blurs the distinction between the board s responsibilities and the executive s, and makes it difficult for the board to assess objectively the executive s performance. Whatever the executive s official status, his or her insights into the daily operations of the organization are essential to decision-making by the board. What should be the length of a board member s term? There are no hard and fast rules for determining board members tenure, and some agencies have policies designed to maintain a mix of experienced, veteran members alongside new ones that bring a the fresh perspective. For example, some organizations limit members to two consecutive terms and require a hiatus of one year before they may be reappointed. Others might stagger terms of service so that half or perhaps one-third of the board are elected every one or two years, for terms of two to four years. What committees should our board have? Much of a board s work is accomplished through its committees. With the exception of the Executive Committee, which acts on the board s behalf, committees recommend action to the full board for discussion and action. Committee structure usually parallels the administrative structure of the organization. Standing committees are established in the bylaws and often include the following: Executive Committee Nominating Committee Finance Committee Investment Committee Audit Committee Management Background Volunteering FAQs Resources

10 Becoming an Effective Not-For-Profit Board Member: Management 10 Development Committee Strategic Planning Committee Buildings and Grounds Committee (Facilities Committee) Personnel Committee Depending on the nature and mission of the organization, committees might also include marketing, public affairs, or education. How should committee members be chosen? Every board member should serve on at least one but preferably no more than two committees. Members are appointed by the chairperson in consultation with the nominating committee. Committee size depends on the needs of the board and the organization, and on a common-sense assessment of how many people are needed to carry out the committee s work. Make committee assignments based on the experience, skills, interests, and available time of board members. Each member must make a serious commitment to participate actively in the committee s work. If a committee is too large, a small group of members may have a disproportionate amount of responsibility; if it is too small, there may not be enough people to get the job done. Board committees may include people who are not board members. Management Background Volunteering FAQs Resources

11 11 Background Your local not-for-profit organization can provide information on any laws and regulations governing its operation, or let you know where to find out more. In the U.S., for example, there are well-established principles of not-for-profit corporation law which obligate board members to meet certain standards of conduct and attention in carrying out their responsibilities to the organization. (States within the U.S. often adopt further variations of these rules.) Other countries may have similar regulations, and you should be aware of them before serving on a board. Loyalty requires board members to give undivided allegiance when making decisions affecting the organization never using information obtained as a member for personal gain, and acting in the organization s best interests. A duty of obedience refers to the organization s mission and central goals, requiring board members to act in a way consistent with them and to honor the public s trust that the organization will manage donated funds to fulfill its mission. What is a conflict of interest? A conflict of interest is difficult to define, yet many people think they know it when they see it. The legal definition of conflict of interest, usually set out in state laws governing not-for-profit corporations, is very specific and covers relatively few situations. Most conflicts fall into a gray area where ethics and public perception are more relevant than statutes or precedents. Management Background Volunteering FAQs Resources

12 Becoming an Effective Not-For-Profit Board Member: Background 12 Conflicts of interest arise whenever the personal or professional interests of a board member are potentially at odds with the best interests of the not-for-profit. Such conflicts are common: A board member might perform professional services for the organization, or propose that a relative or friend be considered for a staff position. Such transactions are perfectly acceptable if they benefit the organization and if the board approved them in an objective and informed manner. Even if they do not meet these standards, such transactions are usually not illegal. They are, however, vulnerable to legal challenges and public misunderstanding. Loss of public confidence and a damaged reputation are the most likely results of a poorly managed conflict of interest. Because public confidence is important to most not-for-profits, boards should take steps to avoid even the appearance of impropriety. These steps may include: Adopting a conflict-of-interest policy that prohibits or limits business transactions with board members and requires board members to disclose potential conflicts. Disclosing conflicts when they occur so that board members who are voting on a decision are aware that another member s interests are being affected. Requiring board members to withdraw from decisions that present a potential conflict. Establishing procedures, such as competitive bidding, to ensure that the organization is receiving fair value in the transaction. What are some examples of actual and potential conflict of interest? A staff member receives an honorarium for conducting a work shop for another group in the organization s field of interest. An organization s policy might require competitive bidding on purchases of more than $1,000, for example, but a printing firm owned by a board member s spouse receives the $25,000 contract for the annual report while no other bids are solicited. How do boards safeguard against conflict of interest? When the personal or professional concerns of a board member or a staff member affect his or her ability to put the welfare of the organization before personal benefit, conflict of interest exists. Not-for-profit board members are likely to be affiliated with many organizations in their communities, both on a professional and a personal basis, so it is not unusual for actual or potential conflicts of interest to arise. Why must we be concerned about conflict of interest? Board service in the not-for-profit sector carries with it important ethical obligations. Not-for-profits serve the broad public good, and when board members fail to exercise reasonable care in their oversight of the organization they are not living up to their public trust. In addition, board members have a legal responsibility to assure the prudent management of an organization s resources. In fact, they may be held liable for the organization s actions. In the U.S., for example, a 1974 court decision known as the Sibley Hospital case set a precedent by confirming that board members can be held legally liable for conflict of interest because it constitutes a breach of their fiduciary responsibility. Do conflicts of interest only involve financial accountability? No. Conflict of interest relates broadly to ethical behavior, which includes not just legal issues but also considerations Management Background Volunteering FAQs Resources

13 Becoming an Effective Not-For-Profit Board Member: Background 13 in every aspect of governance. A statement by Independent Sector describes three levels of ethical behavior: obeying the law; making decisions where the right action is clear, but one is tempted to take a different course; and making decisions that require a choice among competing options. The third level of behavior can pose especially difficult ethical dilemmas for not-for-profit board members. What can we do to prevent conflict-of-interest situations? Self-monitoring is the best preventative measure. Institute a system of checks and balances to circumvent actual or potential conflict of interest, beginning with well-defined operating policies on all matters that might lead to conflict. Most important, create a carefully written conflict-of-interest policy based on the organization s needs and circumstances. Ask each board and staff member to agree in writing to uphold the policy. A conflict-of-interest policy should be reviewed regularly as part of the board s self-assessment. What should be included in a conflict-of-interest policy? who have an actual or potential conflict should not be substantively involved in decision-making affecting such transactions. For a sample conflict-of-interest policy and disclosure form, see the BoardSource booklet Managing Conflicts of Interest. Should an organization contract with a board member for professional services, such as legal counsel or accounting? Legal representatives, accountants, and other professionals can contribute valuable expertise to a board. Due to the potential for conflict of interest, their contributions should be voluntary. At the very least, a board member who is associated with a firm competing for a contract should abstain from discussion and voting in the selection process. If a competitive bidding process results in the selection of that board member s firm, he or she should disclose the affiliation and abstain from voting on future board actions connected with that firm s contract with the organization. A policy on conflict of interest has three essential elements: Full disclosure. Board- and staff members in decision-making roles should make known their connections with groups doing business with the organization. This information should be provided annually. Board member abstention from discussion and voting. Board members who have an actual or potential conflict of interest should not participate in discussions or vote on matters affecting transactions between the organization and the other group. Staff member abstention from decision-making. Staff members Management Background Volunteering FAQs Resources

14 14 Volunteering Serving as a board member is one of the most challenging and rewarding of volunteer assignments. While appointment or election to a board is an honor, board members have important legal and fiduciary responsibilities that require a commitment of time, skill, and resources. By asking some basic questions before joining an organization s board, prospective members do themselves a service and show that they are serious about their commitments. (See a list of topics to consider in the Resources tab.) You can find the answers from the board member who issues your invitation to join, from the organization s chief executive, board chairperson or other board members (current and former), or from written materials. Long-time board members might also benefit from an organization review that answers these questions. In some countries within Latin America, for instance IBM policy requires a review by the company s legal department before an employee can serve on an outside organization s board. Please check with your manager to learn of IBM s requirements, if any, in your country or region. How does IBM support my work on a not-for-profit board? IBM supports your volunteer efforts with international programs such as the Community Grants as well as the Matching Grants program in the United States and Canada. How do I find an organization that needs my help? If you need assistance identifying an agency that fits your interests, we recommend you do the following: Management Background Volunteering FAQs Resources

15 Becoming an Effective Not-For-Profit Board Member: Volunteering 15 In the United States, contact your local United Way. Find a local organization, such as a Volunteer Action Center, that helps match volunteers with agencies needing help, or a national resource such as Volunteer Canada. Contact your local IBM Corporate Citizenship Manager, who will know more about opportunities to volunteer in your area. How can I learn more about a particular not-for-profit? The best source of information is usually the organization itself. Most not-for-profits publish an annual report that is distributed to supporters, members, and other key constituents. Annual reports typically include a statement of the organization s mission and a summary of its programs, a list of board members and key staff, along with financial information (often a summary of the audited annual financial statements). A second key source of information is often the annual information that most not-for-profits must file with their local and/or national tax agencies. In the United States, for example, the Internal Revenue Service requires an IRS Form 990 to be filed yearly. Many other countries have similar ways to ensure that agencies granted preferential taxation status are acting in accordance with their purpose, and any information available to the public can be a valuable resource. IRS Form 990 summarizes the organization s finances, lists the salaries of the highest-paid officials, includes the names of board members, notes insider transactions, and provides a general snapshot of the organization. Not-for-profits are required by law to share their 990 forms with members of the public who ask to see them. They must make the form available during regular business hours, but are allowed to charge a reasonable fee to those who request the form by mail or want to make copies. Journalists also can request copies of the 990 from regional IRS centers under the Freedom of Information Act. Outside the U.S., the not-for-profit agency should be able to tell you about any similar requirements and how to obtain any publicly available information. Selected background materials on the not-for-profit organization can provide a useful overview of the organization, the board s work, and the responsibilities of board members. Helpful material includes: The organization s annual report The most recent audited financial statement The long-range program, financial and technology plans A list of current board members, their titles and all affiliations; a resume of the chief executive A description of board members responsibilities Board and staff organization charts The organization s newsletter, brochure, or other publications Newspaper or magazine articles about the organization A copy of the organization s letter from the applicable government agency (the IRS, in the United States) identifying it as a tax-exempt and/or not-for-profit entity. While doing your research, there are topics to keep in mind. The Resources tab of this document includes a list of questions that you should consider, and which are useful to review before you talk to someone from the organization. What should I ask myself before joining? Once you are satisfied with the information you have received, it is time to evaluate your own interest in serving on the board. Management Background Volunteering FAQs Resources

16 Becoming an Effective Not-For-Profit Board Member: Volunteering 16 Ask yourself the following: Am I committed to the mission of the organization? Can I contribute the time necessary to be an effective board member? Am I comfortable with the approach and tone of the organization s fund-raising efforts? Can I contribute financial support consistent with the organization s expectations of board members and with my own means and priorities? Can I place the organization s purposes and interests above my own professional and personal interests when making decisions as a board member? Is there a potential conflict of interest between this organization and any other organizations I represent? Are there any IBM policies in my country that I must follow before I can accept a position on an outside organization s board? If I am not ready or able to serve on this board now, can I be considered for a future board position? Management Background Volunteering FAQs Resources

17 17??? FAQs When you serve on a not-for-profit board of directors, you may discover that the staff and other board members have high expectations of the resources you bring with you as an employee of IBM. They may anticipate access to technology, talent and other resources simply because you work for IBM. Here are some of the typical questions you may be asked and suggested responses, so you can better anticipate and handle these expectations. We need to replace some old desktop computers with laptops; can you assist us with a donation of technology? Before responding to any requests of this nature, review the organization s technology plan. Is there sufficient budget for infrastructure and staff training? While many not-for-profits want laptop computers, desktop computers may be sufficient and less susceptible to theft. With such rapid changes in technology, IBM generally discourages hand-me-down technology, and having a plan to stay current is as important to not-for-profits as it is in the for-profit sector. If the organization doesn t yet have a formal technology plan or has one that is outdated, you can find information to help you provide some assistance or possibly engage another IBM On Demand Community volunteer on technology planning for not-for-profits. There are two programs that you, as an IBM employee volunteer, may access to help provide technology for your not-for-profit organization. Please refer to the international Community Grants and the Matching Grants programs Management Background Volunteering FAQs Resources

18 Becoming an Effective Not-For-Profit Board Member: FAQs 18??? (US and Canada). In some cases, if the mission of the organization is consistent with a larger corporate initiative, Corporate Citizenship and Corporate Affairs may consider making a technology grant. Contact your local IBM corporate citizenship manager to discuss this possibility. Would you be willing to serve as chairperson of the board s technology planning committee? Many IBM employees choose to volunteer on technology committees. However, not all of us have the breadth of knowledge and customer consulting experience to actually guide the technology strategy for an organization it depends on your personal experience and training. (It is important that you assess your own skills and knowledge to determine what role, if any, you might play in this committee. Discuss the committee s goals and the skills of its members with the board chairperson and executive director to see if you are a good match for this responsibility. It is very important that the technology committee have broad representation and decisions are not viewed as biased by IBM participants.) Additionally, we have resources in the IBM On Demand Community Web site that can support your work with the organization s technology planning. The not-for-profit organization has issued an RFP and the technology committee and board of directors must vote to approve the vendor selected. What will you do? Carefully review IBM s Business Conduct Guidelines to ensure you do not engage in a conflict of interest. It is necessary to remove yourself from this decision, particularly if it involves business with IBM. It is appropriate to abstain from voting stating your conflict of interest because of your employment, and having your statement recorded in the minutes of the meeting. The not-for-profit s chairman of the board, who is an IBM customer, has asked me to have IBM sponsor the upcoming charity golf tournament and dinner. Can IBM sponsor the event? Many benefit events such as golf tournaments do not always raise substantial funds for the organization, since much of the proceeds are used to cover the costs for the event, including food, beverages and prizes for the donors and participants. From a contributions standpoint, IBM does not typically support or participate in these types of events. However, this does not prevent the IBM client team from using sales promotion funds to participate and take advantage of a special opportunity to relate with a customer. A fundraising event is approaching, and the not-for-profit would like a ThinkPad or other IBM donation for an auction. Can you support this request? IBM does not make equipment donations or grants from corporate philanthropic funds directly to fundraising events such as raffles, telethons, walk-a-thons or auctions. You can find IBM s giving guidelines on the corporate philanthropy site. You are serving on a not-for-profit board, and have been notified that there are required board fees. Will IBM pay the fees? No. Even though IBM applauds your volunteerism for giving your time to local not-for-profits, this is still a volunteer commitment. As with other membership organizations, IBM does not support the payment of dues, fees or annual contributions. In some rare situations such as business- and industry-related associations, the employee s business unit might consider the payment of the membership dues as a business expense. Management Background Volunteering FAQs Resources

19 19 Resources Questions to ask and topics to explore before joining a board About the organization s programs: What is the organization s mission? How do its current programs relate to the mission? Can I visit the organization to observe a program firsthand? Does the organization have a strategic plan that is reviewed and evaluated on a regular basis? What is the organization s non-discrimination policy and is it practiced effectively? IBM does not make equipment donations or grants from its corporate philanthropic funds to organizations that discriminate in any way against race, gender, ethnicity or sexual orientation. About the organization s financial status: Is the financial condition of the organization sound? Does the board discuss and approve the annual budget? How often do board members receive financial reports? About the organization s clients or constituencies: Whom does the organization serve? Are the organization s clients or constituencies satisfied with the organization? About the structure of the board: How is the board structured? Are there descriptions of the responsibilities of the board as a whole and of individual board members? Are there descriptions of board committee functions and responsibilities? Management Background Volunteering FAQs Resources

20 Becoming an Effective Not-For-Profit Board Member: Resources 20 Who are the other board members? Is there a system of checks and balances to prevent conflicts of interest between board members and the organization? Does the organization have directors and officers liability coverage? How are board members appointed and how long is their term of office? About individual board members responsibilities: How can I best contribute to the organization as a board member? How much of my time will be required for meetings and special events? How are committee assignments made? What orientation will I receive to the organization and to the responsibilities of board service? Does the organization provide opportunities for board development and education? What is the board s role in fund-raising? Will I be expected to make a specific annual financial contribution? What role will I play in soliciting donors? About the board s relationship to the staff: Is the board satisfied with the performance of the executive staff? How do board members and senior staff typically work with each other? Management Background Volunteering FAQs Resources