A friend of mine, a retired college president, recently told me a story about a trustee who believes the only meeting agenda item necessary for a nonprofit board of trustees is … “Should we fire the president?” If the answer is “no,” the meeting should be adjourned, and the trustees should go home. A bit extreme to be sure but it is not without a kernel of truth.
Trustees of nonprofit institutions have many ways to contribute to the institution and its future. But running the institution is not one of those contributions. Shorthand governance vs. management warnings such as “noses in, fingers out” for boards and for trustees reflect the difficulty in defining the line between oversight and management. My experience suggests that both boards and presidents struggle with finding the right line between their responsibilities.
We have recently seen too many examples of boards that seem to be out of touch with their institutions and too willing to give the president free rein … think Penn State. Or board leadership that thinks and plans in secret without much understanding of the institution and its challenges and opportunities and then acts in preemptive and unexpected ways … think Virginia.
So, what should boards do in the 21st century to fulfill their fiduciary responsibilities, to appropriately support their president, to set ethical standards, and to insure a healthy long term future for their institution? I would suggest five board characteristics … strategic, informed, questioning, ethical, and respectful.
Strategic: This is one of the primary responsibilities of a board of trustees. The board must insure that strategic thinking, in collaboration with the senior management of the institution, is a regular part of board behavior. In addition to having a process for strategic thinking, every board decision should be vetted for its impact on the long term strategic vision for the institution.
Informed: Board members must spend time becoming well informed about the institution and its challenges and opportunities. Likewise, the senior management of the institution must make it a priority to be sure board members get the information necessary to be well informed.
Board members should serve on a variety of board committees over time … committee assignments and committee chairmanships should be rotated regularly. Too many boards have a caste system for committee assignments. A small number of trustees begin to believe they are the only members of the board who should serve on the “elite” committees … finance, audit, or planning. Before long they are the only ones serving on these committees and by default become the board experts in these areas relegating the remainder of the board to “taking their word for it.”
Questioning: The board should be the place where all of the important questions get asked, civilly and respectfully, but asked. To fulfill its fiduciary responsibility the board must regularly be asking questions until it has enough information to provide the governance and oversight that is its reason for being.
The best boards spend time at each meeting in conversation with the senior management of the institution about the vision, mission, and resource questions that are the essential elements of strategic decision making about the future of the institution. Board committees are the place where short term issues can be discussed and plans formulated for full board consideration and action. But, the long term issues and opportunities require the thinking, questions, and involvement of the entire board.
Ethical: Conflict of interest is the greatest enemy of the good for many boards. A conflict of interest is any action or relationship that can impair the board or a trustee’s ability to make a decision in the best interests of the institution. Today, boards must not only prevent actual conflicts, they must also be conscious of the appearance of a conflict if they are going to provide the leadership necessary for a healthy ethical culture.
Max H. Bazerman and Ann E. Tenbrunsel in their aptly titled book Blind Spots also remind us that “motivated blindness” is the tendency to “overlook the unethical behavior in others when it’s in our interest to remain ignorant.” Ethically, boards must be responsible not only for what they know but what they should have known.
And, boards must encourage, support, and evaluate the president in his/her role as chief ethics officer of the institution. The Ethics Resource Center in its 2007 Nonprofit Ethics Survey (alas, the last such nonprofit survey the ERC will run) noted that, “Where boards have heavy influence (in the management of the institution), we also see high levels of misconduct.”
Respectful: While boards discharge their fiduciary responsibility through governance and oversight, for most members of the board the nonprofit community is not their home culture. Most board members do not spend their professional lives in nonprofit settings except for their time as trustees. And, a noisy few can be contemptuous of nonprofit mores and culture.
Boards need to maintain a respectful relationship with the institutions they serve. They should always be respectful of the people, the customs, and the values of a culture that may seem unusual and perhaps even foreign to those who do not live in it every day. While boards and board members can and should bring a different perspective to nonprofit institutions, the wisest members of the board understand there is much the for-profit and governmental sectors can learn from nonprofits.
Most important of all, boards need to support the president by scrupulously respecting the boundary between governance and management. If the board feels the president can no longer fulfill his/her leadership and management responsibilities, then the board should call a board meeting with only one question on the agenda.