TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 7/3/15

Statue of Liberty on Hudson River in NYC

As we head into a long holiday weekend and Independence Day, have a listen to Bruce Springsteen‘s American Land and think about what you can do for our country while perusing our curated nonprofit tweets of the week:

  • Rob Reich: Decision today on gay marriage puts the lie to any person who scoffs at the possibility (and significance) of enormous political progress.
  • Gene: Schools Fear Gay Marriage Ruling Could End Tax Exemptions NY Times
  • Alex Daniels: Opinion: As We Mourn Charleston’s Victims, Philanthropy Must Act https://shar.es/1qtyHO via @Philanthropy
  • Carl Malamud: The IRS has announced they will be distributing e-file data starting in 2016. … Chronicle of Philanthropy
  • Steve Zimmerman: One of the best nonprofit finance primers ever. Required reading for all leaders. Thx for reprinting Nonprofit Quarterly
  • WSJ China Real Time: China is building a cage around NGOs both foreign and domestic, writes Stanley Lubman – Wall Street Journal
  • GOOD: Bigoted donor embarrassed by Girl Scouts after giant cash offer rejected. http://bit.ly/1egVvMG
  • Nonprofit Quarterly: Feds are finally taking action against #crowdfunding fraud, and it’s about time. http://hubs.ly/y0Ys3R0
  • For Purpose Law: CompassPoint — Three Essential Shifts for the Nonprofit Sector
  • Marc Lane: 11 things we learned about social enterprise in international development http://gu.com/p/4aa43/stw @KatherinePurvis #socent
INTERNATIONAL CHARITY

Draft Foreign NGO Management Law (China)

Great Wall of China at the Jinshanling section.

China’s draft Foreign NGO Management Law released in May 2015 would, according to an Opinion piece in the New York Times (Will China Close its Doors?), require foreign nonprofits to be vetted by China’s security police before conducting activities in China and subject them to penalties for vaguely defined offenses such as subverting state power, destroying ethnic harmony, and damaging the national interest. Such penalties could apply regardless of whether the offenses occurred in China. Accordingly, if this law passes, the Chinese authorities could penalize a nonprofit and its agents operating in China for any criticism of the Chinese government or Chinese policy even if such criticism was made in the United States.

According to Reuters:

The draft law “governing foreign NGOs”, which has triggered a storm of criticism since it was made open for public consultation last month, requires foreign non-profits to find an official sponsor, typically a government-backed agency, and gives broad latitude to the police to regulate activities and funding.

 

In a confidential diplomatic document seen by Reuters, the European Union said China was using the law to “silence dissenting voices”.

American nonprofits operating in China will need to be very cautious about operating in China, particularly if they are involved in any type of human rights or social justice advocacy efforts. And it will be particularly important for such nonprofits to make their employees and volunteers aware of the additional personal risks they may face and to mitigate such risks to the extent possible.  It is unfortunate that such a law will very likely result in much less charitable support going to the residents of China and significantly more corruption.

See also China Asserts More Control Over Foreign and Domestic NGOs (Wall Street Journal).

TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 6/26/15

Gay Wedding Rainbow Rings Isolated on White Background.

This morning, the Supreme Court ruled that gay couples have a right to marry nationwide. Yesterday, the Supreme Court ruled to uphold federal subsidies under the Affordable Care Act, “effectively allowing millions of Americans who receive government aid through Healthcare.gov to keep their insurance subsidies.” Have a listen to Bruno MarsMarry You and The Polyphonic Spree’s Light and Day (Scrubs version) while perusing our curated nonprofit tweets of the week:

  • Gene: Free the 990! Why Searchable Tax Forms Are Way More Important Than They Sound | Inside Philanthropy
  • Philanthropy: Opinion: How foundations can win the fight against inequality http://bit.ly/1NkCPb9
  • Gene: Giving More Globally, and Less Locally NY Times
  • Nonprofit Quarterly: Late Breaking – Sweet Briar to Stay Open via Stakeholder Action and court decree! Impressive http://hubs.ly/y0WsvP0
  • For Purpose Law: Nonprofit Fraud: It’s a People Problem, So Combat It with Governance Nonprofit Quarterly
  • Olive Grove: Bigger Is Not Always Better When It Comes To Your #Nonprofit Board – http://linkd.in/1dizk7W via @OGemilyhall
  • Venable Nonprofit Law: Busted: #Nonprofits using #stockphotos may have to pay the #photography piper http://bit.ly/1GaIAU1
  • YNPN: We’ve got big news! Read about our ED @ttchume & upcoming exec transition in @Philanthropy
  • World Economic Forum: 9 habits every leader should master before turning 30 http://wef.ch/1Fm3WMr #work #leadership
  • Social Earth: 8 Companies Creating a Better World You Need to Know About http://bit.ly/1eJle10  via @Inc @johnrampton #socent #socinn
CALIFORNIA LAW

California Charity Registration: Form 990 Schedule B Disclosure

Compliance mind map, business concept

California requires a charity subject to its registration requirements to submit its IRS Form 990 including Schedule B (Schedule of Contributors) with its annual registrations to the Registry of Charitable Trusts. The list of major contributors, which remains confidential pursuant to current policy and proposed regulations*, may not be redacted from the filing.

While the right of the California Attorney General to require the unredacted Schedule of Contributors has been challenged by organizations, last month, the U.S. Court of Appeals for the Ninth Circuit affirmed a lower court’s decision to deny a preliminary injunction against the Attorney General. Notwithstanding this decision, the Ninth Circuit has yet to issue an order to compel the appellate, the Center for Competitive Politics (CCP), to file the unredacted Schedule with the Registry of Charitable Trusts. On May 15, 2015, CCP filed an emergency appeal with the U.S. Supreme Court, but it was denied by Justice Anthony Kennedy. CCP intends to file a full appeal this summer.

* Proposed Regulation 301.1

 

Donor information treated as confidential by the Internal Revenue Service pursuant to Internal Revenue Code section 6104(d)(3)(A) shall be treated as confidential by the Attorney General and shall not be disclosed except as follows:
1.  In a court or administrative proceeding brought pursuant to the Attorney General’s charitable trust enforcement responsibilities; or
2.  In response to a court order, search warrant, or administrative subpoena.

Read more …

California Attorney General Can Demand Full IRS Forms From Charity – Forbes

Court Affirms California Attorney General’s Demand for Confidential Donor List – Seyfarth Shaw LLP

No protection — yet — for group’s donor privacy – SCOTUSblog

TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 6/19/15

Scoring the winning points at a basketball game , motion blur

My week was highlighted by a trip to DC to attend a Public Policy Committee meeting of Independent Sector and the Golden State Warriors winning the NBA Championship! Check out the Golden State Warriors Mix 2015 while perusing our curated nonprofit tweets of the week:

  • Nonprofit Quarterly: Years after decline, charitable giving has now exceeded its pre-recession high at $355.17 billion. http://hubs.ly/y0VyBB0 [Ed. 2015 Giving USA Report.]
  • Alan Cantor: Is charitable giving really at a record high? Not as a % of GDP. Tx @KKelleyHolland. http:// http://cnb.cx/1H1zEpK #philanthropy
  • Emmett Carson: Whack-A-Mole and the Debate on Donor Advised Funds | Silicon Valley Community Foundation
  • Council on Foundations: Charities Must Act Now to Mitigate Misguided Oversight http://ow.ly/OpfB8 @rollcall #charitablegiving #policy #philanthropy
  • The Atlantic: A search to find the best charitable cause in the world http://theatln.tc/1IXPy4E
  • Nonprofit VOTE: 1.4 million nonprofits + 13.7 million workers + 62.6 million volunteers = a powerful force in public affairs: http://bit.ly/npvcount
  • National Council of Nonprofits: Celebrating Foundation Voices in Advocacy http://omkt.co/AAEz8d
  • Gene: ACT 2015 Report of Recommendations to IRS Tax Exempt & Govt Entities … #Form990
  • Nonprofit Quarterly: Survey shows half of the respondents feel it is somewhat difficult to get members involved in #advocacy efforts http://hubs.ly/y0W4RX0
  • Gene: House Appropriations Cmt Amendment makes it more difficult to revoke church’s 501(c)(3) status for electioneering
  • Exempt Org Resource: “White House Announces MRI/PRI Guidance with a Focus on Climate Change and the Environment”: Blog #nonprofitlaw
  • Nonprofit Times: Overhaul At #IRS Speeds EO Application Processes Nonprofit Times @mhrywna reporting from #AICPAnfp
BOARDS / GOVERNANCE   IRS & FEDERAL TAX ISSUES

Nonprofit Law 101 for Journalists

News Article Advertisement Publication Media Journalism Concept

 

Prompted by a conversation among nonprofit leaders about the public’s and media’s general lack of knowledge about nonprofits, this article targeted at journalists briefly discusses some basics of federal tax laws applicable to 501(c)(3) organizations and common state corporate and charitable trust laws applicable to nonprofits.

Internal Revenue Code Section 501(c)(3)

Exempt Purposes

A 501(c)(3) organization must have one or more of the following exempt purposes: religious, charitable, scientific, testing for public safety, literary, or educational purposes, or to foster national or international amateur sports competition (but only if no part of its activities involve the provision of athletic facilities or equipment), or for the prevention of cruelty to children or animals.

Operational Test

A 501(c)(3) organization must be operated primarily (despite the use of the word exclusively in the statute) for one or more exempt purposes. If it is operated for other purposes (e.g., to conduct an unrelated business), such activities must be insubstantial in relation to the exempt function activities.

Private Benefit Prohibition

A 501(c)(3) organization may not confer upon any individual a benefit that is more than incidental, quantitatively and qualitatively, to the furthering of its exempt purposes. Reasonable compensation for necessary services would not confer a prohibited private benefit on an employee or contractor. But gross overpayment to any individual or entity would violate the private benefit prohibition, which under egregious circumstances could result in revocation of the organization’s tax-exempt status.

Private Inurement Prohibition

A 501(c)(3) organization may not confer upon any insider in a position to influence or control use of the organization’s assets (like a director or officer) any part of its gross or net earnings without equal value in return. Like the private benefit prohibition, the prohibition against private inurement is not violated by reasonable compensation to an insider for necessary services. But gross overpayment to an insider could be deemed a violation of the private inurement prohibition, which would result in revocation of the organization’s tax-exempt status.

Excess Benefit Transactions (Public Charities)

A transaction in which a 501(c)(3) public charity confers upon a disqualified person (e.g., an insider like a director or officer ) a benefit that exceeds the value of what such person is providing to the organization in return is an excess benefit transaction. An excess benefit transaction can result in a penalty tax imposed upon the disqualified person (who must also return the excessive portion to the organization) and, in egregious circumstances, upon directors who approved the transaction knowing it would result in an excess benefit conferred upon the disqualified person.  Organizations have to be careful with no- or low-interest loans to insiders, excessive compensation, and compensation (including bonuses) for past services for which the organization has no obligation to pay. Whether compensation is reasonable or excessive depends on all the facts and circumstances, including the size of the charity. And reasonableness may, in certain circumstances, be extremely generous (e.g., college football coaches).

Self-Dealing (Private Foundations)

A transaction between a 501(c)(3) private foundation and a disqualified person (e.g., an insider or substantial contributor), including compensation paid by the private foundation to the disqualified person, may be a prohibited self-dealing transaction subject to penalty taxes. But there are several exceptions, including compensation paid to a disqualified person for personal services reasonable and necessary to carrying out the exempt function of the private foundation (e.g., management, legal, accounting) if the compensation is not excessive. Note that private foundations are subject to more restrictions than public charities because of the lower likelihood and expectation of public accountability where the donors are the same persons or related to the same persons who control the private foundation.

Lobbying (Public Charities)

A 501(c)(3) public charity may engage in lobbying activities subject to certain limitations. Lobbying cannot be a substantial part of its overall activities. But for organizations that have made the very simple 501(h) election, whether lobbying is substantial is measured only by its expenditures and not by its volunteer activities. Moreover, the level of lobbying permissible under 501(h) is relatively generous (e.g., 20% of its first $500,000 of exempt purpose expenditures).

Political Campaign Intervention

A 501(c)(3) organization may not engage in political campaign intervention, including endorsing or otherwise supporting (or opposing) a candidate for public office. Certain voter education or registration activities may not violate this prohibition if conducted in a non-partisan manner. On the other hand, lobbying activities on wedge issues separating two candidates timed to take place only immediately before an election may be considered political campaign intervention.

Public Disclosures

A 501(c)(3) organization that is required to file with the IRS (most 501(c)(3) organizations other than churches) must make publicly available its Form 1023 exemption application and, generally, its Form 990 annual information returns for the past three years.

Checking Whether an Organization is Exempt Under 501(c)(3)

Exempt Organizations Select Check is a valuable online tool for checking whether an organization is exempt under 501(c)(3). It is updated regularly and generally a better way to verify whether an organization is currently exempt than a review of its IRS exemption letter (which may be very old) or past filed Forms 990 (which you can do for free on Guidestar). Churches are exempt from filing for recognition of 501(c)(3) status and may not be listed on EO Select Check or Guidestar.

State Corporate Laws

Governing Documents

The articles of incorporation and bylaws are the main governing documents of a nonprofit corporation. A corporation must act consistent with the provisions in its governing documents.

Boards of Directors

A nonprofit corporation is governed by its board of directors. While the board may delegate management to the corporation’s officers, committees, employees, or management company, the board is ultimately responsible for all of the activities and affairs of the corporation and for the exercise of all corporate powers.

Power of a Director

Individually, a director has no inherent power other than to vote on matters before the board and to inspect and copy corporate books, records, and documents. Collectively, as the board, directors have ultimate authority and power over a corporation, subject to certain limitations (including membership rights for corporations with voting members) which may be codified in the corporation’s governing documents. But some directors may hold other positions (e.g., officer positions) that have been delegated with individual authority.

Fiduciary Duties

Each director owes fiduciary duties of care and loyalty to the corporation. Generally, the duty of care requires each director to act with reasonable care in governing the corporation, including in providing financial and programmatic oversight, taking steps to ensure compliance with external laws and internal policies (duty of obedience), protecting charitable assets from misuse or waste, and setting the future course of the corporation. The duty of loyalty requires each director to act in good faith in the best interests of the corporation, including where the director has a conflict of interest in a particular matter or is exposed to confidential information.

Self-Dealing (Corporate Law)

A director may be prohibited under state corporate laws to enter into a transaction with the corporation in which the director has a material financial interest except under certain conditions and pursuant to certain procedures. Generally, a majority of the directors (not including the vote of the interested director) must approve such transaction after disclosure of the director’s interest. In addition, either (1) the board must have considered and in good faith determined after reasonable investigation under the circumstances that the corporation could not have obtained a more advantageous arrangement with reasonable effort under the circumstances or (2) it must be shown that the corporation in fact could not have obtained a more advantageous arrangement with reasonable effort under the circumstances.

State Charitable Trust Laws

Mission Restriction

Generally, a charitable nonprofit corporation may not use its assets inconsistent with its stated charitable purpose (mission). Accordingly, if a corporation’s mission is restricted to arts education in California, it cannot use its assets to provide earthquake relief in Nepal.

Changing the Mission

A charitable nonprofit corporation may be able to change its mission by amending its governing documents, but this doesn’t mean that its previously acquired assets can be used for the new mission. Accordingly, if a corporation changed its mission from supporting arts education in California to supporting science education throughout the United States, its assets acquired before the change in mission may be restricted to use in furtherance of its original mission.

Restricted Gifts

If a charitable nonprofit corporation accepts a gift that is restricted to a specific use by the donor, the corporation must ensure such restriction is observed. Accordingly, if the gift is restricted to use in San Francisco, the corporation cannot use the gift to fund programs in Oakland or to fund its general administrative costs if the corporation operates in part outside of San Francisco.

Fundraising

A nonprofit must comply with applicable fundraising laws when engaging in charitable solicitations, including registering with the state charity official (typically, the Attorney General) when required, and ensuring the truthfulness of communications by or on behalf of the nonprofit. Charitable solicitations in a state other than the state of incorporation may require registration in such state, but the enforcement of such laws may be uneven and lax, in part because the laws appear ill-suited and overly burdensome for internet-based solicitations not specifically targeting residents in those foreign states by smaller nonprofits (see Charleston Principles).

TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 6/12/15

Ocean 2

Last Monday was World Oceans Day (Healthy Oceans, Healthy Planet). Have a listen to Under the Sea while perusing our curated nonprofit tweets of the week:

  • Foundation Center: Does your org hv a legal audit checklist? No? Here’s a good one fm @GrantSpace http://ow.ly/OciKw #nonprofit
  • Council of Nonprofits: Where do you look to learn about #nonprofit sector trends? http://buff.ly/1IsDbL4
  • Lucy Bernholz: PHILANTHROPY 2173: Where is the democracy in all this democratizing technology?
  • CEP: On the blog: “What is Philanthropy For?” #CEP2015 http://ow.ly/Oc3yf @PhilanthropyCDA
  • Emily Chan: Form 990, Schedule B donor information – tips for responding to public disclosure requests via Nonprofit Law Matters http://bit.ly/1HjJOQX
  • Ford Foundation: Announcing our blueprint for #philanthropy in the 21st century: FordForward.
  • Nonprofit Quarterly: Are nonprofits ready to give honest feedback to funders? The answer is yes: http://hubs.ly/y0TbqV0
  • CompassPoint: Great resources for encouraging staff to become ambassadors for your #nonprofit on #socialmedia: http://ow.ly/NJNFD
  • Gene: “Running a nonprofit is like driving across the country and buying gas one gallon at a time.”
  • Social Earth: 3 Reasons Why #Millennials May Be the Greatest Entrepreneurs http://entm.ag/1GvWmnR via @Entrepreneur #socent
CURRENT AFFAIRS & OPINION   EVENTS

Independent Sector: Threads

Threads

Independent Sector and its convening partners are holding critical community conversations (“Threads”) about the key trends, obstacles, and opportunities that will affect every organization and individual working toward the common good over the next 20 years. A Threads conversation was held in Silicon Valley on Monday and another will be held in Oakland (where I’ll be among the attendees) on Wednesday. I’ll be back in Washington DC on Friday for an Independent Sector Public Policy Committee meeting where I look forward to learning more about the common and distinct threads among the various regions.

Background Resource – Basis for Discussions:

Earlier this year, Independent Sector published Nine Key Trends Shaping the Future of the Charitable Sector. These trends are divided as follows:

Three Assumptions About National and Global-Level Forces
1. Disruption from inequality and environmental degradation
2. Greater ethnic diversity and new generations of leadership
3. Technology transforming learning, gathering, and associations
Three Assumptions About the Context for Pursuing Social Impact
4. Swarms of individuals connecting with institutions
5. Business becoming increasingly engaged in social and environmental issues
6. New models for social welfare and social change
Three Critical Uncertainties About Government
7, Will there be a resurgence of the public’s voice in policymaking?
8. Will the primary focus for policy development be at the local or national level?
9. How will government balance competing priorities and revenue pressures?

Favorite Tweets from Oakland:

  • One reason the #nonprofit sector is not solving big problems: we’re not keeping pace with the changing world. – Diana Aviv
  • Are we in the #nonprofit sector prepared and positioned to succeed in a world that is changing at such a fast pace? – Aviv
  • “We are the crazy ones” says Aviv “who think we can change the world.” Actually we aren’t crazy enough. – Jan Masaoka
  • “Running a nonprofit is like driving across the country and buying gas one gallon at a time.”
  • Another trend: Increasing demand for proof of impact & the challenge it poses to major social changes that take time.
  • Societal challenges: short-term thinking, income inequality, changing forms of communication, power inequality.
  • Why is ok to bemoan income inequality but not call out corporate control of public policy (such as taxes) as the reason? – Masaoka
  • James Head (East Bay Community Foundation) calling on the nonprofit sector to hold philanthropy more accountable and responsive.

Favorite Tweets from Silicon Valley:

  • Lucy Bernholz received applause questioning the premise that technology democratizes power rather than concentrating it.
  • Why do foundations always tell us we need to respond to demographic changes but won’t fund communities of color?
  • Nonprofits need a voice at policy table and be recognized as the service providers on the ground. More nonprofit vets in office!

Favorite Tweets from Earlier Threads:

  • Societal issue challenges: no confidence in institutions, widening inequality, political gridlock, focus on results not change…
  • NP sector in “defensive crouch”, needs to stand up and advocate for what we know works on the front lines.
  • Experience may be the enemy of our sector. We need to be adaptable to keep up.
  • Sector-wide ego holds us back from systems changes. It’s hard to accept solutions may come from outside the room.
  • Sea of information is overwhelming, therefore people are moving into self-imposed like minded clusters – a new form of tribalism
  • Ppl limit info they receive from opp viewpoints, this disconnects us. Fdns exacerbate this w/specialized funding
  • 43% of new workers are people of color. 80% of nonprofit workers are white. That’s a problem.
  • Right on – hiring and affording the best talent, esp in light of student debt is a major issue for nonprofits
  • “Young people don’t have a good on ramp into #nonprofit sector. Not enough training or PD to keep them.” Yes!! @ynpnla agrees
  • “Trust, turf, cash and credit” are noted challenges holding back collaboration in the nonprofit sector
  • Shift to “new power” – open, participatory, engagement – seems dominant theme so far #threadsla #nonprofit
  • Challenging us to move beyond “bold critiques and safe solutions.”
TWEETS OF THE WEEK

Nonprofit Tweets of the Week – 6/5/15

Aunt FB

Some highlights of the past week: the Center for Nonprofit Management’s 501(c)onference in Los Angeles (where Erin was speaking on advocacy) and the funeral of Dr. Rinko Yamazaki, an amazing philanthropist and my aunt, who founded the Kitamachi Senior Center once visited by Princess Diana (that’s her greeting the Princess above). Have a listen to Elton John‘s Candle in the Wind while perusing our curated nonprofit tweets of the week:

  • Leslie Keil: Great conversation starter by David Callahan of @InsidePhilanthr -recommends 4 #philanthropy reforms @nytimes op-ed
  • Public Citizen: Op-Ed in @thehill by @Lisa_PubCitizen discusses the encouraging signs on new rules for nonprofit political activity
  • Cecily Jackson-Zapata: NYT Now: Poll Shows Americans Favor Overhaul of Campaign Financing http://nyti.ms/1dbK2gO #election2016 #politics
  • Rob Reich: Mind boggles at this story about philanthropy, celebrity, the Clinton Foundation and swimsuit model Petra Nemcova NY Times
  • Ellis Carter: MOUs versus Contracts http://bit.ly/1FaZ4Mg
  • Ford Foundation: “Social justice & economic growth are not mutually exclusive but mutually reinforcing” –@DarrenWalker http://buff.ly/1G2bxF2 @PresidioGrad
  • Venable Nonprofit Law: Top factors for improving #nonprofit directors’ #board experiences via @EugeneFram @HuffingtonPost http://huff.to/1cZyhKo
  • Mark Blumberg: Mark Blumberg’s article “Canadian Charities Conducting International Activities” http://ow.ly/NpK9O [Ed. Very informative with lots of great tips for American charities too. Note, however, that charities must also be very careful to make sure they are authorized to operate in any foreign countries.]
  • The Atlantic: Can charity be profitable? When doing good for others means doing well for yourself http://theatln.tc/1AGaHxu
  • Haskell Murray: Excellent @NewYorker article on @patagonia’s anti-growth strategy via @kylewestaway #bcorp #socent

 

BOARDS / GOVERNANCE

Where Nonprofit Boards Fall Short

conference room

 

A few months ago, Harvard Business Review published a great piece by Dominic Barton and Mark Wiseman titled Where Boards Fall Short.  In the piece, the authors examined the ways in which boards of directors are failing their organizations and discussed areas in which we should begin to make changes regarding how we approach board service.  Although the article specifically addressed boards of for-profit entities, many of the points and lessons are equally applicable to nonprofit boards.

For starters, the authors cited a few rather shocking statistics:

A mere 34% of the 772 directors surveyed by McKinsey in 2013 agreed that the boards on which they served fully comprehended their companies’ strategies.  Only 22% said their boards were completely aware of how their firms created value, and just 16% claimed that their boards had a strong understanding of the dynamics of their firms’ industries.

Unfortunately, some of these statements may also ring true for nonprofit boards.  How well does your board fully understand your organization’s strategy?  If the board doesn’t have a strong understanding of the organization’s long and short-term strategies, isn’t aware of the value the organization creates in the communities in which it is active, and/or doesn’t understand the environment in which the organization is operating, what can be done to change that?

It may mean increased communication between the organization’s staff and the board, holding additional board meetings to increase board engagement, or perhaps recruiting new or different individuals to serve on the board.  Directors can and should be powerful advocates on behalf of the organizations they serve and lack of such knowledge can negatively impact their ability to serve in this role.

The authors pointed to another recent survey in which 604 C-suite executives and directors around the world were asked to identify which source of pressure was causing their organizations to overemphasize short-term financial results and underemphasize long-term value creation.  According to the authors, the “most frequent response, cited by 47% of those surveyed, was the company’s board.”

Are nonprofit boards similarly focusing on short-term financial results to the detriment of their organizations’ long-term creation of value?  While boards of tax-exempt nonprofits have a duty to prudently manage and invest the organization’s funds and assets, boards should also be thinking of how the organization is using its assets to create value, both in the short-term and long-term.

So, what can organizations do to strengthen their board involvement?  The authors of the article suggest that a good first step is to make sure that everyone understands what a director’s fiduciary duties to the organization are.  Directors of nonprofits typically owe to the organization on whose board they sit the duties of care, which requires the director to act with such care as an ordinarily prudent person would in a like position and under like circumstances, and loyalty, which requires the director to act in the best interests of the organization.

The authors state “[i]f directors can keep their fiduciary dut[ies] in mind, big changes in the boardroom should follow.”  The same can be said of nonprofits—if directors are aware of, and consistently keep in mind, their fiduciary duties to serve the organization and its mission, it should have a strong positive impact on organizational success.

The article next discusses the importance of selecting the right people for the board.  This is certainly applicable to nonprofits.  The board is entrusted with the responsibility of overseeing the affairs of the nonprofit on behalf of the public; it steers the organization and has ultimate oversight responsibility for its performance.  Having the right individuals on the board makes all the difference and nonprofits should place appropriate emphasis on board recruitment and development.

Another statistic from the article states:

Only 14% of 692 directors and C-suite executives surveyed by McKinsey in September 2014 picked ‘a reputation for independent thinking’ as one of the main criteria that public company boards consider when appointing new directors.

Does your organization actively seek independent thinkers who will bring a fresh perspective to its board?  Are there other qualities that you emphasize in selecting new board members, or that you don’t emphasize, but maybe should?  Do your directors bring appropriate functional knowledge and diversity of expertise to the table, or are there gaps that you should be looking to fill?

The authors also point to the practice of developing an advisory board of external experts to complement the expertise of the board.  Recruiting non-directors to serve on an advisory board or committee can dramatically enhance the resources and knowledge available to a nonprofit.  Moreover, you may find that individuals who are not willing or able to commit to board service may be more than willing to serve in a less demanding capacity as an advisory board or committee member.

The article emphasizes the importance of providing opportunities for the board to engage in quality and in-depth strategic conversations.  With the many things that must be discussed and addressed at nonprofit board meetings, setting aside sufficient time for such in-depth conversations often falls by the wayside.  However, setting the strategic agenda for a nonprofit is one of the board’s most important tasks and creating time for this to be done properly is essential.

Perhaps this is done at an extra board meeting scheduled solely for this purpose, at a board retreat where directors are asked to think big and shift their focus away from the more administrative aspects of governance, or at a special board outing that exposes the board to the organization’s programmatic activities and the impact they have on the communities the organization serves.  Whatever format is chosen for such conversations, the important thing is that they happen and that the board is provided the opportunity to think about the big picture.

The authors next argue that boards “need to do more to develop and communicate nonfinancial metrics that will help guide strategy, especially when income statements don’t capture the emerging story.”  Measuring impact and developing appropriate metrics are matters that nonprofit leaders are often all too familiar with.  However, the importance of finding non-financial metrics and compelling narratives that reflect the fully story of the nonprofit’s successes, and figuring out how to appropriately convey these to supporters and funders, cannot be overemphasized.

Finally, the authors discuss the importance of using the directors to facilitate dialogue with long-term supporters and contributors to the organization.  As mentioned above, directors can and should be fierce advocates on behalf of the organization and, when properly engaged and informed, can serve as a tremendous asset to a nonprofit with respect to donor relations.  Nonprofits should consider the ways in which they can utilize their directors to reach out to, and be available to, current and prospective supporters of the organization and the public at large.

Although nonprofits and exempt organizations are subject to a variety of rules and regulations that do not apply to their for-profit counterparts, many of the considerations regarding board stewardship and utilization apply to organizations in both the nonprofit and for-profit sectors and much can be gained by nonprofits from looking at best practices for for-profit boards.