Nonprofit Law Blog

Youth Board Members: Can minors serve on a nonprofit board?

Youths represent a growing volunteer population for nonprofits and for some, a potential pool of nonprofit board members. The 2007 National Survey of Children's Health estimated that 78% of youths between 12-17 years of age had participated in at least a few volunteer work or community service events that year. Some groups have taken note of this increasingly service-oriented age group and focused discussions about integrating younger individuals into nonprofit boards beyond young professionals and even young adults to youths (i.e., person under the legal age of adulthood).

Youth board members are most commonly found in youth-serving organizations such as, for example, America’s Promise Alliance which has two youth board members and Youth As Resources which has a primarily youth board. While interest in the idea of youth board members may be growing in recent years, in practice, it still remains an anomaly. For example, as the 2010 BoardSource Nonprofit Governance Index reported, the number of nonprofit board members under 30 years old has barely changed from 2 percent since 2007 while 71 percent of nonprofit board members are over 50 years old.

A youth board member can bring potential benefits to an organization (especially in youth-serving organizations) such as reinforcing the mission and values of the organization to internal and external audiences, providing a voice at the highest governance level of the organization on behalf of the population being served by the organization, bringing a fresh perspective, tapping into new networks and, in a broader context, developing the next generation of organizational leaders. Having a youth board member can also create risks, raise legal uncertainties, and cause further dysfunction in pre-existing weaknesses of a board due to the new challenges that accompany such an addition. Accordingly, a board must thoroughly analyze the pros and cons and exercise reasonable care in deciding whether to bring on a youth board member. This decision can raise any number of legal, governance, and practical considerations, some of which we have highlighted below.

Get familiar with the legal implications.

Is there a required minimum age of a nonprofit board member?

The minimum age of a director of a nonprofit may be addressed by state law. Some states explicitly provide for youth board members, other states explicitly prohibit it, while most states are silent on the issue.  According to “Your Guide to Youth Board Involvement and the Law,” a publication by Youth on Board, authors Kelly Bates, Esq. and Karen S. Young reported that as of 2002:

• 3 states have laws providing for youth board members (specifically, Michigan, Minnesota, and New York);
• 7 states have laws prohibiting youth board members (specifically, Colorado, Florida, Georgia, Nevada, New Jersey, Pennsylvania, and Utah); and
• 40 states and the District of Columbia are silent on the issue of youths on boards.

Even if state law provides for youth board members, organizations must still check the applicable statute for any restrictions. For example, New York state law provides in part that only certain nonprofit corporations may have a director of sixteen years of age or older, such as a nonprofit corporation “organized for educational purposes primarily for the benefit of individuals below eighteen years of age” or “organized for recreational or youth development and delinquency prevention purposes primarily for the benefit of individuals below eighteen years of age.” (New York Non-For-Profit Corp. Code §701(a)).

Additionally, organizations incorporated in states where the laws are silent may face a different set of obstacles. As Paula Allen discussed in her article, “Youth and philanthropy: Legal issues, practical consequences,” multiple state agencies in Indiana (where the law is silent), including the Attorney General and Secretary of State offices, were unable to provide a uniform response about whether a minor could serve on the board of an Indiana nonprofit. A takeaway for organizations is not to assume silence in the law means the same as authorization. Organizations incorporated in states where the law is silent may face similar uncertainties from state agencies and should do their homework.

What are the rights and obligations of a youth board member? What about D&O insurance?

A youth board member would have many of the same legal rights as the other board members such as full voting rights as a director and access to corporate records of the nonprofit. However, a youth board member’s authority and obligations are likely limited in other ways. For example, youth board members would generally not have signing authority because minors have limited ability to enter into or sign contracts under general contract law principles. Additionally, while the law articulates that board members have fiduciary duties and a youth board member should strive to carry out his or her position according to such standards of care and loyalty, these may not be legally enforceable duties against a youth board member. As Allen noted in her article, as of 2002, there has not been extensive examination of the limitations on minors under contract law and common law nor case law research on suits brought against boards with youth board members. Notwithstanding whether a youth board member could be legally accountable for his or her observance of a director’s fiduciary duties, some also believe a plaintiff would likely be dissuaded from including a youth board member in a lawsuit for breach of such duties in all but the most egregious circumstances because of the potential backlash.

Furthermore, whether the youth board member is covered under the organization’s directors and officers (D&O) liability insurance may depend on the organization’s specific policy. Many D&O policies do not specify a minimum age for directors. However, an organization is well advised to check its policy and speak with its insurance carrier.

Thus, the uncertainty surrounding the liabilities and protections of a youth board member may create enough cause for concern for both the organization as well as the minor, and possibly his or her parents, that adding a youth board member is not a desirable situation for any party involved.

Evaluate the "why."

Nonprofit organizations are often criticized for seeking “diversity” without definition or direction and the appeal of a youth board member should not fall into the same trap. Even if legally permissible, a board must seriously consider the reasons why the organization seeks a youth board member to begin with. Useful questions may include:

• What skills will a youth board member bring and are these skills valuable to the board and organization?
• What perspective will a youth board member provide and would this fill a current and important void?
• What does the board expect or hope to gain from a youth board member?
• Is there a particular youth in mind that the board finds to be exceptional and if so, what are the qualities and attributes the board believes are appealing and valuable to the organization?
• What does the organization gain from a youth’s participation as a board member that it would not get through alternative forms of involvement (e.g., through participation on an advisory committee)?
• Is having a youth board member consistent with the organization’s mission and values?
• How will staff, funders, donors, and other constituents react to a board with a youth board member?

Thoughtful consideration about the underlying purpose and objectives will not only help the board determine whether to continue its discussion about a youth board member but also subsequently help steer the board in the right direction when determining how to either incorporate a youth board member or pursue an alternative arrangement. 

The Spotlight on Nonprofit Boards

On December 9, 2011, Martin Lipton's post The Spotlight on Boards was published in The Harvard Law School Forum on Corporate Governance and Financial Regulation blog.  Lipton lists 15 expectations of corporate boards and 5 requirements for meeting such expectations.  While the post focused on major public companies, much of the information on "best practices" is equally applicable to nonprofits and well-worth a read.

 

Among the expections (with tweaks for charitable nonprofits):

• Establish the appropriate “Tone at the Top” to actively cultivate an organizational culture that gives high priority to ethical standards, professionalism, integrity, mission-compatibililty, and full compliance with legal requirements.
• Choose the executive, monitor his or her performance and have a succession plan.
• Work with management to navigate the dramatic changes in economic, social and political conditions.
• Plan for and deal with crises [see, for example, our Opinion pieces in The Chronicle of Philanthropy on the Sandusky-Second Mile and 'Three Cups of Tea' scandals].
• Determine executive compensation to achieve the delicate balance of enabling the organization to recruit, retain and incentivize the most talented executives, while avoiding violating the prohibition against excessive compensation (consider using the rebuttable presumption of reasonableness procedures).
• Interview and nominate director candidates, monitor and evaluate the board’s own performance and seek continuous improvement in board performance.
• Approve the organization’s annual operating plan (including the budget) and long-term strategy, monitor performance (including comparisons of actual to budgeted figures), and provide advice to management as a strategic partner.
• Determine the organization’s reasonable risk appetite (financial, safety, reputation, etc.), set appropriate standards for managing risk and monitor the management of those risks.
• Set high standards for compliance with legal and regulatory requirements, monitor compliance and respond appropriately to “red flags.”
• Work with the executive to encourage entrepreneurship, appropriate risk-taking, and investment to appropriately further the organization's mission with consideration of both long-term and short-term impact (intergenerational equity).

Avoiding Trouble: What Nonprofits Can Learn From Sex-Abuse Scandal

Emily and I wrote an op-ed on lessons to be learned from the The Second Mile / Sandusky Scandal published yesterday in The Chronicle of Philanthropy.  We'll publish a more comprehensive version of our article in December.

The child sex abuse scandal involving Jerry Sandusky, Pennsylvania State University, and The Second Mile has devastated individuals, seriously harmed the reputation of a state institution, and jeopardized the existence of a charity serving more than 100,000 children annually.

Sandusky was indicted in November following a three-year investigation into reported sexual assaults of young boys by Sandusky over a period of about 15 years. The Grand Jury reported its finding that Sandusky, a former Penn State assistant football coach and founder of The Second Mile, used the charity to find his victims and sexually assaulted them, at times on the university campus.  Shortly after, Penn State Athletic Director Tim Curley and Senior Vice President Gary Schultz were charged with perjury and vacated their positions, Penn State head football coach Joe Paterno and President Graham B. Spanier were fired, and The Second Mile CEO Jack Raykovitz resigned. Further fallout is to be expected as Penn State, The Second Mile, the NCAA, and the U.S. Department of Education have all initiated their own investigations; and the media continues to cover the riveting story, which remains to be only partly told and filled with conflicting statements, still unsubstantiated allegations of further misconduct, and rumors of a vast cover-up.

For organizations working with children, this is a serious reminder that tragically high rates of child abuse cannot be ignored in their operations, policies, and practices. But there are broader lessons to be learned from the Sandusky scandal for all nonprofits.

Emerging Legal Questions in Today’s Boardroom – BLF 2011

Last week, I had the honor and pleasure of presenting a session on Emerging Legal Questions in Today’s Boardroom at the BoardSource Leadership Forum, a national conference focused on nonprofit governance. This session addressed some of the trending legal issues for nonprofits in the areas of technology and social media, transparency, earned income and social enterprise, and nonprofit advocacy. In particular, we discussed:

TECHNOLOGY & SOCIAL MEDIA

• Considerations regarding social media policies and procedures
• State registration requirements for Internet charitable solicitations
• Risks and tips when using e-mail to vote on board actions

Additional resources

- Social Media Policy Resources for Nonprofits (Nonprofit Law Blog)
- When Marketing Through Social Media, Legal Risks Can Go Viral (Venable LLP)
- A Survey of Social Media Issues Before the NLRB and NLRB Social Media Report
- Charitable solicitation registration: National Association of State Charity Officials Charleston Principles (NASCO) and The Unified Registration Statement Multistate Filer Project
- Can Nonprofit Boards Vote by E-mail? (Blue Avocado)

TRANSPARENCY

• Improved practices for reviewing the Form 990
• Governance policies highlighted by the Form 990
• Best practices for approving executive compensation

Additional resources  

- IRS Automatic Revocation of Exemption List
- Form 990 Policies – Is it better to check “yes” or “no”? (Nonprofit Law Blog)
- Executive Compensation (Nonprofit Law Blog)

EARNED INCOME & SOCIAL ENTERPRISE

• Determining income tax implications of business activity 
• Legal form and business considerations for undertaking business activity
• Introduction to new hybrid legal structures

Additional resources

- Tax on Unrelated Business Income of Exempt Organizations (IRS Pub. 598)
- The Profitable Side of Nonprofits (Nonprofit Law Blog)
- Nonprofit Radio: Earned Income & UBIT (Nonprofit Law Blog)
- Hybrid legal structures: Americans for Community Development (L³C info), B Lab (Benefit Corporation info), and the Business for Good blog (California Flexible Purpose Corporation and other social enterprise info) 

NONPROFIT ADVOCACY 

• Lobbying definition and 501(c)(3) limitations
• Electioneering definition and 501(c)(3) limitations
• First Amendment rights and recommended practices for organizations
• Key principles and practices when setting-up affiliated structures

Additional Resources

- Rules of the Game, 2nd edition (Alliance for Justice)
- Influencing Public Policy in the Digital Age (Alliance for Justice)
- Affiliated 501(c)(3) and 501(c)(4) Organizations (Nonprofit Law Blog)

 
Special thanks to BoardSource, Barb Knoff of The Millennium 3 Company, and everyone who attended the Emerging Legal Questions in Today’s Boardroom session!

More information is available in the session handout (download here) and presentation slides (download here).

BoardSource Leadership Forum 2011

The theme of this year's BoardSource Leadership Forum is Governing Towards the Future.  According to BoardSource, the Forum "is the only national conference focused on the impact of nonprofit boards and the unique role they play in advancing the public good. Every year, approximately 800 nonprofit board members, chief executives, and senior staff from around the world gather with an impressive array of experts to discuss the newest thinking and practices in nonprofit governance."  Among those experts this year, Tim Delaney (National Council of Nonprofits), David Greco (Nonprofit Finance Fund), R. Todd Johnson (Jones Day), Jan Masaoka (Blue Avocado), Francie Ostrower (University of Texas, Austin), and our own Emily Chan!

Emily will be presenting on Emerging Legal Questions in Today's Boardroom, offering the perspective of a nonprofit lawyer and social media savvy millennial.  Here's the description of her session (9/25 - look for her blog post this week!):

All too often, board members stifle their own potential to be great leaders by staying in the dark on important legal issues. Increased attention to earned income and social enterprise, greater utilization of technologies and social media, and heightened demands for transparency are some of the current trends creating new risks for boards and a stronger need for updated governance discussions in the boardroom. In this session, we will discuss the key legal questions and strategies every board should consider to lead more confidently and effectively in today’s nonprofit landscape.

Emily also will be participating on a panel for the following session: Deliberating the Future: How Will the Public's Demand for Transparency Impact the Recruitment and Role of the Nonprofit Board Member?

9/25 UPDATE:  Some of my favorite tweets from #BLF2011 (we'll post separately about Emily's session) -

• emilychan: "History rarely moves in straight lines." RT @BoardSource "Certainty is the enemy of hope." Linda Crompton at the opening plenary
• ReachInc: "Not everything that is faced can be changed, but nothing can be changed without being faced." - James Baldwin quote
• emilychan: Healthy to take nothing for granted; to be willing to hold everything out to scrutiny; & to ask the difficult questions. - Crompton
• BClarkWhitney: In for-profit, risk is absorbed by investors. In the NP sector, risk is absorbed by the most vulnerable in our communities - David Greco 
• BoardSource: Politics 2.0 have young people on your bd to help u thru technology and figure out branding.
• BoardSource: Tim Delany: "Politicians don't see our sector as a whole. Only as Tax expenditures and lobbyists for causes."
• beachpace: Qualities of effective NPO leaders: Commitment to Impact, Willfull Naivety & Resource Magnetism. - Cheryl Dorsey
• FrogPurse: Dorsey notes that being a next generation leader isn't about your age, it is about your view of the world.
  
• emilychan: Fourth Sector accounts for 5-15% of U.S. GDP and 10-20% of U.S. Jobs. - Heerad Sabeti
  
• emilychan: The role of nonprofit leaders in the Fourth Sector: Embrace it, help shape it, & find opportunities in it. - Sabeti
  
• emilychan: Debate! audience poll: If we want better performance from nonprofit board members, we should pay them. 25% agree; 75% disagree.
  
• emilychan: Debate! Q2: Chief Exec accountable & responsible for work of Board. 49% agree; 51% agree. Lively debate in room around the nuances.
  
• emilychan: Debate! Q3:Should foundations impose governance stds on grantees? 32% Y; 68% N | More by panelist Rick Moyers http://bit.ly/n06pSz
  
• MeredithKennedy The best boards don't think the same, but they do think together. - Richard Chait 

Governing Boards – Craigslist Foundation Boot Camp 2011

At this year’s Craigslist Foundation Boot Camp, Vance Yoshida, Senior Manager at La Piana Consulting, and Lynn Luckow, CEO of Craigslist Foundation, presented an informative session on "Governing Boards: From Good to Great." Vance and Lynn provided useful tips on a common and difficult issue for many nonprofits: how to create and maintain a strong board of directors. Below we’ve shared some of the key takeaways from this session. 

Getting the Right People on the Bus

Vance stated having the right people on the bus to take you where you want to go is the most fundamental element to having a great board. He suggested board recruitment should be similar to recruitment for a sports team. You need particular skill sets but skill sets only get you so far; these individuals have to be able to come together to work as a team. Having a superstar does little good for the organization if he or she is unable to work well with others.

Additionally, recruitment cannot be left to chance; it must be strategic.  For example, Lynn cautioned against assigning the responsibility of recruitment solely to the outgoing director who is creating the vacancy on the board. The practical result, he stated, is that the outgoing director will find someone just like him; this may not be a beneficial situation in terms of growing the organization, striving towards greater diversity, reaching new networks, and meeting other objectives that require a more strategic approach.

Lynn also emphasized that recruitment should account for the potentially changing role of the board as the organization changes. Lynn highlighted that in the early stages of an organization, the directors are often “do-ers,” taking responsibility for tasks that would otherwise be delegated to staff such as lending their expertise in finance and marketing to help get the organization going. However, later in an organization’s life, there may be a lesser need for “do-ers” and a greater need for visionaries on the board who can help stretch the organization, not just monitor it. A director who initially joined a “do-er” board may not like the changing role of the board or may not find the work as fulfilling as the organization changes, in which case it might be necessary to recruit a new board member who better fits the current direction of the organization. 

The alternative can be true as well, for example, with a fiscally sponsored project that intends to apply for its own tax-exempt status. The advisory board of a fiscally sponsored project may not want to take on the responsibilities and workload necessary of the founding board of the new tax-exempt entity, in which case the project may need to recruit individuals to the advisory board who are willing and able to help with the transition to a governing board of directors. (For more on fiscal sponsorship, please see our previous posts here.).

Vance furthermore noted that transitioning from a volunteer workforce to staff can also change the responsibilities of the board. As Vance pointed out, the tricky part with directors who continue to also serve in staff capacities is that the directors need to understand that in doing so, they are helping the organization in a non-director capacity and will report to the Executive Director or other staff.

Vance and Lynn gave the following tips for strategic recruitment:

1. Evaluate the context of the organization – e.g., the need for a “do-er” board.
2. Think about where you want the organization to go strategically and what is needed to get there.
3. Evaluate the prospects’ ability to contribute to strategic planning – e.g., strong understanding or willingness to learn about the programs and those served by the organization, passion about the organization’s mission, etc.
4. Use a governance or nomination committee for assessing recruitment needs and making nominations.
5. Periodically review the governing documents of the organization such as bylaws and ensure they continue to meet the needs, and work with the strategic plan, of the organization, and don’t just honor them – e.g., increasing the number of authorized directors in order to create necessary committees.
6. Involve the Board Chair and/or Executive Director in the recruitment process.
7. Think beyond traditional expectations of the board; think in terms of value-add (i.e., what you need on top of those expectations to take the organization to the next level).
8. Evaluate prospects in terms of their board potential beyond their initial term – e.g., potential future board chair, likely to serve a second term, etc. 
9. Have mechanisms in place for getting the right people off of the bus such as conducting board assessments, implementing term limits, and having a Board Chair who is willing to have the often difficult conversations such as resignation or removal with a director should it become necessary.

Creating an Environment for High Impact

Lynn stated more often than not, there is not enough expertise among the directors to know where the organization ought to go or how to plan for the future of the organization. Thus, Lynn suggested that 50% of the board’s time should be spent on learning about subjects such as the organization’s mission and programs, and who the organization serves.  Lynn also advocated for never allowing board members to bring finished thoughts to the table, meaning board members should come ready to engage in discussions. 

Vance and Lynn reminded all of us that board service is not a natural activity in the sense that organizations need to devote time and resources to orient, educate, and familiarize directors, and put them in a role where they can make a difference. The importance of training and giving directors the tools they need to accomplish their tasks should not be ignored. 

Alternative Roles

Although not a topic of the main presentation, a common question from the audience during the Q&A portion related to non-director roles in capacities such as member of an emeritus board or advisory board, and how that compares to the board of directors. This can be an area ripe with problems for the unaware.  For more on the distinction between a governing board and other roles, please read our post  “Advisory Board v. Board of Directors - A Distinction with a Difference.” 

Quotes from Glee and Nonprofit Governance

"When my mom applied to college, she put being popular as her main extracurricular activity." - Quinn.  Too often, nonprofits recruit board members because of their social status or popularity.  They justify this because of the funds and connections they may bring with them.  We criticize colleges for accepting students for the same reasons.  Shouldn’t nonprofits also recruit and elect board members for their abilities and desire to govern the organization?

“I'm only really generous if there's something in it for me.” - Rachel.  There is a lot of truth to this statement with respect to board members.  What incentives are there for board members to be active in fulfilling their governance responsibilities and otherwise providing support to the organization?  Board members may be interested in educational and network opportunities as well as acknowledgement of distinguished service.  They certainly want to know that they are contributing positively to advancing the organization’s mission.  What disincentives are there for board members who fail to meet their basic governance responsibilities?  An automatic removal process for a number of consecutive absences might encourage attendance.  Alternatively, a board member might be compelled to live up to obligations of an organizational board member contract that he or she signed.

“You're a constellation of stars. I just hate to think you might be ignoring some of them because they don't burn quite as bright." - Emma.  One important role of the board chair is to elicit the active participation of all board members and not allow the board to be dominated by just a few of the most assertive and/or aggressive directors.  Presiding over a meeting is not simply following parliamentary procedures (like Robert’s Rules).  It can be a challenging task that involves setting an agenda, getting and sharing pertinent information in advance, and managing the board members for ideas and input.

“It takes years to build a good reputation, and only seconds to destroy it.” - Will.  Doesn’t this apply almost everywhere?  There are so many ways to ruin an organization’s reputation.  Some bad fact patterns:  board members using organizational resources to benefit themselves, unprofessional conduct of staff and other representatives, negligent management of organizational resources, and failure to control the organization’s communications (including through social media vehicles).  Make sure the board is attentive to the need to protect the organization’s reputation.  Use Will’s statement as a talking point at one board meeting.

“In this age of celebrity sex tapes, a good reputation does no good at all.” - Rachel.  Sometimes, the quick attention that a provocative communication can generate can entice organizations away from their core values (kind of what happened to "Glee" itself at times).  Being innovative and taking chances can be great and may often be necessary for advancing your mission.  However, while you may thoughtfully modify your values from time to time (which should involve the board’s approval), you should never compromise them.  Make sure you have appropriate policies in place so employees, volunteers, and others cannot determine for themselves to send out public communications that may jeopardize the organization’s good reputation.

“Sometimes being special sucks.” - Will.  A valued board member or organizational leader who is always there for others, champions the organization to the community, and finds myriad other ways to provide meaningful support to the organization may suffer burn-out, particularly if he or she feels underappreciated or has to continually deal with crisis after crisis.  Take steps on the board level to mitigate the risk of losing this person.  Recognize that being special can suck, but it can also reap substantial rewards.

“You're lashing out at me is fantastically compelling and inappropriate.” - Kurt.  A good lashing out can make for great television.  But it generally would not be appropriate at a board meeting, where divergent ideas and perspectives should be encouraged, but only if they are delivered respectfully and within an agreed upon framework.  Chairs of the board or board committees should be instructed on how to effectively preside at meetings consistent with the organization’s values.

“People just don't like me.” - Rachel.  “You might wanna work on that.” - Finn.  If your organization goes through a multi-year decline in donations, donors, and volunteers, you might wanna work on that … at the board level.

“I have no idea what's going on in this script, and it's not in a cool Inception kind of way." - Finn.  It’s important that instructions given by the board to the executive and staff through policies and directives are clear.  Be careful of informal directions given by individual board members who have no inherent authority to act and conflicting directions.  Make sure your policies are regularly updated and staff trained on understanding them.  For example, it may be critical to educate and receive feedback from your development staff about the organization’s gift acceptance policy.

“Status is like currency. When your bank account is full, you can get away with doing just about anything. But right now, we're, like, toxic assets.” - Quinn.  When your organization is riding on a wave of strong support, financial health, and programmatic achievements, it may seem like you can do just about anything – expand, pay more, leverage your status in collaborations.  But waves eventually break and your organization’s status will also go through valleys as well as peaks.  Make sure your plans account for these fluctuations.

“We're gonna win because we're different. That what makes us special.” - Rachel.  Often, being different is essential to advancing your mission in the most effective and efficient way possible.  And often it’s essential to your organization’s continued survival.  Your environment is constantly changing, people are changing, and the laws are changing.  How is your board addressing these changes?  What is setting you apart from other organizations in a competitive environment for funding, goods, and services?  What makes your organization special?  Your board should be thinking about these things.

"Are you questioning my badassness? Have you seen my guns?" - Puck. Is your organization a badass?  Should it be?  Being a badass may be critical for organizations that do advocacy and lobbying work.  And guns are the organizational muscles you are displaying which may influence who will join you and who will compromise or back down based on your perceived clout.  Boards need to think about this because organizations can often best further their missions through advocacy rather than direct service.

“At what age are you allowed to look back on your life with nothing but regret?” - Emma.  At certain times, your organization may need to cut a program, reduce the scope of its services or the number of people it serves, lay off staff, or even dissolve.  Yet, there may not be a need to look back with regret.  Sometimes, admitting failure is a sign of strength – that the organization was able to take a chance on something new that turned out not to work but would stand as a learning tool for others, or that the organization recognized its mission could be advanced more effectively and/or efficiently by another organization or another way.

If you found this fun, read Quotes from Seinfeld and Nonprofit Governance.  More to come.

Leadership Through Board Service - YNPNsfba Program on May 24

NEO Law Group's Emily Chan is one of the expert panelists discussing Leadership Through Board Service, a 2-hour program on Tuesday, May 24, starting at 6:15 pm, hosted by the Young Nonprofit Professionals Network of the San Francisco Bay Area (YNPNsfba). Emily will be joined by:

• Ann Lehman, Nonprofit Planning and Policy Specialist and Author of Board Members Rule: How to Be a Strategic Advocate for your Nonprofit;
• Bruce Marcus, San Francisco State University Instructor of Volunteer Management: From Boards to Bag Stuffers; and
  
• John Power, Executive Director of The Volunteer Center Serving San Francisco and San Mateo Counties.

Emily is of course my extraordinary young colleague and principal contributor to this blog. In addition to being a nonprofit attorney, she serves on the boards of At the Crossroads and Streetside Stories, and has written articles for The Chronicle of Philanthropy, the ABA's Business Law Today, About.com, and Blue Avocado; presented on nonprofit legal issues to the Center for Volunteer and Nonprofit Leadership, CalCPA nonprofit interest groups, the Bar Association of San Francisco, and an MBA class at USF; and coached the UC Hastings moot court team at a national competition where she previously won an award as best oral advocate.  Did I mention she's 25 and a former competitive figure skater?

You can sign up here. It's only $10 or $7 if you're a YNPNsfba member.

Location:

SF Friends Meeting House
65 9th Street
San Francisco, CA 94103

Details:

Do you want to stand out as a leader in the non-profit community? Are you looking for an opportunity to have a substantial impact toward a mission you care deeply about? Learn how board service can take your career in the nonprofit sector to the next level!

Joining a board will allow you to make new connections with leaders and like-minded professionals, as well as learn more about nonprofit governance nd develop yourself as a leader. Join YNPNsfba Career Development Committee for an introduction to board service with expert panelists who will discuss:

• Considerations when choosing a board;
• Different types of boards and board culture;
• Roles and responsibilities;
• Important legal aspects;
• Fundraising techniques and tactics; and
• Tips on how to improve your experience and contributions as a board member.

Feel confident in your decision to join a board, with the tools and information to find a board service opportunity that matches your availability and expertise, and is sure to enrich your personal and career growth!

Highlights of the BoardSource Nonprofit Governance Index 2010

The BoardSource Nonprofit Governance Index 2010, released at the 2010 Leadership Forum in San Francisco, reports on data collected from surveys of 978 chief executives and 780 board members (all BoardSource members as of the survey date).  While the sampling methodology did not allow for results that are representative of the sector as a whole (e.g., underrepresentation of smaller charities and local nonprofits, overrepresentation of organizations that have an independent audit), the Index provides valuable information in several areas.  Here are some of the results that I found most meaningful as an attorney for nonprofits:

Board Performance Ratings (0-4) - board members survey

Understanding organization's mission - 3.65
Financial oversight - 3.36
Legal and ethical oversight - 3.14
Monitoring organizational performance - 2.87
Providing guidance and support to the chief executive - 3.24
Evaluating the chief executive - 3.06
Understanding board responsibilities - 2.97
Community relations and outreach - 2.70
Increasing board diversity - 2.39

Most Important Areas for Board Improvement - board members survey

Fundraising - 54%
Focus (more strategic, less operational) - 27%
Board composition and diversity - 24%
Board development/orientation - 23%

Governance Issues on Form 990

Written conflict of interest policy - 95%
Signed conflict of interest and annual disclosure statements - 87%
Written whistleblower policy - 86%
Written document retention and destruction policy - 83%
Formal, written performance evaluation of the chief executive - 71%
Comparable data when determining chief executive compensation - 71%
Provide board members with a copy of Form 990 before filing - 74%

Lesson:  If you don't have such policies, you may be in a shrinking minority.  That's bad if you're a board member who wants to show that you've exhibited reasonable care in governing the organization.  Also, the organization will stand out more and more to the IRS agent deciding on a potential examination/audit.

Most Common Committees

Governance/Nominating - 83%
Finance - 83%
Executive - 78%
Audit - 27% 

Miscellaneous

Average board size - 16
Boards with term limits - 70%
Average maximum [continuous] tenure - 7.2 years
Organizations using consent agendas as meeting practice - 55%
Organizations with dedicated board Web site - 26%
On average, boards meet 7.4 times per year
An average board meeting lasts 3.4 hours
84% of boards have average board meeting attendance of 75% and higher
Boards have an average of 5.6 committees

Diversity

Board members - 84% Caucasian, 52% male, under 30 - 2%, 30-39 - 12%
Chief executives - 88% Caucasian, 64% female, under 30 - 0.5%, 30-39 - 6%

We'll devote a future post on nonprofit board diversity.  It's alarming to review these numbers with the additional findings that 63% of organizations reported that they incorporated diversity into the organization's core values and 74% of board members are satisfied with their diversity.  Seriously?

Three Cups of Tea Scandal Offers Lessons for Charities & Trustees

Teaching moment?  Read our opinion piece in The Chronicle of Philanthropy, Three Cups of Tea Scandal Offers Lessons for Charities and Trustees.  Here's a teaser:

• Consider public expectations in every report and publication.
• View the informational tax return as a public-disclosure document, not just an IRS form.
• Watch for potential conflicts of interests involving top executives and board members.
• Prevent sweetheart deals that benefit a charity’s officials or board members.
• Structure the board to engender public trust.
• Conduct independent audits regularly to avoid trouble.
• Adopt clear and fair travel policies.
• Draft an emergency-response plan long before any problems arise.