BEING A NONPROFIT BOARD MEMBER CAN BE MORE CHALLENGING THAN BEING ON A PUBLIC COMPANY BOARD

BEING A NONPROFIT BOARD MEMBER CAN BE MORE CHALLENGING THAN BEING ON A PUBLIC COMPANY BOARD

David Tate, Esq. (San Francisco), http://davidtate.us, tateatty@yahoo.com

Yes, being a nonprofit board member can be more challenging than being on a public company board.  Why is that?  There are several reasons, but they are not necessarily good or bad, just different.  Here are a few.

1.  The people on the nonprofit board are probably more diverse in background than on a public company board.  Some examples—more diverse in life and work experiences, education, how they got on the board (who they knew), economic level, reasons for serving on the board, and past board or similar experience.  Just think about it, on a nonprofit board you have male/female; every race; wealthy and not as wealthy; graduate and less than graduate level educated; educators, medical professionals, social and community professionals, religious, computer professionals, trade workers, CPAs, lawyers, CEOs, and the list goes on without end reflecting the community as a whole.  The diversity is good as it probably benefits the nonprofit and the board in achieving the nonprofit’s mission.  The diversity can present challenges—if not guided skillfully, the board can reflect a scattered, undirected group lacking in cohesiveness where the members have difficulty relating to each other and where they are coming from with their demeanor, ideas and opinions.

2.  In a manner of speaking, identifying and agreeing upon nonprofit board responsibilities and functions is sort of like the Wild West, even less structured than for public companies pre-Sarbanes-Oxley.  For example . . . recognizing the nonprofit’s board level need for an audit committee, internal control oversight, etc. can be a somewhat recent development.  On the other hand, it is entirely possible that a nonprofit board could be more directly involved in fund raising and donations, whereas it would be unlikely for a public company board to be directly involved in revenue production (although a startup company board would exercise greater oversight of funding and capitalization).  It is probably a safe bet that if you went around the table at a nonprofit board meeting and asked the members to list the top five board responsibilities, other than helping the nonprofit to achieve its mission, you will probably get a wide variety of responses.  Broadly speaking, I view the nonprofit board member’s responsibilities as being the same as for a member of a public company board—that is, as being a member of the board which is responsible for oversight of the entity’s processes and functions pertaining to strategy, governance, risk, compliance and talent/succession.  In any event, the point is that on a public company board you are more likely to have a general understanding between the board members as to their responsibilities, functions, processes and time commitments.  That understanding might well be lacking on a nonprofit board.

3.  And the third area that I will mention, although certainly additional areas can be listed, involves the interaction between the nonprofit board and the nonprofit’s executive officers and senior managers.  As a general proposition, I would say that people who work at nonprofits, and people who serve on nonprofit boards tend to be more “personally” committed to the mission of the nonprofit than their counterparts are at public companies.  That is not to say that people who work at public companies and who serve on public company boards are not committed, but merely to say that as a whole, people at nonprofits have a greater tendency to become “personal” about their involvement and the good of the nonprofit.  This “personal” attribute or commitment can add a dynamic to relationship interactions.  As nonprofit boards are encouraged and expected to become more active and involved in their oversight activities, by necessity they must also increase their interaction with executive officers and at times with senior management.  In situations where this interaction has not been the norm, it can be viewed as excessive or unwelcomed second guessing.  In the public company arena this type of interaction should be expected, whereas for nonprofits there might be a learning curve.

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