The fundamentals of overseeing a for-profit and nonprofit organization are similar. For example, consider this scenario: one of your neighbors sits on the board of a company in which you own shares, and another sits on the board of your local hospital. You are counting on both to do the same thing: to oversee the economic vitality of each organization, and to ensure that they deliver products or services in an effective manner, which aligns with their designated purpose.

There are some differences, of course, but the overarching rules and expectations are the same. We all want economically, socially and culturally strong communities.

The fundamental role of the Board is to define the organization’s mission and establish sound policies that ensure mission-based activities are rendered in alignment with that mission.

Specifically, Boards:

1. Plan for the future: Once a year, the Board should review and evaluate the mission of the organization, current service delivery models, and funding sources, along with organizational goals and objectives. The results then become the operating plan for the next fiscal year.

2. Approve financial statements: At its regular meetings, the Board should review a financial statement that reflects the fiscal status of the corporation, up-to-date annual expense/revenue budgets, actual income and expenses, and fund balances. The Board is also responsible for having procedures in place to insure compliance with laws and regulations.

3. Hire and evaluate the Executive Director: It is the Board’s responsibility to ensure that a competent CEO is hired, and to plan for that individual’s eventual transition out of the organization when the time comes. The supervision of staff is the CEO’s responsibility.

4. Represent the public needs and interests, while also acting as an ambassador to the public: The viewpoint of the public is heard and represented through the Board. The organization’s position, value and impact is often communicated through the board to the public.

5. Ensure that resources for an efficient organization are obtained: Every nonprofit needs people, money, goods and services. The Board must ensure that the resources available to the organization are sufficient to accomplish the organization’s goals.

6. Evaluate effectiveness: Typically, operating management will evaluate the individual programs or services, but it is the Board’s responsibility to ensure that the organization as a whole is effective in achieving its mission.

Legal duties

Legal considerations are an important part of serving on a board. There are three fundamental duties of a Director:

THE DUTY OF CARE– A director shall discharge his or her duties…
• in good faith
• with the care an ordinarily prudent person in a like
• position would exercise under similar circumstances in a manner the director reasonably believes to be in the best interests of the organization

THE DUTY OF LOYALTY – A director should have an undivided allegiance to the organization’s mission when using either the power of his/her position or information s/he possesses concerning the organization or its property.

THE DUTY OF OBEDIENCE – A director is charged with carrying out the purposes of the organization as expressed in the legal documents creating and defining its mission.
In fulfilling these duties, BoardStrong suggests all board members:

• Attend board meetings regularly
• Understand the responsibility delegated to board officers
• Discuss, seek to understand, and vote on important financial, business and policy matters
• Support organizational objectives and ensure they are met
• Ensure a sound board through regular elections and a peer performance appraisal process
• Send meeting agendas and materials requiring board action prior to board meetings
• Be involved (along with the rest of the board) in the CEO/Executive Director’s annual salary review
• Reveal all self-interest transactions and serve without seeking personal gain

This is the foundation for a successful board director. Keep these principles in mind while engaging in board service or searching for new opportunities.