Dear Nonprofiteer, How can we protect the Executive Director and mission from the Board?

Dear Nonprofiteer,

I have a delicate question. I am on the board of a very small social services non-profit. We operate a special trust that helps people get government benefits. Our non-profit has the potential to be abused for profit. There is another non-profit that does what we do, but for a less than charitable cause.

Our Problem:

The person who started this non-profit is the Executive Director and not a board member. He set up the non-profit to have as few conflicts as possible and chose to be an employee in effect and in actuality. He could eventually lose his job if the board so decided. Our board to this point has been little more than a Garden Club.

My Fear:

Our non-profit could be the manager of millions of trust fund dollars and is growing monthly. This sort of money can cause many bad things to happen. The one I fear is rogue board members’ collusion (I’m sure you’ve not heard of that) on taking out the ED (and Founder) and replacing him with a less mission oriented person who will do their bidding.

Is  their a way to assure this does not happen? Is it inappropriate for the ED to be on the board and have a vote? Is there another board structure we could adopt that would keep this from happening?

Thanks,

Fretful in Florida

Dear Fretful:

If you’re concerned that people will try to steal the nonprofit’s money for non-mission uses, that suggests the nonprofit doesn’t have appropriate financial safeguards in place.  The Nonprofiteer is not an accountant, but she knows a few basic rules of forensic accounting, like every check over a minimal amount should require two signatures.  If your agency doesn’t have a bookkeeper, accountant or  CFO who’s implementing these rules, you should hire one.

But it appears that your concern is actually that the Board of Directors has the power to fire the Executive Director.  That’s absolutely true, and there’s nothing whatsoever you can do about it: from a legal standpoint, the agency belongs to the Board of Directors and the Board gets to hire and fire staff pretty much at will (though not, of course, for legally proscribed reasons like race or gender).

It’s not totally inappropriate for the ED to be on the Board and have a vote, though the Nonprofiteer prefers a bright line between governors (Board) and executives (staff).  But the simple addition of the ED to the Board roster won’t prevent the scenario you fear.

So what’s to prevent the Board from firing the Executive Director so it can loot the agency’s resources?  Well, the Board has a legal responsibility not to loot the agency, regardless of what the Executive Director says/does/doesn’t say/doesn’t do.  Assuming your agency is a 501(c)(3) charity, this responsibility is laid out in the bylaws and enforceable by the Internal Revenue Service.  So the members of the Board who don’t want to end up making little rocks out of big rocks in a Federal prison will be sure to keep their hands out of the till.

Nothing, however, will prevent the Board from firing the Executive Director for some other purpose, unless you and the Executive Director and any other current Board members committed to the agency’s mission get off your collective duff and recruit additional Board members who will be more than “a Garden Club.”

This is a common problem in nonprofits: people who lament that their Board “won’t do anything” or “isn’t really committed” but who neither train nor replace the current Board members.  No one is born knowing how to be a nonprofit Board member–knowing what the responsibilities are and/or how to discharge them.  Is there really some reason to think that your current Board is dishonest and opposed to the mission, or has it merely not responded to generalized requests for its help, e.g. “You people should be raising money”?

So try the following:

  • Create or activate a Board nominating committee to summarize the agency’s mission and the Board’s role in a piece of paper suitable for use in recruiting new Board members.
  • Decide how many new Board members you want and have the nominating committee go find that many people who are committed to the mission and willing to work on its behalf.
  • Once they’re recruited, schedule a Board orientation for veteran and new Board members alike, including a presentation by the Executive Director about the mission and discussions by you and other active members of the Board about the Board’s role in implementing that mission.

Or, to put it more briefly: the best defense is a good offense.  Don’t wait for the current Board to come after the Executive Director and change the mission; pack the Board yourself with mission-loving newcomers.

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5 Responses to “Dear Nonprofiteer, How can we protect the Executive Director and mission from the Board?”

  1. Ellen Wadey Says:

    Here’s another take on the situation…

    I’m an executive director at a very small nonprofit arts organization. I sit on the board, but I don’t have a vote, which I think it appropriate and speaks to The Nonprofiteer’s concern about separation of board and staff. I need to sit on the board to engage in the conversations, but I don’t think I should have a vote to keep a checks and balances.

    I inherited an organization who had the gatekeeper executive director for a decade, and then he decided it was time to more on to other things. His departure nearly destroyed the organization — commonly known as founder’s syndrome — because so much of the organization’s identity resided in him — and the board had done nothing to stop that connection. If you think the mission of your organization should only live as long as your e.d. is in place…then fine. But, if you think the mission is more important and should be able to survive an e.d. change, then you need to think less about making sure no e.d. change ever happens and more about how to move through an e.d. transition successfully. In my opinion, no one person should be able to destroy the good work — and the money invested in that good work by donors — by stepping away.

    When I came to my organization, it was a garden club without a garden club president. And to extend the metaphor, the garden club was in crappy shape. The mission hadn’t been updated in 15 years. The programs hadn’t changed with the times. The audiences had dwindled long ago, but no one seemed to notice — because that was the e.d.’s job. The board was a group of friends who liked to sit around the table and talk about ideas versus lead the organization to better days. I set the goal of my tenure to move this private/garden club organization to a fully public organization — and size doesn’t matter in this case, just mindset. We all agreed that the mission was unique and vital enough that we had to be prepared for any given person to step away — e.d., board president, strongest fund raiser on the board, highly talented artistic director — and the mission would survive. We had to welcome and adapt to change rather than see it as the wolf at the door.

    If you’re worried that certain board members have less than honorable intentions, then you’re recruiting the wrong kind of people to the board. But is the threat really that or that some of the board sees the e.d. as potentially standing in the way of progress and growth because it’s a vanity project for them? If you’re asking for and using other people’s money, it’s your legal and ethical responsibility to make sure that your organization makes the best choices for the people you serve and the public who is investing in you…no matter how hard those choices may be. And, you should always be thinking about transition and making plans for using those moments to create positive change.

  2. hermhill Says:

    I endorse this advice.
    “Fretful” should let it stimulate her own ideas from business or education — and, keep moving forward.

    Your mission is too important to hold back.
    Start your ideas with one friend on the Board, and add others until the entire BOARD is ready to keep moving.

    One small detail: the enforcer of the Board’s Charter is FL’s Attorney-General [ or, maybe Sec’y of State in FL], not the IRS. this Fed. Agency is useless.

  3. Newton Fagundes Says:

    I appreciate the last entry. That was extremely refreshing.

  4. John Says:

    are you saying that executive directors can vote too?

    • Nonprofiteer Says:

      The Nonprofiteer is opposed to having executive directors as voting members of nonprofit Boards–the Board hires, compensates and fires the ED and it makes no sense to have someone voting on his/her own employment status; but there’s no statutory obstacle to having a voting Executive Director and some EDs regard having a vote as a perk. If the agency is able to save on some other perk by providing this one, it’s probably harmless enough.

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