Recent discussions with numerous colleagues indicate that service on non-profit boards is certainly not getting any easier. How much does a board need to know? Can policies be crafted to guide the board and its management staff on this issue? Or, is it more of an art than a science? A judgment call rather than a rule?

This article will attempt to address this issue using feedback from several colleagues with many years of non-profit board experience. I believe there are more questions than answers, but the questions can serve to stimulate useful dialogue, much like the opportunity I enjoyed with my colleagues.

Let’s do the Stephen Covey thing and “begin with the end in mind.”

One thing is for certain: when it (whatever ‘it’ is) really hits the wall, the board will want to know (or, should want to know) why it did not know! This puts enormous pressure on both the board and the management staff. It also leads to another dilemma that has long been a personal curiosity: if the chair of the board is merely an officer of the board with one vote on the board, why is the chair often expected to be the leader and confidante (and keeper of more information than the rest of the board) in his or her relationship with the executive director? Isn’t that notion entirely contradictory?

To be sure, no amount of policy-writing can replace common sense and judgment that is founded upon relevant experience. In a related discussion with the same colleagues, we noted that one key attribute among us was the large number of ‘weird’ situations that we have experienced (enjoyed?) over the years – both in our professional endeavors and in our community service – that has shaped our thought processes, particularly as it relates to non-profit board membership. This makes a strong case for recruiting the most diverse and experienced board possible.

Similarly, on the executive director side, experience is vital as well. We note that an increasing number of unqualified executive directors seem to be emerging. Specific examples often relate to seemingly fiscally sound board decisions: revenues are down, executive searches are time-consuming and costly, so ‘someone’ in the organization becomes the new executive director. Off hand, I cannot think of a single situation where this has ultimately benefitted the organization – either in the short-term or in the long-term. Accordingly, it seems increasingly likely that the average small-to-medium-sized non-profit would have an executive director that may know much more about the subject matter related to the mission of the organization, while also having much less knowledge of running or managing anything. This makes a strong case for recruiting the most experienced, well-rounded executive director as possible. Conversely, the lack thereof increases the potential for the miscommunication, or lack of communication, of issues important to the board.

Our organization is strongly supportive of ‘accountability’ for outcomes in our ongoing efforts to provide helpful guidance to non-profit organizations. As we review IRS regulations and research various actual ‘case studies’ among non-profit organizations that are having problems, it does not appear that boards are being held ‘personally responsible’ (i.e. liable) for the problems of the non-profit organization on whose board they sit, although that is very often referenced in board seminars and the like. From a regulatory standpoint, the issue of personal liability was surely intended to make a strong point regarding the accountability and responsibility of non-profit board membership. However, we are not aware of a single incident in which this level of accountability has been applied, even in some rather high-profile cases. (This is also an example of the need for non-profits to check state laws under which they are incorporated because some states provide indemnification and others may not.)

From the standpoint of striving for excellence in non-profit governance, it does not matter if personal liability is being actively assessed; rather, it matters that the governance and accountability policies and practices are followed by the organization as if regulatory penalties would indeed be assessed. It pays to be safe rather than sorry.

In the worst-case scenario, information would be intentionally withheld from the board by its executive director. There are a number of scenarios whereby this could happen with no mal intent; however, should mal intent be encountered, the accountability for such action should be obvious even to the most inexperienced board. Trust between the board and its executive director is of paramount importance.

The ‘gray area’ exists when the unintentional occurs and the resulting repercussions are harmful to the organization and its mission. By raising the potential for such problems to occur, we are hopeful that non-profit boards will place this issue on an upcoming agenda and spend some quality time discussing potential issues and come to consensus on types of issues that must be communicated. These issues will certainly vary from one non-profit to another, but it is the dialogue and the awareness that can guide a non-profit to excellence.