January 29, 2015
Creating an accountable board of directors should be an organizational objective for any philanthropic group. In reality, this is a goal shared by the for-profit world as well, and there are areas where these two types of enterprises can share thoughts to empower their leadership.
Looking at crossover
According to the Chicago-based law firm Wagenmaker and Oberly, both nonprofits and for-profits look to their board to appoint some of the most important members of the organization. For instance, boards regularly appoint members of the C suite, including the chief executive and financial officers.
At the same time, a major point of divergence is apparent when looking at the stakeholders to whom nonprofits and for-profits are beholden. It is fairly clear cut for organizations that earn profits: They answer to shareholders and owners. However, nonprofits' stakeholders are somewhat more ambiguous. There are obviously the staff members, donors and volunteers. However, there is also the community that the organization serves, and even the public at large. In legal terms, nonprofits are primarily responsible for reporting their financial situation to government agencies, like the IRS.
Create a clear record
Regardless of enterprise type, the main goal is transparency. A key tool in accomplishing this objective is creating an annual report. In reality, this measures an organization's ability to communicate well with its stakeholders.
GuideStar supported this assertion, highlighting several actions that nonprofits can take to better ensure accountability. For instance, it is important for organizations to establish financial oversight processes and accurate reporting. This will likely mean giving each member of the board the chance to review financial statements and raise any questions he or she may have before it's distributed to other interested parties or posted on the organization's website.
Another way to establish accountability is to perform self-assessments on an annual basis. By taking an open and honest look at how well the board is performing, it establishes credibility in the nonprofits' stakeholders minds that these individuals are dedicated to improving processes. The CEO or executive director should also be party to assessments to provide another metric to gauge whether every member of the leadership is on the same page and shares the same objectives.
Creating an accountable and trustworthy board of directors is central to a healthy nonprofit. A clear record of financial standing, solid communication and regular assessment can help provide a firm foundation.
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