A board of directors is a requirement for the operation of a nonprofit entity. This elected group serves as the governance of your organization in everything from finances to the nonprofit’s mission.
Electing the right personalities to your board of directors is essential for your organization’s success. This guide will help you select your first board or grow an established board to better serve your nonprofit.
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What Is a Board of Directors?
A nonprofit board of directors works as a support system for the organization. Its duties include financial management, structural guidance, the hiring of executive directors, and much more. While the board typically isn’t involved in day-to-day operations, it plays an active role in maintaining the well-being of the organization as a whole, its effectiveness, and its financial health.
The Internal Revenue Service (IRS) recommends nonprofit entities to have at least three unrelated directors, but doesn’t require a specific term length.
To learn more about choosing a board of directors for your nonprofit, start by selecting your state below:
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- Washington D.C.
- West Virginia
What Is the Function of the Board of Directors?
Before you begin the election process of your board, it's important to understand the role this group plays in the success of your organization. While the tasks and requirements may vary based on the state in which you incorporated your nonprofit, the general responsibilities of a board include:
- Enforcing the Organization’s Mission and Purpose: The foundation of any nonprofit is its mission so a board’s chief task involves upholding that mission as well as the organization’s purpose.
- Hiring a CEO/Executive Director: While your board of directors plays an instrumental role in the success and effectiveness of your nonprofit, it doesn’t participate in the daily operations. That makes it vital for the board to hire a CEO or executive director who will provide effective, day-to-day leadership.
- Incorporating New Members: A board also must source and incorporate new board members capable of effectively upholding the organization’s values.
- Assessing the Allocation of Funds: Careful distribution of assets within an organization ensures all areas receive adequate funding and thus supports the success of each aspect of a nonprofit’s mission.
- Generating Funds and Ensuring Financial Stability: Alongside verifying the appropriate distribution of funds, the board also has a responsibility to generate more assets to create a solid foundation for the nonprofit’s long-term financial stability.
- Supporting and Evaluating the CEO/Executive Director: A nonprofit’s board of directors not only serves as a support system for the CEO/executive director, but also assesses their job performance.
- Ensuring the Organization Follows Legal and Ethical Practices: It comes as no surprise that upholding the ethics of a nonprofit is essential to its success in achieving its mission. In this case, the board’s task involves ensuring the organization consistently follows legal and ethical practices across its operations.
- Generating a Positive Public Image: Building trust within the community not only attracts private investors, but also develops credibility among community members who may use the services your organization offers.
- Acknowledging and Addressing Conflicts of Interest: The IRS requires nonprofits to develop a written conflict of interest policy that the organization’s board of directors will enforce. This prevents any board member from using their position in order to serve their personal interests.
Additional Legal Responsibilities
A nonprofit board of directors also must fulfill certain legal responsibilities. Those legal obligations can vary, depending on the state in which your nonprofit is located. But, they generally focus on three key areas: duty of care, duty of loyalty, and duty of obedience.
- Duty of Care: This involves making appropriate use of the assets held by the organization. Specifically, board members must ensure the use of such funds promotes the good of the organization and those who benefit from its services.
- Duty of Loyalty: This involves acknowledging and disclosing any conflicts of interest as well as making decisions that benefit the nonprofit as a whole rather than a single board member.
- Duty of Obedience: Board members also must ensure the nonprofit adheres to all applicable laws and regulations while operating under the mission and bylaws that form its foundation.
Developing Your First Board of Directors
If you’re still in the process of developing your nonprofit entity, choosing the right board members is key to ensuring the effectiveness and stability of your organization. Here are a few tips to help you get started:
- Solidify Roles. Whether you choose to assign elected officers or simply create concrete roles for board members to fill, designating functional roles to individual board members can improve the board’s overall effectiveness and functionality.
- Develop and Commit to Bylaws. Creating a set of bylaws to uphold the mission of your organization creates a strong foundation to guide board members’ decision-making. In addition, state law may require nonprofits to develop bylaws.
- Prioritize Your Mission. Another beneficial strategy when choosing board members is to seek candidates with a passion for your organization’s mission and goals.
- Acknowledge Any Conflicts of Interest. Conflicts of interest will inhibit a board member’s ability to effectively uphold the values and best interests of your organization. That makes it extremely important to assess potential or existing conflicts of interest when evaluating board members for your nonprofit.
Filling Board Vacancies
When electing new members to your organization’s existing board of directors, focus on finding individuals dedicated to your nonprofit’s mission. Here are a few tips to consider as you begin your search:
- Look to Your Volunteers. Volunteers who stand out can make excellent additions to a board of directors. These individuals already dedicate their time and energy to your organization and most likely will bring that same dedication and goodwill to your board.
- Explore Candidates Among Loyal Donors. Donors represent another group to consider when electing new board members because they create the financial foundation for your organization. That means they have a track record of dedicating time and money to ensuring the success and sustainability of your nonprofit.
- Expand Your Search. Diversifying your search to include outside groups can prove effective in creating a well-rounded board of directors.
What Are Elected Officers?
Elected officers are members of the board with assigned roles focused on regulating the day-to-day activities of the organization and maintaining its success. Each position should have a clear role defined in the organization's bylaws.
While not required in all states, elected officer roles can prove helpful in ensuring the effectiveness of the board of directors. They also can provide a foundation of leadership.
The four most common elected officers for nonprofits include:
- Treasurer: The treasurer is responsible for evaluating the financial health of the organization by keeping track of receipts and spending.
- President: As the leader of the board, the president commonly has authority over key activities like signing contracts and hiring or firing employees. This role differs from the CEO/executive director position, which the board typically hires after assigning the president role.
- Vice President: The vice president serves as support for the president. In many cases, the vice president moves into the role of president after the current president completes their term.
- Secretary: This individual serves as the organizer of the board meetings, which may include scheduling the meetings, informing board members of the meeting schedule, planning the meeting agendas, and recording meeting minutes.
Forming a board of directors is an essential part of creating and operating a nonprofit. Ideally, this group will advocate for your organization's best interests in everything from finances to public relations. To form or expand a board of directors that will best represent your nonprofit’s needs, search for members who will uphold your organization’s mission and purpose.