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Governance for Non-Profit Companies

Governance for non profit companies

Nonprofit boards have a lot of responsibility. The biggest duties of a board are maintaining the fiduciary integrity of the organization, making sure the organization is achieving mission goals, and managing the employment of the CEO (if there is one).

We can think of nonprofit board governance as the guidelines the board uses to accomplish all these duties in a fair, effective, and responsible way. 

Nonprofit board governance is the combination of systems, guidelines, and processes used to make decisions, hold decision-makers accountable, and take action. Good governance is crucial for a nonprofit to not only effective, but to attract the kind of board members, volunteers, and staff that make the organization stronger over time. The most impactful organizations have one thing in common: superior nonprofit board governance!

1. The Advisory Board Model

An advisory board is the platform a president or CEO turns to for assistance and advice. The members of an advisory board are usually those who are known to the nonprofit’s management team, and are trusted by them. They bring professional skills and unique talents with them that are useful to the nonprofit, and that they offer at no charge.

A good advisory board can increase the reputation and credibility of a nonprofit and is an excellent model for those nonprofits that are concerned with achieving high fundraising and public relations goals.

The advisory board may be the main governing board at an organization, or there could be additional advisory board models that offer special expertise such as development

2. The Cooperative Governance Model

Not every nonprofit has a president or a CEO. Those that do not use this governance model. With cooperative governance, the board makes decisions for the nonprofit as a group of equals.

It is a highly democratic model of nonprofit governance because no member has a higher standing or more power on the board than another. When the cooperative governance model exists, it is often because the law requires a nonprofit to have a board of directors. This model works best when each member of the board is able to show an equal amount of commitment to the nonprofit.

3. The Policy Board Model

This model was developed by author John Carver, who wrote the book, “Boards that Make a Difference.” Its effectiveness makes it a popular governance model with nonprofits.

With this model, the board delegates much of their trust and confidence in operating the group to the CEO. Regular meetings are held between the board and the CEO, so the board can receive updates on the activities of the nonprofit.

There are few or no standing committees on the board in this model. In fact, the board is secondary to the CEO in overall power in the organization in this governance model.

However, by working together as a team, the board and the CEO can make many wonderful things happen at the nonprofit. This is the most common type of board, but it can be combined with other types to create a more specialized advisory team.

4. The Patron Governance Model

This model is similar to the Advisory Board model. However, there are a few key differences that distinguish it. These include:

  • Boards are comprised of people who have either a great deal of personal wealth, or a lot of influence in the nonprofit’s field.
  • The primary duty of the board is fundraising.
  • Board members contribute their own funds to the nonprofit, and convince members of their network to do the same.
  • Board members have less influence over the CEO than with the Advisory Board model.

In this model, the board members have little input into the performance of the CEO, and don’t typically have a lot of meetings and committees. The primary contribution of patron governance model board members is financial support.

5. The Management Team Model

This is a very common type of nonprofit governance model. With this model, things at the nonprofit are done similarly to how they are done at a for-profit corporation. Instead of hiring people or teams to handle things like human resources, financing, fundraising, and public relations, the board forms itself into committees to do these things itself.

Innovation in Nonprofit Governance Models

As communities, nonprofits, and everyday life evolve over time, so do the governance models needed to support organizations. A new offering from the Alliance for Nonprofit Management is the Community Engagement Governance Model.

With this model, stakeholders and the community maintain responsibility for governance. The idea is that the board serves the community but may not be a part of it. Having community insight is essential for boards to serve a specific population.

Without insight and a full understanding of the mission and needs of the community, the board simply can’t function effectively. Giving the community a chance to be involved at a fundamental level yields better results for many small, local nonprofits.

This symbiotic relationship between the community and the nonprofit means that the community can help inform the services of the nonprofit, while also sharing some responsibility for success.

Mixed Nonprofit Governance Models

While it is not the most common method of governing a nonprofit, some choose a mixed model. Usually, this involves choosing a primary governance model among any of the first four models. Then, the board will add sub-boards as needed, to fit the needs of the nonprofit. These sub-boards are sometimes referred to as committees, and they operate the same way nonprofit committees do in the Management Team model.

Essentially, the mixed model is one that is mostly any one of the first four models, with a little bit of the fifth model thrown in as needed. As an example, religious nonprofits may form a committee to do fundraising for targeted, church-based initiatives or activities, while operating primarily under an Advisory Board governance model.

Minutes for Non-Profit Board Meetings

Beyond documenting that a meeting did in fact occur, nonprofit board meeting minutes are helpful for a number of reasons. Before taking minutes yourself, it’s important to understand these reasons to ensure you’re documenting all relevant actions.

To get a firm grasp on the purpose behind taking minutes, let’s explore the top three benefits of recording effective notes:

  1. Once approved, board minutes become a legal record of what actually occurred in the meeting. In the event of a lawsuit, minutes can be subpoenaed, and in turn, board members could potentially be held liable. If important details are missing or if votes are recorded incorrectly, this could be disastrous for the nonprofit and its board members.
  2. Effective board meeting minutes serve as a valid reference point for future decision-making. They act as a reminder of what was addressed in the meeting, who said what, what the designated next steps were, and who is taking responsibility for what upcoming projects.

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