Ten Myths About Nonprofit Boards

A quick directory to the most common myths wreaking havoc in nonprofit boardrooms.

It seems as if there’s always somebody at the board meeting saying, “That’s what nonprofit boards are supposed to do.” Sometimes it’s even the executive director. Here is a quick directory to the most common myths wreaking havoc in nonprofit boardrooms:

Myth #1: Nonprofits have to comply with Sarbanes-Oxley

In the wake of the Enron and other corporate scandals, this federal act of 2002 was designed to improve accuracy of disclosures by publicly held companies. Provisions include certification of financial reports by the CEO and CFO, having non-staff on the board’s Audit Committee, prohibition of personal loans to executives, and so forth.

Reality: Only two SOX provisions apply to nonprofits:

Stronger whistleblower protections
Longer retention of certain legal records

Myth #2: The best size for a board is 16.

Reality: Well, that’s the average size. (Do you want to be average?) There isn’t a “best” size for a board. Research shows that small boards think they should be bigger and big boards think they should be smaller. Size depends on:

What the organization needs the board to do at this time in its history
How many people the executive director and the staff can support
The size of the room at your organization where the board meets (really!)

Myth #3: The board and the executive director should have such a good working relationship that the board never needs to go into executive session.

Reality: Executive sessions are important for:

ED evaluation
Airing of tentative views
The board’s gaining a sense of itself

And whether or not the executive director is a member of the board, the board always has the authority to go into session without staff present.

Myth #4: The annual approval of the budget is the cornerstone of the board’s financial oversight.

Reality: Budget approval is often a meaningless act. Most of the time board members can’t be familiar enough with details to know whether the income is accurately projected and whether the expenses represent sound choices.

Instead:

Give guidelines to staff for where the organization needs to be financially at the end of the year
Focus on monitoring through the year rather than trying to ferret out details in a complex budget before voting to approve it

Myth #5: Boards are supposed to raise money.

Reality: Actually, nonprofits are required by law to have boards (as are for-profit corporations) in order to hold the organization accountable to the public (not to raise money). And, in addition, boards don’t raise money. Board members raise money.

The board approves a plan for how the organization will obtain funds (in its approval of the budget) through some combination of donations, earned income, grants, etc. Then individual board members help with the plan by obtaining donations, making connections for earned income and grants, and so forth. See also:

Should Board Members Be Required to Give?

Myth #6: It’s okay that we didn’t do an evaluation of our ED this year. She’s doing a good job.

Reality: You owe it to good executives to do an evaluation; they may not like it, but they’ll get even better. And you owe it to the community to know whether your executive is doing the good job it looks like she is. And… it doesn’t have to be that difficult.

Myth #7: We’re an all-volunteer organization and we can’t accomplish much until we have paid staff.

Reality: Many high-impact organizations don’t have staff, and will never have staff. All-volunteer organizations (AVOs) often represent the community at its best, and many field hundreds of volunteers every week. If you’re an AVO, take pride in what you accomplish, and don’t feel that “growing up” needs to mean having paid staff.

Myth #8: Committee reports should be made at every meeting.

Reality: The best thing about committee reports is that they make committee chairs attend. Instead, consider one Annual Report that rotates to each committee and that recaps goals and accomplishments. Outside of that Annual Report only allow committee reports (other than finance) that either require a board decision or that involve board members signing up for tasks.

Myth #9: We’re too small to do succession planning,” or “Our ED isn’t going anywhere for awhile.”

Reality: This myth reflects an outdated view of succession planning built on identifying and grooming a successor on staff. In today’s nonprofits it means:

Making the ED job do-able (it’s hard to replace a superhero, but it’s not as hard to replace an excellent executive director)
Bringing staff salaries to competitive levels
Recruiting board members who will be good at hiring, not just good at supporting the current ED

See: Succession Planning for Nonprofits of All Sizes

Myth #10: Boards don’t work. The whole model of nonprofit governance is broken.

Criticism of nonprofit boards (across the board) is usually one of two types:

Outsiders who are critical of a board that has let an executive director run a nonprofit into the ground or in the wrong direction
An insider — usually the executive director — who sees the board as standing in his or her way and additionally, as not raising money.

But most nonprofit boards work hard — if imperfectly — to both support and govern their organizations. And we should remember that boards are not mandated to raise money; they are mandated not simply to support an executive but to stand in the way of reckless executive decisions.

Reality: Despite all the reasons why boards shouldn’t work, the reality is that thousands of boards are working, everywhere and everyday.

Churchill said: “Democracy is the worst form of government there is. Except for all the other ones.” We say the same thing about nonprofit boards.

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About the Author

Jan Masaoka

Jan is a former editor of Blue Avocado, former executive director of CompassPoint Nonprofit Services, and has sat in on dozens of budget discussions as a board member of several nonprofits. With Jeanne Bell and Steve Zimmerman, she co-authored Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, which looks at nonprofit business models.

17 thoughts on “Ten Myths About Nonprofit Boards”

Hi Jan – another conversation-provoking article I am clipping and sharing with my board – thank you! Is there a typo in this paragraph, though? "But most nonprofit boards work hard — if imperfectly — to both support and govern their organizations. And we should remember that boards are not mandated to raise money but to RAISE (manage? protect?) money; they are mandated not simply to support an executive but to stand in the way of reckless executive decisions." – Laura, Los Altos

Just a nit to pick — many consultants are emphasizing that individuals on boards of directors are not MEMBERS, but actually DIRECTORS. This emphasizes the actual role which they play, and the responsibilities which go far beyond membership.

It is not difficult to change the habit by referring to such individuals as “directors of XYZ” or “directors on the board of XYZ” instead of “members of the board.”

Some may find it clumsy or fussy. I find it has real significance with my board.

Charles, Milwaukee

noname says:

June 30, 2011 at 1:43 pm

I agree that how you refer to board members affects how they act. But I much prefer TRUSTEES (who hold the mission of the organization in trust) to DIRECTORS (which overemphasizes “directing” the activities of the organization). “Director” is much more the language of the corporate world, and members of corporate boards typically have things to unlearn when they join a non-profit board.

Reply
1. noname says:
  
  July 6, 2011 at 5:53 pm
  
  When consulting with boards, I too have emphasized the trusteeship distinction, but I have always used i with the descriptor that he Board acts in “trust for the common weal, i.e., the common good.” To me, the board must have loyalty to mission, but act in trusteeship for the good of the community and stakeholders. There have been too many instances where the board becomes so focused on the mission and the organization that it no longer acts for the common good.
  
  I also agree that the “corporatization” of the nonprofit board has had some adverse effects on the nonprofit sector.
  
  Reply

Really useful pieces of information about the role of boards, much of this gets overlooked in the hectic, day-to-day happenings of a nonprofit. Great work!

Tom

Really useful pieces of information about the role of boards, much of this gets overlooked in the hectic, day-to-day happenings of a nonprofit. Great work!

Tom

Ten Myths…according to whom? It’s disappointing that these views are being espoused as fact. This is one person’s opinion. I’m surprised, actually, that more supporting evidence or voices are not cited. “Myth” suggests something that can be definitively disproved (or at least persuasively argued against). It concerns me that these arguments are being promoted this way, especially since a number of these points are currently highly-debated in NPO management circles.

Anonymous,

What I see in these types of ‘Myth’ posts is not that there isn’t some truth to some of the items, but that they are false limitations or ideas that should be reevaluated. #4 for instance, perhaps the annual budget approval is vital, but is it the only thing?

Or #10, sure a board can slow things down or can become dysfunctional, but let’s not throw the baby out w/ the bathwater.

The post is meant to challenge the ruts that we can get into when we think about the purposes, functions, and helpfulness of a nonprofit board. I think it does so quite nicely.

Anonymous,

Or #10, sure a board can slow things down or can become dysfunctional, but let’s not throw the baby out w/ the bathwater.

The post is meant to challenge the ruts that we can get into when we think about the purposes, functions, and helpfulness of a nonprofit board. I think it does so quite nicely.

Jan,

While you are correct about the limited legal applicability of Sarbanes Oxley to non-profits, the good governance practices prescribed in the legislation are valid for any corporation. To build and maintain the trust of the community, we need to use management best practices and be held accountable to our shareholders, whether they be the public, or private investors.

I have never found the Sarbanes Oxley requirements to be onerous. They require executive managers to rise to a level of professionalism that we should all strive for.

Now, a tiny backroom operation non-profit may not have capacity to meet these standards. We can live with that, because there’s much less at stake vis-a-vis protecting the public interest.