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Public Management Program

 

25th Anniversary

Board Service Session

Moderator
Jing Lyman, Trustee, The Enterprise Foundation

Panelists
Larry Slesinger, Slesinger Management Services
Connie Bagley, Senior Lecturer, Stanford Graduate School of Business
Faye McNair-Knox, Executive Director, Start Up

Student Organizer of the Panel
Trey Pruitt

Jing Lyman
Trustee, The Enterprise Foundation
Focus on role of non-profit versus public and private sectors.

Larry Slesinger
Slesinger Management Services
What is the role of the board in nonprofit organizations? Does it hinder or enhance? Advice on being an effective board member. Challenge the board.

How do you get board members to contribute? Genuine commitment to the goals of the organization. Don't make it about favors or your own interests/advancement. Understand the responsibilities. Review the mission, CEO, raise money. Active involvement in the committee. Meet more often. It's more interesting and has more value.

Nominating committee: Recommended for impact. Select board and CEO. Get to know the program. Get to know the CEO. Get off the board on time. Don't become permanent.

Connie Bagley
Senior Lecturer, Stanford Graduate School of Business
Corporate governance in nonprofits: Tax exempt status, incorporating status and regulations, more general rules. Non distribution constraint— net earnings can't go to managers (different from appropriate salaries). Indirect payments to suppliers, etc. may also be a violation.

Invokes rule on self-dealing: Full-disclosure on potential conflict of interest. Not as strong as if you're a trustee. Transaction must be fair to the nonprofit organization. It's the duty of the board member to act in good faith and in the best interests of the nonprofit.

Duty of care: The "care of ordinarily prudent person in like situation" translates into "What would I do if it were my money?" Important to show up. Board has to act as collective body—not only telephone. Important to be informed.

Support of CEO: Board shouldn't stop a hiring. Annual evaluation, feedback, and even firing. Executive compensation - responsible use of funds but also competitive.

Faye McKnair-Knox
Executive Director, Start Up
Demographic change: Black to Latino to Pacific Islander. Mission: promote community development by cultivating entrepreneurs and micro-loan programs. Microenterprise development—"right place, right time" philosophy. High turnover in executives. Active relationship with board. The founders are still involved in the board.

The community is suspicious of external intrusion (such as Stanford involvement), but I can bridge that gap (Faye lives in EPA and is a Stanford graduate). My role and the board's mission is a partnership, a collaboration.

Advantages to that relationship: Members (especially the executives) are involved in supporting the Executive Director. Large board (18). Three founders, five community members, two from the GSB, local business persons (VC, IT, Entrep.).

Resources—individual skills (in kind service): Guardian—board has had to take over temporarily. May be a hindrance—there's the possibility of micromanaging—as the nonprofit organization strengthens its own staff. Advocacy—before the city and people who hold it accountable. The board can be a great support by keeping the CEO focused on the vision when inundated with work. Collaboration with and involvement of University.

Challenges: The CEO mediates conflicts within the board local versus national outlook of members. Should nonprofit organization, as grass roots, not be led by local people as opposed to outsiders? Multiple bosses—board members directly involved. CEO has to respond and be responsible to them. Regulating the flow of information.

Questions

Q. The time spent on external board members is huge. Why would nonprofit organizations have large boards? How do you deal with them? How do you get rid of members?

A. from Faye McNair-Knox:
You balance the information you give. Have them be involved, but not micromanaging the CEO. My solution is to have periodic summaries and updates.

A. Larry Slesinger:
You have large boards because all directors are "outside" directors. Focus on the board's role in the tax exempt status. The median number of people to have on a board is 17. Many constituencies' (e.g. racial) skills are required (e.g. legal). You get rid of them by setting term limits of 2-3 years. With no more than 2-3 terms.

A. Connie Bagley:
You need to have regular evaluations of board members. Have questionnaires on how the nonprofit is doing, and what the skills are on the board. Have self-evaluations by board members, as well as having them evaluate the chairman.

Q. The board feels its role is to give ideas and advice. The CEO feels its role is to give resources.

A. from Faye McNair-Knox:
For Start Up, there's a lot of skill that comes from the board and from students. PR is an important role of a board. You need volunteer consulting from the community, attracted by board members.

A. from Larry Slesinger:
A simple invitation to a discussion is dishonest - it minimizes their participation. The invitation should be: "we're going to use your time effectively and over the next three years." It's a time commitment.

Q. What other experience?

A. from Denise Brousseau, conference participant:
Originally, there was no staff for nonprofit organizations. Board members were attracted, but in time they didn't participate. When there's no staff, it's easier to get people off the board. Personal conversations (2 to 1). Now it's more institutional. You can't do it for personal reasons.

Q. How has the issue of institutional memory affected things?

A. from Larry Slesinger:
Stagger board terms. Potential for renewal of position.

Q. Can the Chair be a buffer between the CEO and the board?

A. from Denise Brousseau:
Clarifying questions (founder). In this case, the Chair has become more detached. The CEO has tried to mediate but has kept out. My advice for a CEO is to get people involved.

A. from Jing Lyman:
The Chair should take a general role, not micromanage.

Q. How can you make meetings more effective? What should be the role of the executive director?

A.from Faye McNair-Knox:
I don't sit on the board. I serve more of a backup role. Information package. Discussion: first, presentation, then discussion of point. Points are timed. So members feel their time is being well spent. Timing is tricky when you're dealing with controversial issues. It's the role of the chair to decide how much the point is discussed.

A. from Connie Bagley:
It's important for the ED to get the packets out on time. Use consent agenda. Non-controversial issues moved first without discussion. ED present at meetings, but Chair runs them.

Q. What if you have a dysfunctional board?

A. from Jing Lyman:
Get the board to a retreat to work things out. Also, I would recommend a book: Welcome to the Board by Fisher Howe.

Q. Do people ask for board seats in exchange for a donation?

A. Be careful when a NPO board has strong social image implications. Some boards actually have a tacit ante—40-50 people.

Q. Is there salary competition with the for-profit world?

A. Connie Bagley:
In more than 25% of major national nonprofits the pay for ED's is $200,000. Benchmark pay vs. other similarly-sized NPO's. Pay is balanced with evaluations. With the government pulling back on many areas, this is becoming more of an issue. To be addressed prominently with donors. Role of incentive compensation: There's a conflict between incentive competition and "profit sharing." Make it clear that compensation is tied to performance. Can be subtle in terminology. Nonprofits haven't gone very far in this area.