For-profit and nonprofit organizations exist for different reasons: for-profits to generate a return on investment for shareholders, and nonprofits to pursue charitable and social activities unrelated to commerce. The obligations of the boards of directors of both entities, however, are the same: to oversee the organization and to hire, advise, evaluate, and, when necessary, remove the CEO.
We examine the attributes and processes of both for-profit and nonprofit boards, and identify opportunities to learn from one another. We ask:
- Why is there not greater sharing of practices between the two entities?
- Why are both unsuccessful at developing reliable nonfinancial metrics to measure organizational progress?
- Why are for-profit CEOs paid so much more for their services? Do they create commensurately more value?