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What Should Nonprofit Board Members Not Do As A Board Of Directors for a Nonprofit?

What Should Nonprofit Board Members Not Do While Holding A Position on A Board Of Directors?

As the chair of a nonprofit organization, you are in a position of power and influence. You can make decisions that will affect the organization and the people it serves.

 

With great power comes great responsibility. As a leader, you must know your biases and how they might impact your decision-making. You must also be aware of the potential for conflict of interest when making decisions on behalf of an organization.

 

There are certain things that board members should not do in a leadership position. Let us discuss what should nonprofit board members not do.

What Should Nonprofit Board Members Not Do?

1. Board members should not make decisions without having proper knowledge and understanding of the issue.

 

It is critical for everyone who serves on the board to thoroughly read through any and all materials related to the issue before board meetings. Good board members should not feel intimidated to ask questions before the meeting to ensure everyone understands what is being discussed clearly.

 

It is recommended to hold a pre-meeting to discuss the issue in more detail so that everyone can ask additional questions and have their perspectives heard. If needed, allow for additional time for further research to be conducted before holding a vote.  

 

2. Board members should not make decisions based on their own personal interests.

 

Board members must be able to make impartial decisions on behalf of the organization. Any known conflicts of interest of an organization’s board member must be disclosed, and a decision should not be made until after discussion with the board.

 

3. Board members should not make decisions without consulting fellow board members.

 

The board chair must ensure all board directors, the treasure, and the secretary have come together to discuss important issues facing nonprofit organizations. It is critical to ensure everyone is informed and on the same page. 

 

If the rest of the board members don’t agree with a decision or don’t understand the implications of it, then further discussion is recommended. This will help ensure that decisions are made for the greater good, not just one individual.

 

4. Board members should not make decisions without considering the consequences.

 

Board members are responsible for making important decisions that can have far-reaching consequences for an organization. Before taking any action, board members need to think about how their decisions will impact the organization, its stakeholders, and the community at large.

 

This means considering potential risks and benefits, financial implications, and how the decision aligns with the organization’s goals and values. Board members should also seek input from experts, stakeholders, and those affected by the decision. 

 

5. Board members should not make decisions without consulting the organization’s bylaws.

 

It is essential to consult the organization’s bylaws when making decisions for a nonprofit because they are the governing document that outlines the organization’s mission, objectives, and responsibilities of the board and its members. Bylaws provide clarity and structure when making decisions, helping to ensure that the organization is consistent and that the decisions align with its mission.

 

Bylaws should be consulted to ensure the board is not overstepping its authority or taking actions outside its jurisdiction. This protects the organization from making decisions that could be considered illegal or unethical. 

 

6. Board members should not make decisions without considering the input of stakeholders.

 

Decisions made by the board significantly impact the organization’s future and success, and stakeholders are a crucial source of insight and guidance in this regard. For this reason, the board should actively engage with stakeholders, including employees, shareholders, customers, vendors, and external partners, to gather their input, perspectives, and concerns on critical issues affecting the organization.

 

Stakeholder engagement is essential to building trust, enhancing reputation, and promoting transparency and accountability, critical values in good corporate governance. 

 

7. Board members should not make decisions without considering the input of outside advisors.

 

An outside advisor can provide an objective perspective and bring specialized knowledge, experience, and insight. Additionally, outside advisors can help to protect the board from potential conflicts of interest, ensure that all legal and financial requirements are being met, and ensure that the board is adhering to transparency, confidentiality, and trust.

 

8. Board members should not make decisions without considering the impact on the organization’s tax-exempt status.

 

A nonprofit’s tax-exempt status should always be considered when making board decisions. This is because tax-exempt status comes with various rules, regulations, and laws that must be followed to maintain it. Failure to do so can lead to penalties such as late fees, loss of tax-exempt status, and inability to accept tax-deductible donations. Beyond tax issues, state-level “Sunshine Laws” and other regulations must be considered to ensure the organization is not exposed to hefty fees or poor public image.

 

Ongoing training is necessary to ensure that the board members understand their legal obligations. The board should understand the penalties associated with activities such as overpaying staff or executives, engaging in excessive lobbying or political activities, making poor bargains on behalf of the organization, and not meeting public support tests. Additionally, they should be familiar with the various tax benefits and programs available to help the organization achieve its goals.

 

To effectively manage the organization’s revenue and ensure that it is fulfilling its mission, the board should also monitor all financial activities and ensure appropriate program spending. A diverse board of directors is essential to the nonprofit organization’s success, and in many cases, even staying exempt and not losing the tax exemption status. This diversity should be based on having no conflict of interest between board members, which should be considered when making board decisions.

 

9. Board members should not make decisions without following the organization’s policies.

 

Making decisions without following the policies can lead to legal issues and jeopardize the organization’s reputation. Board members are appointed to represent the interests of stakeholders and should exercise their power for the betterment of the organization while ensuring compliance with policies, laws, and regulations.

 

Board members have a fiduciary responsibility to the organization, which requires making decisions ethically, responsibly, and legally. They must always consider the long-term effects of their decisions on the organization’s mission and operations. 

 

Board members should be educated about their roles and responsibilities and the organization’s policies to ensure effective decision-making. Board members must adhere to the guidelines before making decisions that may impact the entire organization.

Reasons Why Non-Actions From Nonprofit Board Members Is Harmful

Reasons Why Non-Actions From Nonprofit Board Members Is Harmful

The consequences of non-action from nonprofit board members in a leadership position can damage the organization. Suppose a board member fails to prepare for board meetings or puts in the necessary effort or time. In that case, it can lead to poor decision-making, mismanagement of resources, policies and procedures not being followed, and a lack of accountability. 

 

This can lead to reduced meeting attendance, financial issues, increased board turnover, inappropriate behavior, and decreased quality of future board members. It can also create a toxic environment where the worst behavior of individual board members is encouraged and reinforced. 

 

While these are the worst case scenarios, effective board members who take action lead to improved risk management practices allowing the executive committee to stay on task.  

How to Avoid These Non-actions as a Board Member?

The best way to prevent non-actions is to be prepared and attentive. Board members should understand their responsibilities and the board’s objectives, read a packet of documents ahead of time, attend every meeting, actively participate in discussions, ask questions when needed, take notes throughout the meeting, and follow up as required.

 

It is also crucial for board members to hold one another accountable for tasks and expectations. Additionally, each board member should be familiar with the organization’s bylaws and ensure that decisions are aligned.

 

Finally, board members should strive to create an environment of respect, professionalism, and collaboration where everyone’s views are respected. A board can ensure it operates efficiently and effectively by taking these steps. 

How To Handling Toxic Board Members

How To Handling Toxic Board Members

If you have a toxic board member and the remaining board members are looking for a solution to deal with this individual, follow these steps.

 

Step 1: Institute Term Limits

The first step in handling a toxic board member in a leadership position is to institute term limits. This can be done by including a provision in your board’s bylaws for term limits. A typical term limit policy states that a board member may serve no more than three consecutive annual terms and that any vacancies due to the death, resignation, or removal of a board member should be filled temporarily by the Council.

 

Step 2: Establish an Impeachment Procedure

The second step in dealing with a toxic board member is establishing an impeachment procedure. This should be included in the board’s bylaws and specify that the elected position holder may be removed and replaced by a two-thirds (2/3) vote of a general or special membership meeting. It is important to note that removal does not require a cause.

 

Step 3: Address the Behavior

The third step in handling a toxic board member in a leadership position is to directly and respectfully address the behavior. This is a difficult situation and should not be taken lightly. The board must confront the board member and explain why their behavior is unacceptable and damages the organization’s culture.

 

Step 4: Find a Resolution

The fourth step in dealing with a toxic board member in a leadership position is to find an agreeable resolution for all parties. The board should be open to finding a mutually beneficial solution. This could include offering the board member a different role within the organization or allowing him or her to take a leave of absence.

 

Step 5: Take Action

The fifth and final step in handling a toxic board member in a leadership position is to take action if the behavior continues or if a resolution cannot be found. This may include removing the board member from the position or voting to impeach the board member.

What Makes A Nonprofit Board Superior Over Other Executive Boards?

What makes a nonprofit board superior to other executive boards is its ability to harness the collective efforts of talented individuals and their specialized knowledge to support the organization’s mission.

 

Nonprofit boards focus on long-term planning, high-level oversight, and strategic growth, while other executive boards may be engaged in more mundane tasks.

 

Additionally, nonprofit boards can be divided into committees, allowing the leadership team to manage the organization independently. By making sure board members are engaged in meaningful activities, a nonprofit board can maximize its resources and add value to the organization.

How to Keep your Not-for-Profit Organization Compliant in All 50 States

Not-for-profit organizations must comply with state regulations to operate effectively and avoid legal issues. To ensure compliance in all 50 states, organizations should first identify state requirements and verify their status with each state’s regulatory agency.

 

Keeping up-to-date with changes in regulations and filling out annual reports and filings is crucial. Additionally, conducting regular internal audits to ensure compliance with bylaws, policies, and procedures is necessary.

 

Organizations should also establish a governance structure with a board of directors with proper oversight and financial management policies. Finally, maintaining transparency in financial reporting and filing for tax-exempt status with the IRS can help keep organizations compliant.

 

Most importantly, not-for-profit organizations can maintain compliance in all 50 states by hiring outside legal counsel specializing in nonprofit organizations.

An employer dealing with legal liabilities without employers liability insurance

What Constitutes A Personal Liability Exposure For Board Members?

A personal liability exposure for board members occurs when they are involved in the following:

 

  • A situation that intentionally causes injury, harm, or damage
  • Knowingly approve criminal acts or are actively engaged in criminal activities
  • Personally involved in a contract involving the nonprofit tainted by fraud
  • Actively participate in a transaction approved by the board with an entity in which the board member has a substantial personal or financial interest.

 

Board members are expected to exercise diligence and care in their decisions and actions and should not act in bad faith. Failing to do so exposes them to the risk of personal liability.

 

To minimize this risk, board members should serve the proper purpose, think carefully before volunteering for any leadership roles, come to meetings prepared to ask questions and provide perspective, and only vote “yes” when they are confident it is the right thing to do, and be courageous to speak up if they disagree or believe a conflict of interest is present.

 

Board members need the proper general liability and directors and officers insurance to protect them from the financial decisions made on behalf of the nonprofit organization. Directors and officers liability protects churches and nonprofits for decisions of the board and each board member from personal liability.

Frequent asked questions faq

Top 3 Nonprofit board governance mistakes

Board governance is vital for any nonprofit organization to function effectively and efficiently. However, even experienced nonprofit board members can make mistakes regarding their governance responsibilities.

 

The top three nonprofit board governance mistakes include insufficient board member engagement, unclear strategic direction, and inadequate risk management.

 

Many boards struggle with engaging board members fully, leading to a lack of interest and accountability from board members. Similarly, the unclear strategic direction can hamper board members’ ability to set practical goals for the organization.

 

Finally, inadequate risk management can lead to unexpected risks, such as legal issues or reputation damage. Nonprofit boards can avoid these mistakes by providing adequate training to board members, fostering transparency and accountability, and developing robust risk management policies.

 

Who should not serve on a board of directors?

Some individuals may not be suited for serving on a board of directors. For example, those with a conflict of interest with the organization or its stakeholders should not serve on the board. This can include shareholders or employees who may have a personal interest in the board’s decisions or actions.

 

Additionally, individuals with a history of unethical or illegal behavior may not fit the director role. Those lacking the necessary skills or knowledge to contribute to the board’s decision-making process may also not be suitable candidates.

 

Finally, individuals with extensive commitments to other organizations or responsibilities that may interfere with their ability to commit to the board’s demands fully may not be ideal for the position. 

 

501c3 board of directors rules for Board Members

The 501c3 board of directors has a set of rules and regulations that all board members must abide by. These include some of the following rules:

 

  • Firstly, they must attend regular meetings and actively participate in discussions and decision-making processes.
  • They must maintain confidentiality and not share sensitive information outside the boardroom.
  • Board members should avoid conflicts of interest and provide unbiased input during decision-making.
  • The board should function within the boundaries established by the organization’s bylaws and policy framework.
  • Transparency and accountability are crucial components of 501c3 board management.
  • Board members must ensure diligence and care in performing their duties and act in a manner that upholds the organization’s values and reputation. 

 

What is a board member overstepping?

A board member overstepping occurs when a board of directors member exceeds their bounds of authority or responsibility in making decisions or taking actions on behalf of the organization. This can range from making decisions without consulting the rest of the board or disregarding the organization’s bylaws to engaging in conflicts of interest or using their position for personal gain. 

 

What are the signs of a bad executive director?

A bad executive director can harm an organization in various ways. Some signs of a lousy executive director include a lack of transparency and communication, a failure to set clear goals and expectations, and an inability to manage staff and resources effectively.

 

Additionally, a bad executive director may be unwilling to listen to feedback, resist change, and maintain a closed-minded approach to decision-making. Poor financial management can also be a red flag, such as not keeping accurate records, not adhering to budgets, or a lack of financial accountability.

 

A bad executive director may also have a high turnover of employees or difficulty retaining top talent due to a lack of leadership, vision, and direction. 

Does Your Governance Committee Need Liability Insurance protection

Integrity Now Insurance Brokers recommend that every governance committee carries liability insurance protection to cover its’ board of directors. Governance committees have essential responsibilities to oversee and direct the activities of organizations, including financial management and legal compliance.

 

The high level of responsibility also exposes them to risk and potential legal actions. Liability insurance protection for your governance committee can help protect your members and prevent financial damages in the event of a lawsuit. It is essential to have coverage that includes legal defense costs and any settlement or judgment awarded against the committee. 

 

We specialize in insurance for churches and nonprofit organizations. As independent insurance agents, we represent your best interest, not the insurance company’s.  

 

Our duties and responsibilities are to help our clients obtain affordable church insurance coverage with comprehensive insurance protection. Your board members also may need workers’ compensation insurance and business auto insurance to cover your employees for tasks that require them to drive on behalf of the organization. 

 

Contact our nonprofit insurance agents for help today and request a free quote.

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