Board Silly, v1

Jan 20

Dear Erin,

The other night you mentioned that you had told your board of directors something about how you felt you over-invested in one thing last year and under-invested in another. You talked to your board!!! That’s my girl! Holding board meetings! Proud mom moment, indeed.

Let’s pause a moment and talk boards just to bring everyone up to speed.

The board, sometimes called board of directors, is the group of people charged with oversight of your organization. The board protects and tries to maximize the interests of the stakeholders and keep the company focused on what it set out to do. There are a couple of different kinds of boards:

The “Nonprofit Board,” which is what you have for your dance company. Every nonprofit must have a board of directors, by law. The minimum number of board members is governed by the state in which you are incorporated. The nonprofit board is charged with protecting the interest of the donors and supporters in an organization, and ensuring that their investments are used consistent with the mission of the organization in service to the public good. Their actions are governed by the by-laws of the nonprofit.
The nonprofit organizations we are talking about are usually 501c3 organizations, which means they are exempt from federal tax, can receive grants AND individual donors may be able to claim donations to the organization as tax deductions on their income tax filings. The Internal Revenue Service grants 501c3 status to these organizations because the organizations are operating on behalf of the “public good” and are “charities” in the eyes of the IRS. As much as you’d like to think that you are a good person doing good work and you shouldn’t need a board watching over you, the government requires that your work is governed by an independent board of directors as a form of checks and balances over a company which has been granted favorable tax status.
The nonprofit board oversees the Executive Director, or whatever title you’ve given to the top employee running the nonprofit corporation. You manage, the board governs. More on that later.

The “Corporate Board,” which is the kind of board of directors that gives rise to the image of old white men in suits smoking cigars in a stuffy boardroom. (We’ve come along way since the days of JP Morgan and that kind of board, but the image still resonates, unfortunately.)
A corporate board exists when there is more than one owner of the corporation. Their actions are governed by a governing agreement, such as articles of incorporation, by-laws, a charter or a stockholder agreement. The board members govern a for-profit corporation owned by investors, either publicly or privately.
The board’s job is to protect and maximize the interest of the owners - you’ll often hear owners called “shareholders” when it’s a public company. In fact, “maximizing shareholder wealth” is a term bandied about to suggest that a corporation’s board is more focused on making its owners rich, or maximizing shareholder wealth, than social responsibility or any other kind of mission. Well, yes. That’s what they are designed to do.
The corporate board oversees the CEO, though in many cases the CEO is also Chairman of the Board.

Elected Board - this really isn’t the same thing as the other two boards, but there are some similarities so I like to mention it. In government, you’ll hear about the school board, or the Council of Aldermen (in Chicago) or the Town Council or the Village Board - or even Congress. These “boards” represent the people who elected them. Their actions are governed by law and the protocols they publicly adopt. These boards are responsible for ensuring that taxpayer is money is used in the best interest of the taxpayers by setting laws and voting when decisions need to be made on use of resources.
The elected board oversees the employed civil servants.

I like to emphasize that any of the three types of boards are representing stakeholders, whether they are donors, owners or voters/taxpayers. This is a key point, because the employees of the company (or the government workers) may be managed by a top dog within the company, but that top dog reports to a board. And that board is responsible for making sure the company stays on track. Even in a nonprofit, the board is responsible for ensuring that the donors’ funds are going to serve the people or cause within the nonprofit’s mission and charitable purpose. This is slightly different than the board being responsible for direct service. The board has a voice in making sure the direct service is being carried out in the best possible way, but once again that is due to its fiduciary responsibility with regard to the mission.

I know, it’s weird, but let me say it like this. Your mission is to promote movement arts (overly-simplified, but stay with me). Your board’s job is to make sure that you, as Executive Director, use the money you raise to promote movement arts as best as you can. They are here to help and advise you as you do that. The board’s job is NOT to decide for you how you will do that or to do the direct service work themselves, though they will have a voice when you are making important decisions about pursuing one path over another.

Even a working board is advisory. They may be doing the work or helping to do the work in a small nonprofit because that’s how it goes, but their first priority, and their legal responsibility, is to ensure that the work done is in service to the mission.

So, much as you might be tempted, you cannot use your nonprofit dance company with a mission of promoting movement arts to raise money that you’ll use instead to make cat videos. Unless the cat is dancing, ideally with humans. Your board should have something to say about it and should be quite displeased.

Hah - just kidding. I know that’s not a real thing. If you ever made videos of that cat of yours, you’d definitely want to organize the venture as a for-profit endeavor!! That cat is something.

Lots more to say on boards: by-laws, electing officers, board minutes, agenda, meeting management, conflicts of interest, committees… but let’s leave it there for now. Congratulations on assembling a great board for your own organization! I look forward to hearing about your next meeting.

Love, Mom

Disclaimer: I am not an accountant or a lawyer! If you are reading this an you aren’t Erin, consult a professional or ask you own mom!