When tallying the differences between for-profit board director responsibilities and those of nonprofit board members, there are noticeably more similarities than differences. However, where there are differences, they are significant and of great importance on both sides. Regardless of the type of board, two things stand out as being primary indicators of whether the organization is successful - getting a good quality board and striving for the best possible governance practices. The following is a breakdown of board service and what it looks like for nonprofit board members and for-profit board members.
How Nonprofit Board Directors Compare to Corporate Board Directors
Purpose The main purpose of for-profit and nonprofit entities is starkly different, but they also share one important similarity. For-profit corporations serve their shareholders, and board directors are accountable to them. Nonprofit board members serve the members of their organization, their cause and their communities. What unites nonprofit and for-profit organizations regarding their purpose is that they both have a clearly stated mission and core values, a desire to practice good governance, and a willingness to change and adapt as often as they need to. Governing Documents The governing documents for nonprofits and for-profits are essentially the same, though they may be worded a bit differently. Both entities have articles of incorporation, bylaws, and descriptions of the duties and responsibilities of the board, individual directors and committees. Governing documents list the name of the organization, how it's governed and how to amend the bylaws. The bylaws define how boards give formal notice of meetings, including annual and special meetings. In addition, the bylaws state the necessary voting percentages and the definition of a quorum. Both types of boards develop written policies for director independence, conflicts of interest, codes of ethics, confidentiality and indemnification. Fiduciary Duties Board directors for all entities have basic fiduciary duties. They include Duty of Care, which means that they must act as a reasonable and prudent person would under the same circumstances. The Duty of Loyalty is another important fiduciary duty, which means that board directors must place the interests of the organization before their own. There are two other fiduciary duties that aren't as commonly known. One of them is the Duty of Candor, which means that boards must disclose material facts in a timely manner. The other is the Duty of Confidentiality, which means that board directors shouldn't disclose sensitive or confidential information. Nonprofit board members have an extra fiduciary duty, which is the Duty of Obedience. This duty means that board directors must remain faithful to and supportive of the nonprofit's mission and its organizational goals. A breach of any of these duties may subject nonprofit board members to personal liability and/or a call for dismissal. Board Duties Most of the basic board duties for nonprofits and for-profits are essentially the same. Many of these duties include:- Hiring, firing and evaluating the CEO or executive director and setting their compensation
- Establishing an operating plan
- Ensuring that financial statements are accurate and timely
- Safeguarding and allocating financial resources
- Ensuring that management's actions are in the best interests of the stakeholders
- Ensuring that policies are in keeping with legal and ethical compliance
- Protecting the organization's reputation, especially during times of crisis
- Communicating the corporate culture
- Serving as ambassadors of the organization
- Providing guidance to the CEO
- Overseeing the strategic plan
Successful Nonprofit Boards Pave the Way for Successful Organizations
Nonprofit and for-profit boards also share some key similarities along the road to success. Successful boards practice clear communication. They regularly reinforce their board directors' expectations and obligations. High-achieving boards foster a supportive, respectful environment and use trusting relationships as the basis for challenging management and addressing complex and difficult issues. Conscientious boards of all kinds identify and make the best use of people, processes and technology in order to comply with good governance principles and lead their organization toward progress and prosperity.Media Highlights
Environmental, social and governance (ESG) issues have become more complex and multifaceted than ever before. At the same time, ESG continues to ascend on board and leadership agendas.
In this buyer’s guide, we explore what a market-leading ESG solution should look like and highlight the key areas organisations should be prioritising as they embark on their search.