When you start a charitable organization, one of the most important decisions you’ll make is selecting your board of directors. Your board is legally responsible for governance, fiduciary, and strategic oversight of your nonprofit corporation. This usually includes ratification of your initial bylaws, as well as overseeing budget management. The board has an obligation to the donating public for ensuring that the nonprofit stays on mission and operates effectively.
How to Choose Board Members
The most important question you should ask when assessing board prospects is: does your prospective board member have a passion for the mission of your organization? If they’re not willing to give their time, money, and resources, they’re not a good fit. Board members should also have some business skills and be willing (and able!) to help make financial decisions. It can be tempting to seek wealthy or prestigious names to join your board, but if they are not people of action and enthusiasm, they will be a detriment to the organization. It should go without saying that board members should have integrity and value compliance and transparency.
It is also important to consider your board as a unit when identifying board prospects. Remember, family members and business associates cannot make up a majority of a public charity’s board. Another important consideration is the range of skills and experience that your board represents. Ideally your board will represent a diversity of skills that will help support all areas of your nonprofit – fundraising, governance and programs. Even on a private foundation board, which allows for much closer relationships, having a healthy representation of necessary talents is still vitally important.
IRS Requirements & Other Details
The IRS generally requires a minimum of three board members for every nonprofit, but does not dictate board term length. What is important to remember is that board service terms aren’t intended to be perpetual, and are typically one to five years. Service terms must be outlined in the nonprofit bylaws. New board members are typically nominated and given an up or down vote by existing board members in traditional organizations, and by stakeholder vote in nonprofits that operate via membership.
The IRS expects (and state law usually dictates) that a board of directors should meet a minimum of once a year, and best practices suggest four times a year. During these meetings, the annual budget is passed, and operational and strategic decisions requiring votes are discussed. It is important to remember that the board of directors is responsible for the governance of the nonprofit, not the management.
Strategy & Governance
The board is tasked with setting the strategic direction. It should not be involved in the day to day management of the nonprofit. In small organizations, when it is typical for the Executive Director of the nonprofit to also occupy a board role, it’s especially important to mind this difference. This is the key difference between governance and management. Governance oversees operations, approves the annual budget, and sets strategic goals. Management, on the other hand, makes the day to day tactical decisions that help the organization achieve those goals.