Nonprofit Network Presentation- Bylaws and Related Policies- What You Need to Know

Conflict of Interest Policies

Adoption of a Conflict of Interest Policy, applicable to a nonprofit’s officers and directors and compliant with governing laws, is considered a management and governance best practice. As explained by BoardSource:

“board service in the nonprofit sector carries with it important ethical obligations. Nonprofits serve the broad public good, and when board members fail to exercise reasonable care in their oversight of the organization they are not living up to their public trust. In addition, board members have a legal responsibility to assure the prudent management of an organization's resources. In fact, they may be held liable for the organization's actions. A 1974 court decision known as the "Sibley Hospital case" set a precedent by confirming that board members can be held legally liable for conflict of interest because it constitutes a breach of their fiduciary responsibility.”

There are many examples of such policies that can be found through a web search of with the terms “conflict of interest policy nonprofit.”

In particular, the Nonprofit Resource Center of Texas has created a conflicts policy that you may find helpful. To access their policy, just click on the title to this post.

If you are interested in reviewing a sample policy provided by the Internal Revenue Service, just copy and paste this link into your browser: http://www.irs.gov/instructions/i1023/ar03.html

To access the BoardSource explanation, just copy and paste this link: http://www.boardsource.org/Knowledge.asp?ID=3.389

Boards- Helpful Hint #6- Executive Sessions

BoardSource has an excellent article available entitled “Executive Sessions: How to Use Them Regularly and Wisely.” The article explains:

“By the board and for the board, executive sessions enable the board to manage itself. They create an appropriate forum for board members to talk openly about topics that warrant special treatment. In effect, executive sessions are a kind of special meeting-within-a-meeting. Executive sessions may take place before, in the middle, or at the end of a regular board meeting. They are, by definition, exclusive to board members, but others, such as the chief executive or professional advisors, may be invited to join for part or all of the session.”

Some of the reasons given to convene an executive session include:

“First, the board needs time alone to strengthen relationships and communication among board members and with the chief executive. For example, board members may be reluctant to challenge the chief executive in front of staff for fear of undermining his or her authority. In other instances, board members may wish to discuss sensitive topics like succession planning, senior staff performance, or executive compensation. Likewise, the chief executive may want to discuss future retirement plans without causing consternation among staff.

Second, board members need an opportunity to get to know and trust each other, personally and collectively. They need to be able to speak freely to air concerns and explore all aspects of issues. Executive sessions afford the board an opportunity to raise warning flags, discuss time sensitive opportunities that can’t yet be made public, and allow the board to explore different courses of action. Some issues involve the board itself, such as board performance or individual member participation. Other issues might warrant further board discussion with the chief executive, such as negative community reaction to a recent decision.

Third, as a governing body, the board needs to demonstrate and exercise its independence from the chief executive. For example, a nonprofit board serves as a check-and-balance when accepting the financial audit and determining chief executive compensation. These oversight activities require the board to make decisions that are not controlled by the chief executive.

Fourth, the board has a responsibility to maintain confidentiality to protect the organization. The law allows boards to handle certain situations in a restricted setting. For example, if an organization has been sued, the board, chief executive, and legal counsel may meet in executive session to decide whether to settle the case and the terms of the settlement. Sound business sense may also require that key strategic decisions be discussed privately. For example, if an organization is considering a merger, the board, chief executive, and chief financial officer may need to consider the pros and cons before discussing alternative courses of action with various stakeholders.”

The article contains much more information about executive sessions and how to use them wisely. If you are interested in reading more, just click on the title to this post.

Boards- Helpful Hint #5- Interview Questions for Prospective Board Members

Proper selection of board members is key to the performance of a non-profit. Board members who work together cooperatively, have a passion for the organization’s mission and help secure financial resources lead to success. On the other hand, board members who are antagonistic, lack passion for the mission and avoid donating and raising funds lead to an organization’s underperformance or failure.

For help in determining interview questions for prospective board members, try reading GuideStar’s article entitled “What to Ask Every Prospective Board Member.” The article discusses questions to consider, including:

• How passionate are you about our cause?
• What expectations do you have from the management of organizations on whose boards you serve?
• What are your personal dreams or aspirations that could be enhanced by service on our board?
• What professional or personal constraints on your time or service might you anticipate?
• Are you willing to make a financial commitment that is a stretch?

To access the article, just click on the title to this post.

Boards- Helpful Hint #4- Using Due Diligence in Board Member Selection

Grant Thorton is a national accounting firm with a large non-profit organization practice. Their current issue of “Forward Thinking,” discusses using a process of due diligence to increase the likelihood that new board members will be a good fit. The authors observe,

“organizations are concerned that selecting the wrong board members could lead to governance problems, reputational damage and, simply put, bad chemistry. Moreover, heightened scrutiny and transparency requirements from the IRS and state agencies also have raised the stakes for candidate selection. But how do organizations identify and select the most ideal candidates for board membership? While there is a wide range of methods, a growing number of savvy not-for-profit organizations are undertaking due diligence in assessing candidates for board membership.”

A number of suggested procedures that can be used to employ due diligence in the new member selection process are included in the article. To read more, just click on the title to this post.

Boards- Helpful Hint #3- Consent Agendas

BoardSource has an excellent article available which discusses the use of Consent Agendas to improve board meeting productivity and governance. According to the article,

“a consent agenda can turn a board meeting into a meeting of the minds around the things that matter most. A consent agenda is a bundle of items that is voted on, without discussion, as a package. It differentiates between routine matters not needing explanation and more complex issues needing examination. While not difficult to use, a consent agenda requires discipline in working through the following seven steps:

1. Set the meeting agenda

2. Distribute materials in advance

3. Read materials in advance

4. Introduce the consent agenda at the meeting

5. Remove (if requested) an item from and accept the consent agenda

6. Approve the consent agenda

7. Document acceptance of the consent agenda

With a consent agenda, what might have taken an hour for the board to review, takes only five minutes. Because it promotes good time management, a consent agenda leaves room for the board to focus on issues of real importance to the organization and its future, such as the organization’s image and brand, changing demographics of its constituents, or program opportunities created by new technology.”

The article discusses in detail how to effectively use consent agendas. It also provides helpful tips and a sample agenda.

If you would like to access the article, just click on the title to this post.

Boards- Helpful Hint #2- How to Keep Members that Miss a Meeting on Track

With the hectic schedules of many board members these days, it is almost inevitable that some members will miss meetings. Here’s a suggestion for keeping those that miss a meeting on track.

Helpful Hint #2- If a member must miss a meeting, try to make arrangements for their participation via speaker phone or conference call (be sure to follow Helpful Hint #1 so the member will be prepared and have any last minute documents which have been changed or were not included in the pre-meeting package emailed to the member). If it is not possible for attendance via telephone, then consider having the executive director- 1) send any meeting documents the member has not yet received to the member and 2) make an appointment to go over, either in person or by telephone, what took place in the meeting.

Boards- Helpful Hint #1- How to Help Avoid Getting Bogged Down in Meetings

Are your board meetings getting bogged down? If so, it may be because board members are receiving the information being discussed for the first time at the meeting.

Helpful Hint #1- Consider requiring all materials that will be discussed at the board meeting to be sent to your executive director 10 days in advance of the meeting. Next, make it the executive director’s responsibility to send a pre-meeting package (preliminary agenda and materials to be discussed) to all board members so that they have at least 5 days prior to the meeting for review.

Of course, some items may come up at the last minute, but this method should help ease member’s uneasiness with being asked to make a decision based on information they have had little time to consider. The potential benefits include not only speeding up your meeting, but a more thoughtful discussion since the members have had time to study the materials beforehand.