Nonprofit boards operate differently than their for-profit counterparts. Let's examine some of the similarities and differences.
According to the National Center for Charitable Statistics, there are 1.54 million nonprofit organizations registered with the IRS. These organizations focus on a number of important causes ranging from hunger and health care to literacy and animal welfare — and everything in between.
A board of directors is central to the operations of many of these nonprofits. In fact, according to Nonprofit Quarterly, having a board in place is required if a nonprofit expects to incorporate, get a tax exemption, properly file annual reports, and make myriad types of important transactions.
Because there are so many nonprofit organizations, there are also many nonprofit board members. Northeastern University reports there are an estimated 24 million nonprofit board members in the U.S. alone.
But what exactly do these board members do?
Corporate vs. Nonprofit Board Responsibilities
In some ways, the responsibilities of nonprofit boards are similar to that of their for-profit counterparts. For example, both types of boards are responsible for providing oversight and guidance to the organizations they serve.
In addition, according to the National Council of Nonprofits, nonprofit board members have the same fiduciary responsibilities as for-profits, including:
- Duty of Care: Ensuring all assets are used prudently.
- Duty of Loyalty: Ensuring all decisions are made in the best interests of the nonprofit organization and help it move closer to its mission. If there is a conflict of interest, the board member must disclosure it.
- Duty of Obedience: Ensuring the organization abides by all laws and regulations, as well as its own bylaws.
But that’s really where the similarities end.
In reality, nonprofit boards live in a completely different world than their for-profit counterparts. While the role of a corporate board of directors is to represent shareholders, nonprofit boards are responsible for ensuring the nonprofit is fulfilling its mission and meeting the needs of the individuals and communities it serves. For example, the board of directors at Make-a-Wish Alabama ensures the organization delivers on its mission to “create life-changing wishes for children with critical illnesses.”
Unlike corporate boards, nonprofit boards don’t have to strive to show an annual profit. However, they do need to focus on staying out of the red financially. They often have a bevy of regulations to follow that differ greatly from the for-profit world. Those regulations vary widely from one industry to the next.
Basic Nonprofit Board Responsibilities
The day-to-day responsibilities of nonprofit boards of directors vary based on many factors, including the mission and structure of the organization, among other things.
However, there are some basic responsibilities that are common across all nonprofit boards. These include (but aren’t limited to):
- Establishing the mission and vision of the organization
- Hiring the executive director of the organization and overseeing their performance
- Working with staff members to develop short and long-term plans
- Ensuring the organization’s programs and services are effective
- Helping to secure operating funds so the organization can continue to fulfill its mission
- Reviewing and approving major gifts, as well as the terms associated with those gifts
- Reviewing and approving the budget and providing ongoing financial oversight
- Ensuring the organization meets all legal and ethical obligations
- Maximizing the support of the community
- Regularly attending board meetings and committee meetings
- Recruiting new board members who meet the needs of the board and the organization
Nonprofit Board Structure and Positions
According to a report from Russell Reynolds Associates, the average size of a nonprofit board is 30 members. In comparison, the average size of a Fortune 500 board is 11 members.
Each member of a nonprofit board serve is referred to as a director. Some members may also serve in leadership positions, which each come with specific responsibilities.
Nonprofit board structure and positions vary; however, there are common nonprofit board of directors positions, including:
- President: As the leader of the board, this person oversees all the nonprofit board’s work. They’re also responsible for leading board meetings.
- Treasurer: The treasurer oversees the organization’s finances.
- Secretary: This person is responsible for myriad tasks that ensure the board is running effectively and efficiently. This includes sending out meeting notices, recording the minutes for each board meeting, and preparing and maintaining board records, among other duties.
- Committee Chair: A committee chair is the leader of a specific committee within a nonprofit board, such as fundraising.
- Director: A director is simply a way to refer to an individual member of the board of directors.
It’s usually not efficient for all board members to be involved in all matters. This is especially true with larger boards. As such, many nonprofit boards create committees focused on various initiatives. A report from BoardSource found the average nonprofit board has 4.1 committees. Again, the types of committees vary from board to board. However, some of the most common committees include:
- Audit & finance
- Development (also referred to as fundraising)
- Governance & nominating
- Planning & strategy
- Marketing & PR
Directors can volunteer or be appointed to committees based on their experience or interests. For example, the CFO at a major for-profit corporation may sit on the board of directors for a nonprofit organization and serve on its finance committee.
Can Nonprofit Board Members be Paid?
A seat on the board of directors for a nonprofit organization comes with a lot of responsibilities. Fulfilling these board member responsibilities requires a significant time commitment — often on top of full-time jobs, personal lives, and even service on other nonprofit boards.
So you might wonder, “Can nonprofit board members be paid for their work?”
For-profit board members typically earn a wage. Reuters reported that in 2018, the average annual compensation for non-executive directors at S&P companies was $304,856.
On the other hand, nonprofit board members don’t bring in anywhere near this level of compensation. In fact, according to the National Council of Nonprofits, most nonprofit board members are volunteers. In other words, they aren’t paid for their service. However, they typically can deduct board-related expenses they incur, such as mileage to travel to in-person meetings.
While it’s most common for nonprofit board members to serve as volunteers, there are some organizations that do compensate their board members. If a nonprofit board member is compensated more than $600 per year, the nonprofit must issue an IRS Form 1099-MISC.
How Board Management Software Helps Nonprofit Boards Achieve Their Goals
Nonprofit organizations are important fixtures in the communities they serve. Board members play an essential role in ensuring these organizations are achieving their goals and fulfilling their missions.
Managing a nonprofit board involves a number of moving pieces. However, many nonprofit boards employ outdated, time-consuming processes and procedures.
Take, for example, Starr Commonwealth, a social services nonprofit organization. Prior to using board management software, Starr Commonwealth didn’t have a system for organizing and managing important documents and information. As such, if a board member required a document or information (which they often do), it was like looking for a needle in a haystack.
Or, consider the challenges of Planned Parenthood of Southwestern Oregon, whose team would sink hours into manually preparing board meeting materials. These materials would then be sent via email, where they were quickly buried by other emails.
These inefficient processes stand in the way of nonprofit boards meeting their full potential and helping the organizations they serve reach their goals.
As such, a growing number of organizations are making the decision to use board management software that’s built with nonprofits in mind. The right board portal can save time and significantly improve the effectiveness and efficiency of nonprofit boards.
With a board portal, board members have access to all the documents and information they need in a single, secure location. For example, since partnering with OnBoard, the board of directors at Starr Commonwealth can access all of the information they need, whenever and wherever they need it.
In addition, a board portal eliminates the time (and expense) of manually compiling board meeting materials, such as board books. Instead, materials are prepared digitally, and if revisions are required, they can be made easily, and board members always have access to the most up-to-date materials.
What’s more, because board materials are prepared and shared digitally, board members can prepare in advance. That way, the meeting itself can be spent having discussions and making decisions, rather than reviewing materials.
The right board portal improves the collaboration of nonprofit boards before, during, and after board meetings. By improving collaboration, boards are empowered to achieve more for the organizations they serve.
Key Responsibilities of Different Board Roles
Typically, individuals hold different roles on the boards they serve, and each role comes with specific responsibilities. Roles — as well as the duties assigned to each role — vary from organization to organization. However, there are a few roles that are common across boards of all types:
- Board Chair: The board chair, frequently referred to as the board president, is the leader of the board — and typically has the most responsibilities. This person works closely with the organization’s leaders to ensure it’s carrying out its mission and accomplishing its goals. The board chair is also responsible for conducting board meetings and ensuring the board is achieving its goals. The board chair also plays an essential role in hiring and supervising the organization’s CEO. They also create committees and appoint committee chairs.
- Vice President: This person, also referred to as the vice chair, is always ready to step in as board president. They may also take on special projects assigned by the board chair.
- Secretary: This person is responsible for the many tasks that ensure board meetings (and boards in general) are effective and efficient. This includes providing meeting notices, preparing agendas, and taking minutes during board meetings, then distributing the approved minutes. In addition, a board’s secretary is responsible for preparing and maintaining various board records.
- Treasurer: The treasurer is typically a financial expert and uses this expertise to monitor and direct finances and prepare the organization’s budget. This person also oversees the board’s finance committee, if one exists.
- Committee Chair: Oftentimes, boards have various committees that are focused on different initiatives. Each committee has a leader, often referred to as the committee chair.
- Director: A director is a member of the board of directors. Directors have various responsibilities based on the committees they’re involved with and the type of organization they serve.
Key Responsibilities of Different Board Committees
Oftentimes, it’s not effective or efficient for every board member to be involved in every board-related matter. This is especially true if the board of directors is large.
As such, boards often have various committees, each with different focus areas and responsibilities. According to a report from BoardSource, non-profit boards have an average of 4.1 committees, and some of the most common standing board committees are:
- Audit and finance
- Governance and nominating
Sometimes, boards also establish ad hoc committees to address a specific goal or need. Once the goal or need has been addressed, the committee dissolves.
Board members are often appointed to committees or volunteer based on areas of expertise, as well as interests. In order to be effective, the American Society of Association Executives (ASAE) recommends board members not serve on more than two committees.
The Bottom Line
The success of an organization depends on its board of directors. But a lot is expected of these directors.
Boards must make it a priority to identify the right members, and then provide them with easy, secure access to the tools and information they need to be most effective in their roles.
Ready to take your meeting agenda and minutes to the next level? Request a demo or a free trial of OnBoard, the board intelligence platform that empowers boards and committees to hold more effective, informed, and uncomplicated meetings.
About The Author
- At OnBoard, we believe board meetings should be informed, effective, and uncomplicated. That’s why we give boards and leadership teams an elegant solution that simplifies governance. With customers in higher education, nonprofit, health care systems, government, and corporate enterprise business, OnBoard is the leading board management provider.