Not For Profit Board of Directors and Governance

Abstract

Anon-profit (NFP entity’s Board of Directors) bears ultimate responsibility for its governance. It ensures the non-profit functions in accordance with all applicable laws, regulations, and the entity’s internal guidelines and mission statement. We examine these Boards’ role in overseeing the functioning of non-profit entities and their management. We begin by reviewing the purpose of a Board of Directors and a commonly adopted structure for them including who may serve on such Boards; and how these Boards differ from those in the for-profit world. We then review the formal responsibilities that NFP Boards have for the entities they govern as well as some unspoken requirements for Board members. We examine specific activities in which these Boards typically engage and some activities which violate good governance practices. We provide examples of both well-functioning boards and some which serve as cautionary tales for entities. We discuss how a Board can deal with Board members who violate an entity’s rules and/or laws and how such members might be removed from their respective office as well as other regulatory and legal issues related to the conduct of Board members. We discuss the government entities both state and federal which regulate the function of non-profit Boards.