What Does a Nonprofit Board Need to Know and When?

Nonprofit corporations exist for reasons other than making a profit. Success is measured not by financial performance but by social benefits.

The sector is supported by a number of nonprofit organizations invested in its activities from the Independent Sector to the Nonprofit Quarterly to Guidestar and Bridgespan, each of which supports a website rich with resources for those interested in the sector.

Yet, I can find clearer, more distinct guidelines for the corporate boards of for-profit organizations more easily than I can find similar materials to provide guidance for nonprofit boards. One strong example of tools available for corporate boards is Sidley Austin’s Best Practices Calendar for Corporate Boards and Committees [1]. If a nonprofit corporate board calendar like this has been developed, I have not yet come across it.

The monthly meeting and subject matter information in the Sidley guide is detailed and useful. It helps corporate boards function presumably without too much outside guidance, though many work with outside legal counsel to insure they are fulfilling their obligations fully.  

Here, I’ve adopted one area of their calendar, Matters About Which the Board Must be Notified, a portion of the calendar provided in the link above, for the nonprofit sector in the simplest language I can find.

Matters About Which the Board Must be Notified

(immediate notification versus notification at next regular meeting, to be determined by the executive director in consultation with either outside legal counsel or guidance from the board chair)

1. Acts of fraud by employees involving material amounts or by any officer, regardless of amount.
2. Any alleged claim of sexual harassment against any officer or director.
3. Any request for a waiver from the organization’s code of business conduct or ethics.
4. Resignation of any officer/executive or director.
5. Any out-of-the ordinary-course contact from a regulatory body.
6. Any material issue raised by outside auditors with respect to previously issued financial statements.
7. Any approach by an organization seeking to merge with or acquire the organization.
8. The commencement of any litigation against the organization of a material amount.
9. Any significant data breach or cybersecurity incident.
10. Any other matter that poses material risk to the reputation and or/financial stability of the company.

Nonprofit boards tend towards the laissez-faire, both in my experience and in the opinion of some legal scholars. This Fordham Law Review article [2] by Chicago-Kent College of Law professor Evelyn Brody is one example which does a very good job of exploring the gaps between law and practice. Many professionals adhere strictly to the guidelines and best practices followed in their career but relax their attention to such matters when serving on boards. 

[1] The Sidley Best Practices Calendar for Corporate Boards and Committees, Sidley Austin LLP, September 2015

[2] Evelyn Brody, The Board of Nonprofit Organizations: Puzzling Through the Gaps Between Law and Practice, 76 Fordham L. Rev. 521 (2007). Available at: http://ir.lawnet.fordham.edu/flr/vol76/iss2/2