Tips for Nonprofit Directors and Officers

The Center for Nonprofit ExcellenceJanuary 18, 2012

BUILDING A POWER BOARD The Perkins Five-Finger Philosophy of

Nonprofit Board Composition

The Important Role of the Board

• Who owns the organization anyway?• What are my legal duties?• What are the 3 most likely sources of trouble?• What is D & O Insurance (and why should I

care)?

Sources of Trouble

• The IRS• The State Attorney General’s Office• The Disgruntled

D & O Coverage

• D&O = Directors and Officers

• Protects against breach of fiduciary duty claim

• Biggest benefit: Covers legal fees and costs of defense

A Nonprofit Director’s Worst Nightmare

• Imagine you’re a director or officer of The Second Mile Foundation

• PA Governor Tom Corbett says, “I need to know what the board members knew.”

• Organization (founded in 1977) is basically in wind-up mode at this point.

Other Examples

• New Caste Youth Football Program—Managers investigated by state AG for misuse of funds, state police involved, criminal charges filed.

• USTA Sectional Association—Disputed board election and nomination process, settled via arbitration.

Self-Assessment

• How much do you know about your nonprofit organization?• Take the test now and calculate your

score.

How Did You Do?

• Don’t Feel Bad• Few Score in Top Category• Topics for discussion at your next

board meeting

Miscellaneous Issues

• What’s a registered agent?• Are we legally required to have a

social media policy?• What is a gift policy?

The 5-Finger Philosophy

The Concept: Every person on your board of directors (including YOU) fits into one of five categories, each resembling one of the fingers on your hand.

Benefits of the5-Finger Philosophy

• Maximize Effectiveness of Current Board• Better Recruiting and Retention• Self-Actualization (Abraham Maslow)

AN IMPROVED, HIGHER FUNCTIONING NONPROFIT ORGANIZATION

The Index Finger

• The most important

• Need at least 1-2 on your board

The Thumb

• Reliable• Loyal• Hardworking• Perfect candidate for

corporate secretary or treasurer

The Ring Finger

• Inconsistent participant• Flashes of brilliance and

passion• Potential leader• Underutilized asset

The Pinky

• Poor attendance• Minimal input at meetings• Minimal activity• Nonfactor

The Middle Finger

• Type A personality, argumentative, uncooperative, narcissist, controlling, patronizing, etc.

• The trouble with these people• What do you do?

The Worksheets

• Evaluate Your Board RIGHT NOW• Take Extra Worksheets for Your Colleagues• Make It Part of Your Annual Nominating or

Strategic Planning Process

What Happens Next?

• Address Current Problems• Improved Engagement Levels• More Strategic Succession Planning• Better Leadership Development

You Are Now a Guru on Assembling an Effective Nonprofit Board of Directors!

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