Non-profits are legal entities that exist to address an important social purpose; they are often charitable and have missions relating to research, education, and/or community aid. Typically, non-profits are registered as 501(c)(3) organizations to receive tax-exempt status from the IRS. Charitable organizations are vital to the social and economic vitality of the U.S. Non-profits in the United States are abundant. Over 1.5 million 501(c)(3) organizations are registered in the U.S. as of 2023 and non-profits employ 10% of the U.S. labor force, making up over $2.5 trillion of U.S. GDP.
What is a Board of Directors?
Legal entities like corporations and non-profits are governed by a Board of Directors, which is a group of individuals elected by shareholders to set goals and maintain legal and ethical benchmarks. All directors owe their respective entities a fiduciary duty, which, put simply, means that they are tasked with acting in the best interests of the entity.
Directors cannot usurp corporate opportunities, self-deal, or put their own needs before the organization's needs. The purpose behind establishing a board of directors is to protect the organization and meet organizational goals. For a non-profit, this primarily means maintenance of tax-exempt status, maximization of fundraising, verification of charitable expenditures, and protection from fraudsters.
Different Roles on a Non-Profit Board of Directors
A Board of Directors typically has a President or Chairperson, Secretary, and Treasurer.
The President leads meetings, supervises general business, and governs the missions the non-profit decides to undertake.
The Secretary is the compass – they will set the meetings, notify board members of agenda items, take minutes, and keep the rest of the board members on track to accomplish their goals.
The Treasurer serves to set the budget for the non-profit and any sub-budgets within the entity, reports to the board on the fiscal condition of the non-profit, and advises on courses of action that impact finances.
How many board members should you have?
More board members may be necessary to accomplish a specific non-profit's goals. For example, UNICEF has 25 directors on its board, including the CEO of UNICEF (although he does not serve as the Chair) and a Vice Chair. The American Cancer Society has 21 directors on its board, including a Scientific Officer.
Every non-profit's board will be slightly different than the next, depending on the needs of the non-profit itself. The Bill and Melinda Gates Foundation has 14 directors on its board, including Ankur Vora. Vora serves as the Chief Strategy Officer, working to limit risk and maximize strategic opportunities for the non-profit.
How Often Do Non-Profit Boards Meet?
Most states require that the Board of Directors of a non-profit organization meet at least once per year. This requirement is the floor, not the ceiling, and not necessarily a guideline for success. Typically, at the annual meeting, director elections take place, a yearly summation of work accomplished is given, and goals for the new year are set.
Most non-profits meet monthly or quarterly to work through issues that can be solved quickly, discuss new projects, analyze any budgetary discrepancies, and keep the board at large apprised of happenings outside of each director's role.
What are Committees?
Board meetings are not the only forum for working towards goals. Boards of Directors are typically split up into committees of varying purposes to tackle smaller issues on behalf of the board as a whole.
For example, the most common committee is the Finance Committee, chaired by the Treasurer.
This committee will convene to work out the specifics of the budget and allocations so that only some directors need to sit through the deliberations of the entire budget. Executive Committees ("E.C.") are typically small committees made up of the President, the CEO (if they sit on the board), and a few other key directors.
The E.C. is on standby to resolve urgent executive decisions when there is insufficient time to convene a full board. Other committees may include a Compensation Committee (which decides the compensation of top corporate officers), an Audit Committee (which ensures the financial records comply with tax law), a Fundraising Committee, and a Membership Committee.
Another essential committee is the Nominating Committee ("N.C."). This committee identifies, interviews, and approaches potential candidates for board positions. The NC also works to streamline the nomination and voting processes through practice and amendments to the bylaws. Members of the N.C. must have a particularly deep understanding of the non-profit's mission and the stakeholders' needs to find appropriate leadership for the organization's government. This committee is discussed in further detail below when finding board members is addressed.
Who Sits on the Board of Directors?
Typically, those who sit on boards of large non-profits are either retired C-Suite Officers or current C-Suite Officers with impressive career paths and numerous connections. Directors for non-profits have major responsibilities, but believe it or not, they aren't usually paid to serve as a Director.
Individuals who serve on boards of non-profit organizations usually have business experience, technical knowledge, or personal reasons for dedicating so much time and effort to their roles. However, this doesn't mean they are prepared for their director positions. The National Council of Non-profits offers a nationwide network of state-specific programs to help educate and train board members to meet their non-profit's missions.
BoardSource, the non-profit industry leader in good practices, says the non-profit's CEO must sit on the Board of Directors. The CEO doesn't usually take on double duty in the Chairman or President role, but the CEO's input and collaboration are vital to smooth sailing. CEOs exist to make major corporate decisions and manage operations throughout the organization. A strong rapport between the board of directors and the CEO, CFO, and other C-Suite executives makes for a stronger organization.
Examples of Non-Profit Board Members
One outstanding example of a non-profit President is Deborah Archer of the ACLU. She began her career out of law school as a fellow at the ACLU, worked her way up to general counsel to the Board of Directors, and now serves as President. She is also a tenured professor at the New York University Law School.
Another stellar example of a non-profit board member is Susan Byrnes of the Bill and Melinda Gates Foundation. Ms. Byrnes serves the Gates Foundation as their Chief Communications Officer and sits on the board of directors. She began her career as a journalist for esteemed publications such as the Los Angeles Times and The Seattle Times.
While serving as the CCO and a board member at the Gates Foundation, she concurrently sits on the board of Seattle's Downtown Emergency Service Center, which provides housing, healthcare, and crisis intervention for marginalized communities.
How Does a Non-Profit Find Board Members?
Most non-profit board members work their way up from another position within the non-profit. Some are even beneficiaries of the non-profit's mission, moved to help others who are in the position they once were in.
Prior Experience in the Non-Profit
For example, Noorain Fatima Khan was recently named the newest President of the Girl Scouts of America's board of directors. Khan served as a girl scout herself and has served on the board in other capacities since 2017.
Doctor Christos Christou is another excellent example of someone passionate about their non-profit's work. Dr. Christou is the International President of Medecins Sans Frontieres ("MSF"), also known as Doctors Without Borders. Dr. Christou has worked with MSF since 2002 (over 20 years!), and his first assignment was as a field doctor assisting refugees in Greece. His dedication to helping those in need of medical care led to his involvement in administrative roles within the organization.
These are just two examples of passionate people entering the ground floor of an organization only to become the backbone of it. Recruiting people to donate funds and volunteer at events is crucial to a non-profit's success, but treating these people with care and appreciation can be a powerful investment in the long term.
Identification and Recruitment From Current Management
Another crucial method for identifying and recruiting board members comes from the current management and the current board. Many non-profit boards have Nomination Committees that identify potential board members from applicants, donors, current organizational members, and the private sector. This option is more successful when practiced by an established non-profit, but it could be a useful practice when only a few of the board positions have been filled.
Key Factors for Identifying Board of Director Members
Experience, reliability, and passion are the three most important factors when identifying candidates for a non-profit board of directors. Those who are willing to educate themselves on aspects of the board's responsibilities, make time for important business, and offer thoughtful opinions are the most successful board members. Remember to always keep an eye out for the hard workers further down the organizational hierarchy – they may sit at the table one day in the near future.
Questions about who should be on your board of directors? Contact our experienced non-profit attorneys today for a free consultation.