Governance in the Charitable Sector
The following resources cover governance basics and considerations for board members in a mission-based environment. This includes: best practices, state attorneys general resources for nonprofits, and the differences between nonprofit and for-profit governance, particularly where directors and officers find themselves working in both environments simultaneously.
STATE ATTORNEYS GENERAL RESOURCES FOR NONPROFITS
- National Association of Attorneys General -
- California -
The California Attorney General's office has assembled a webpage of resources for those seeking assistance in operating and managing a nonprofit organization.
- New York -
New York State Attorney General's website providing resources and information for charitable organizations, grantmakers, fundraisers and the general public. The site also includes links to the aforementioned booklet.
- Tennessee -
IRS WEBPAGES ON CHARITABLE/NONPROFIT GOVERNANCE
- Basic Pages -
- Educational Resources -
GOVERNANCE FOR NONPROFITS
"To folks who are new to nonprofit governance, grasping the difference between directors and officers of a nonprofit corporation can be confusing. This post attempts to explain the differences."
“Lawyers who regularly represent tax-exempt and nonprofit organizations are eventually solicited for advice regarding nonprofit governance. Often these questions drift into management issues. While always quick to point out that my expertise is in nonprofit law, not management, I have summarized some of the most common governance mistakes I have witnessed in my practice.”
NONPROFIT VS. FOR-PROFIT GOVERNANCE
Governing boards in the for-profit and nonprofit contexts share many legal precepts: the oversight role, the decision-making power, their place in the organizational structure, and their members’ fiduciary duties. But in the nonprofit setting, misconceptions about corporate governance abound. Are board members primarily fundraisers? Cheerleaders? A rubber stamp to legitimize the actions and decisions of the executives? Do they run the organization to the extent staff is unable? Are they window-dressing to spruce up the organization’s letterhead? If they are rich or famous, must they attend board meetings? How do they know whether they are doing a good job, or when it is time to go? Despite the common ancestry and legal underpinnings, nonprofit corporate governance places heightened demands on trustees: a larger mix of stakeholders, a more complex economic model, and a lack of external accountability. This post explores how substituting a charitable purpose for shareholders’ interests affects the board’s role.”
"The problem of corporate governance has been a conspicuous item on the agenda of public reform in recent years. Most of that attention has been focused on business corporations. But nonprofit firms have attracted attention as well. Some of this has been drawn by scandals, the most conspicuous of which actually preceded the Enron-era scandals of the business sector – such as the scandalous behavior of William Aramony, CEO of United Way, and of Peter Diamandopoulos, President of Adelphi University. Some of the attention has also been drawn by the numerous conversions of nonprofit hospitals, insurance companies, and HMOs to for-profit status, which often resulted in a large fraction of the institution’s value being captured by the for-profit acquirer.”
"Although Sarbanes-Oxley and the NYSE standards may have raised the bar for public governance behavior, 'best practices' for corporate boards cannot be transferred automatically to health care and other nonprofit boards. The consensus among the experts is that both models have their strengths and flaws—and lessons to take from each other.”
NONPROFIT GOVERNANCE AND SARBANES-OXLEY
- Francie Ostrower, Marla J. Bobowick, Nonprofit Governance and the Sarbanes-Oxley Act, Urban Institute, (2006).
- Nonprofits and Sarbanes-Oxley, ABA Standing Committee on Pro Bono and Public Service, (updated April 8, 2013).
- Ellen P. Aprill, What Critiques of Sarbanes-Oxley Can Teach About Regulation of Nonprofit Governance, 76 FORDHAM L. REV. 765 (2007).
- Linda Sugin, Resisting the Corporatization of Nonprofit Governance: Transforming Obedience into Fidelity, 76 FORDHAM L. REV. 893 (2007).