The balance of board and executive power in nonprofit organizations is a critical and essential ingredient of organizational viability. Organizational stability requires that boards and executives negotiate, sustain, and honor the balance of power – and define the contours of mutual accountability. Easier said than done!
(For context, please reference Herb’s Third Law of Nonprofit Physics in my February 18th post.)
The reality is that achieving and honoring the balance of power in nonprofit organizations is complicated, if not impeded, by the prevailing nonprofit business model that accords unchecked authority to boards of directors. (Here’s where we really get irreverent!)
In corporate America, boards are ultimately and directly accountable to their shareholders. A range of regulatory mechanisms and metrics enables shareholder and public monitoring of performance. The market and whistleblowers provide additional incentives for good behavior. Notwithstanding the periodic excesses and abuses that make the news, corporations manage the balance of power with their own institutional set of checks and balances.
There are no parallel incentives for board discipline and accountability in the nonprofit sector, not even the superficial compliance requirements of funding sources. (And maybe there should be.)
The question must be asked:
To whom is the board of directors (ultimately) accountable?
I like John Carver’s answer: the notion that boards are trustees for the true owners of the organization. But the question remains, pray tell, how do these true owners command accountability for the board’s stewardship of the public trust? What tools have they to determine outcomes, impact, and relevance? What authority can they exercise? What recourse?
In the absence of an ultimate practical and functional authority to whom organizational governers are accountable, the potential exists for dysfunction, mischief, nonperformance, carelessness, inattention to finances and other critical details of organizational performance, and rogue behavior.
Yes, there are great boards. But, there is nothing inherent in the nonprofit organizational architecture that precludes boards going from great to good to not so good. As well developed as they may be at a point in time, succession plans and board development strategies can pass with the tide of board turnover.
So, let’s return to the matter of balance of power and how this governance dilemma pertains.
As much as proponents of effective governance (and I believe Carver to be at the top of the heap) talk of strong board/strong executive models with clearly defined roles and mutual accountabilities, the balance of power between board and executive can never be equal and realize its potential as long as the board can act with impunity, has no ultimate authority to which it is accountable, and can, without consequences, ignore the policies it, or its predecessors) so diligently formulated.
Place the executive in this scenario, and see how vulnerable (s)he is to whim, to moving goalposts of performance expectations, and to personalities.
We all know of great executives who have been the casualties of wayward boards and of the subsequent disruption to the work of the organization. We all know how reticent boards are to conduct regular performance evaluations, let alone establish clearly defined measures on which to evaluate executive performance.
We need a better framework for accountability within which nonprofit organizations operate that is standard among all nonprofits – and in which a reasonable balance of power is maintained, good executives are protected, boards are called to a higher duty of care, and the discipline of board/executive mutual accountability is strengthened.
If, short of establishing an external regulatory structure for nonprofits, we can’t answer the question to whom the board is ultimately accountable, then let me suggest that we promote an alternate means to accomplish the above objectives.
Specifically, let us advocate that boards become accountable to the terms of a legal contract with their executive director. Let us advocate that every CEO should have a contract that specifically outlines the terms of his/her employment and identifies the reasonable objectives against which performance and remuneration will be evaluated.
And, let’s go a step further, perhaps. To be a true contract, let the quid pro quo be an articulation of the Board’s corresponding accountability.
As attractive as at will provisions are to board employers, at will provisions put good executives at risk and open the door to caprice and subjectivity.
Boards may be loath to have contracts, but that’s tough; executives, for their own sanity and integrity, ought to insist on them.
What do you think? What’s your alternative?
Join the conversation. Forward this post to your colleagues, and invite them to join in.