Bottom Line: A Working Board of Directors

By Reiss, Alvin H. | Management Review, May 1990 | Go to article overview

Bottom Line: A Working Board of Directors


Reiss, Alvin H., Management Review


When Theodore Kesselman was executive vice president and chief financial officer of Bankers Trust, he conducted million-dollar transactions regularly. Today, three years after he took early retirement, he deals with smaller figures, yet the stakes remain just as high. Kesselman is one of at least 15 million Americans who serve on the boards of nonprofit organizations. And he didn't wait until his retirement to get involved. For the past nine years, he has been serving on nonprofit boards and currently sits on three, including the New York Youth Symphony, of which he is president.

An effective board of directors is essential not only to the growth but perhaps to the survival of the 900,000 or more nonprofit organizations in America. Volunteer board members establish policy and provide governance. They also supply business expertise in key management, marketing and financial areas-advice the organization otherwise could not afford. And when financial support is needed to keep an organization afloat, board members may have to act as fund-raisers.

All told, board service can be a considerable commitment, involving far more than appearing at meetings three or four times a year. The heaviest load falls, of course, on officers and, if the organization has one, the executive committee. But other board members generally sit on one or more committees-finance, membership, program, nominations, development-which meet between board sessions. Me days when non-profits told prospective members "Lend us your name or give us some money and we won't bother you again" are long past.

Yet, as many organizations discover, board membership and board service are not always synonymous. In spite of their strong interest in an organization and support for its programs, some board members are unable to combine professional and personal obligations with voluntary service. This can either lead to inaction or rubber-stamp approval of every decision.

"If you've got big names and busy people on the board, it's sometimes difficult to get them all together at the same place and the same time," claims Kenneth Albrecht, president of the National Charities Information Bureau, which evaluates the governance, policy and programs of some 400 major nonprofit organizations as a service to potential contributors. "Of the 40 organizations that did not meet our standards recently, 10 had attendance problems at board meetings."

Attendance may be the least of the concerns. Difficulties may arise when there are philosophical divisions within the board, or when a strong chairman overpowers all the other members. The working relationship between paid staff and the volunteer board is also critical; a clear distinction must be made between staff jobs and boar

What happens when a board doesn't function well? The worst-case scenarios are pretty forbidding. In one nightmare, the New York Historical Society's board allowed its deficit to increase by nearly $4 million without taking firm steps to close the income gap. Then, the board invaded its endowment to cover costs and approved expenses far beyond the organization's budget.

Meanwhile, the society's prized art collection was deteriorating due to poor building maintenance. Only after the story exploded in the press in 1988 did the institution reorganize and, with the help of outside supporters, rights itself again.

Then there are boards that find themselves at odds with their institution's chief executive. Last January, when Michigan State University football coach George Perles was wooed by the New York Jets, the university's board of trustees would not release him from his contract. Instead, they named him, on a one-year trial basis, to the additional post of university athletic director. This action displeased Michigan State University president John DiBiaggio, according to press reports; he believed it to be a conflict of interest for Perles to hold the roles of both employer and employee. …

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