By Ret Boney
Nonprofits must strengthen board effectiveness to win back donor confidence that has flagged in response to a series of highly publicized scandals, a nonprofit board expert says.
“When scandals hit, it’s donor confidence and public confidence that’s hit the most,” Deborah Hechinger, president and CEO of BoardSource, told an estimated 1,000 people Oct. 28 at the annual conference of the North Carolina Center for Nonprofits.
The public expects nonprofits to carry out their missions well and manage their funds well because of the critical work they do and the special status they hold as tax-exempt organizations and recipients of private contributions, said Hechinger, whose organization works to support and strengthen nonprofit boards.
“The perception is that all of us have breached the public trust in some way,” she said of the effect of the scandals, “And that’s what hurts donor confidence.”
In response to the scandals, which have involved conflicts of interest, excessive pay and compensation for executives and board members, and “interlocking” memberships on boards of funders and charities they fund, the IRS has begun changing the tax forms nonprofits file, and will be looking at CEO compensation and cooperating more with state attorneys general, Hechinger said.
The Senate Finance Committee likely will make changes in laws regulating nonprofits, she said, and has asked Independent Sector, a nonprofit advocacy group, to create a national panel to recommend changes.
And states such as California and New York have toughened their laws regulating nonprofits.
All those initiatives, she said, “do not take into account the diversity of the sector,” and show little understanding about differences among organizations within the nonprofit sector.
To increase board effectiveness, she recommended that nonprofits recognize the talents board members bring to their organizations and allow them to govern by doing their fiduciary job and particpating in setting strategic priorities and devising solutions.
Nonprofits should also construct boards to meet their specific needs, noting that one board structure does not fit all organizations, and should build bridges between board and staff.
“The board only knows what you tell it,” Hechinger said. “Don’t build a Berlin Wall between your staff and board.”
She also encouraged nonprofits to better engage their boards by developing meeting agendas that focus on critical issues rather than status reports, asking for and acting on board members’ insights, and encouraging periodic board self-assessments.
“Pay attention to compliance for sure,” she said. “But also pay attention to effectiveness. They’re not always the same thing.”
Ret Boney is the Assistant Editor of the Philanthropy Journal.