What questions should a potential new director ask before joining a non-profit board?
I was recently asked this by a bank vice-president who was mulling the possibility of joining a non-profit board. Below, I’ve listed some of the questions I shared with her, along with others that may be applicable to your own situation. Some questions may even apply to other types of boards.
At the start of the process, as with other professional commitments, do a self-assessment on what you bring to the equation and undertake due diligence to ensure you are going into the endeavour with all the facts.
More than anything, you must scrutinize the organization for professionalism and personal fit, especially before joining non-profits that have stretched resources, as your reputation or financial assets may be put at risk.
Self-assessment and commitment
Do you have an inner passion for what the organization does and stands for (its vision, mission and values) and whom it serves? Can you make a solid contribution to the organization’s strategy and performance? What competencies, skills and contacts do you possess that would contribute to your effectiveness as a director? Find out what are your roles, responsibilities and expectations are in joining a non-profit board. Are donations or fundraising expected? Be as explicit as possible here in finding your answers, but do so tactfully and diplomatically.
The average board position, even in a non-profit, is a 200-plus-hour-a-year commitment, so don’t take a board position lightly. Find out how many board and committee meetings are there? Length? Location? Frequency? What is the tenure? What are the conditions for reappointment or resignation, if any?
Consider, is your directorship tied to your professional employment at your home firm? Do you have consent from your home firm on your end, if it’s needed? Tell your firm the name of the prospective non-profit. Consent, however, should not unreasonably be withheld. Make your case by citing professional development, networking, learning, brand and reputation.
Lastly, ask yourself, why do you want to serve as a director on this non-profit board? Does this board and sector align with your long-term career trajectory?
Scrutinizing the board
Get your boots on the ground and find out how the board functions and how you can be protected in worst case scenarios.
What does the director and officer insurance cover? Ask to see the policy and have it independently reviewed. In reviewing it, assume various events such as fraud. Make sure you are adequately covered, including advancement of legal expenses.
Have a shopping list of enquiries. Probe about donor stewardship assurance, conflicts of interest, internal policies governing self-dealing, asset treatment, ethical compliance, expense reports for staff, gift policy and reputational risk.
Ask to see all important reporting (financial, budgets and others) as part of your consideration. Be prepared to sign a confidentiality agreement if you are asked. Ensure you understand (or have the capacity to understand in short order) the revenue model and the financial accounting and measurement issues involved in this non-profit. Staff will make choices on accounting policies for making estimates, and you need to understand how and why they do so, and to detect potential manipulation. (Assume fraud may occur.)
Ask tough questions to current and former directors, including CEOs or executive directors. Look at the tenure of management, staff and directors, too. Prolonged tenure can indicate entrenchment and undue influence. Find out what are the board dynamics and board-staff relations like. Are there factions within the board, say from a particular donor, management or other stakeholder? Ask to see a board meeting in action. Take a tour of key facilities as talks progress, to see the culture.
Find out the reporting structures of the board and the audit committees. What is chair’s leadership style and commitment to effective governance? Are you happy with that commitment if a conflict arises?
Determine if there are ongoing conflicts of interest between volunteers or operational roles and director/governance roles.
Is there any pending or past litigation you should be aware of? Tax arrears? Infractions? Staff difficulties? I would even do a search of the non-profit and its executives, and even fellow directors, as a precaution. Many of these searches can be done online, but if you have concerns, there are several professionals who can help you with this due diligence.
What is the quality and ethics of the executive director and the management team? This question is very important. Is there a code of conduct and is it effective and enforced? If it’s a large non-profit, you may want to speak to the external auditor and even the internal audit function.
How is the executive director assessed and by whom? How is compensation for him/her and staff established? Does the full board consent? Is compensation transparent, including to external stakeholders? Some firms have shown weakness on the issue of compensation: setting it, approval and disclosure. Assume self-interest on the part of executives, and know what the role and power of the board is.
How progressive is the board and how comfortable are you if it isn’t? Find how if the organization has a whistleblowing procedure. Is it effective? What are the ethical reporting procedures to, and oversight by, the board? Does the board assess its own performance, including that of the chair? What are the professional development and learning opportunities on this board?
A critical choice
This may be your first board, and your first board is likely a non-profit or governmental board, so plan for the future. Good firms and people should have no hesitation whatsoever in fully answering your questions. (I have seen all of them answered in my own experience.) If you’re not entirely confident in the answers you receive, or if you have any red flags, say, “No, thanks.” More directorships will come along. And remember: your subsequent directorships are based on your first one, so be careful in joining the right board. Then your directorial career can flourish.
Richard Leblanc is a lawyer, corporate governance academic, speaker and independent advisor to leading Canadian and international boards of directors.