Mixed Reviews for Nonprofit Boards
from March/April 2008
by Julie Connelly
You’d think that enough corporate directors sit on the boards of nonprofit organizations to instill rigorous governance practices. Not so, evidently. Says BoardSource, a consulting firm in Washington, D.C., that specializes in nonprofits: “Despite some gains, mediocrity is the norm.”
BoardSource bases its low opinion on a 2007 survey of 1,126 chief executives of public charities and foundations and 1,026 people who served on nonprofit boards. The findings weren’t all negative. The survey, conducted to measure the impact of Sarbanes-Oxley reforms, showed that 92% of the nonprofits underwent an external audit in 2007, versus 84% in 2004, and 54% had audit committees, a big increase over 2004’s 18%. And there was improvement in the percentage of boards that conducted formal written evaluations of their own performance: 52% did these assessments, according to the survey, compared with 43% in 2004. Nonprofit boards were also more diversified—the percentage of white directors dropped from 91% in 2004 to 86% in 2007.
Among the findings of mediocrity, boards weren’t exercising much control over CEO pay. The survey showed that 35% of the boards didn’t weigh the salaries collected by CEOs of comparable organizations before setting their own honcho’s compensation package. There is no 2004 number for comparison.
Succession planning didn’t appear to get much attention either. “While 49% of chief executives anticipate a change in their position within the next five years [that is, they plan to quit], only 30% of board members see this change coming,” says BoardSource.
The survey discovered that directors of nonprofits were falling down on another key responsibility: fund-raising, which Linda Crompton, BoardSource’s CEO, describes as “an element of good governance for nonprofits.” Some 68% of the organizations required their directors to make personal contributions (up from 55% in 2004), but only 46% said all the board members were coming through. And the tightwad directors weren’t adept at prying money out of other people either. Just 40% said they were comfortable making direct pitches for financial contributions. This reluctance to give—and to ask others to do the same—flies in the face of another survey finding: 80% of the directors said their main reason for joining a nonprofit board was their commitment to its particular mission.
