This is a presentation given at the Center for Nonprofit Excellence on useful legal and compliance tips for officers and directors of nonprofit organizations. The featured speaker was Richmond, Virginia business and nonprofit attorney Eric Perkins, who also shared with the group his Five Finger Philosophy of Nonprofit Board Composition. Which finger are you? Email eric@ericperkinslaw.com for copies of the program handouts.
1. The Center for Nonprofit Excellence
January 18, 2012
BUILDING A POWER BOARD
The Perkins Five-Finger Philosophy of
Nonprofit Board Composition
2. The Important Role of the Board
• Who owns the organization anyway?
• What are my legal duties?
• What are the 3 most likely sources of trouble?
• What is D & O Insurance (and why should I
care)?
3. Sources of Trouble
• The IRS
• The State Attorney General’s Office
• The Disgruntled
4. D & O Coverage
• D&O = Directors and Officers
• Protects against breach of fiduciary duty claim
• Biggest benefit: Covers legal fees and costs of
defense
5. A Nonprofit Director’s
Worst Nightmare
• Imagine you’re a director or officer of The
Second Mile Foundation
• PA Governor Tom Corbett says, “I need to
know what the board members knew.”
• Organization (founded in 1977) is basically in
wind-up mode at this point.
6. Other Examples
• New Caste Youth Football Program—
Managers investigated by state AG for misuse
of funds, state police involved, criminal
charges filed.
• USTA Sectional Association—Disputed board
election and nomination process, settled via
arbitration.
7. Self-Assessment
• How much do you know about your
nonprofit organization?
• Take the test now and calculate your
score.
8. How Did You Do?
• Don’t Feel Bad
• Few Score in Top Category
• Topics for discussion at your next
board meeting
9. Miscellaneous Issues
• What’s a registered agent?
• Are we legally required to have a
social media policy?
• What is a gift policy?
10. The 5-Finger Philosophy
The Concept: Every person on your board of
directors (including YOU) fits into one of five
categories, each resembling one of the fingers
on your hand.
11. Benefits of the
5-Finger Philosophy
• Maximize Effectiveness of Current Board
• Better Recruiting and Retention
• Self-Actualization (Abraham Maslow)
AN IMPROVED, HIGHER FUNCTIONING
NONPROFIT ORGANIZATION
13. The Thumb
• Reliable
• Loyal
• Hardworking
• Perfect candidate for
corporate secretary or
treasurer
14. The Ring Finger
• Inconsistent participant
• Flashes of brilliance and
passion
• Potential leader
• Underutilized asset
15. The Pinky
• Poor attendance
• Minimal input at meetings
• Minimal activity
• Nonfactor
16. The Middle Finger
• Type A personality, argumentative,
uncooperative, narcissist, controlling,
patronizing, etc.
• The trouble with these people
• What do you do?
17. The Worksheets
• Evaluate Your Board RIGHT NOW
• Take Extra Worksheets for Your Colleagues
• Make It Part of Your Annual Nominating or
Strategic Planning Process
18. What Happens Next?
• Address Current Problems
• Improved Engagement Levels
• More Strategic Succession Planning
• Better Leadership Development
19. You Are Now a Guru on Assembling an
Effective Nonprofit Board of Directors!
Attorney and Ambassador of Tennis (32 years—tournament competitor, teaching pro, tournament director, tournament sponsor, league participant, racket stringer, been to all 4 grand slams, volunteered and led committees at local, state, sectional, and national levels…and right now I serve as an officer and director of a CTA) --We’re here to have some fun and learn a few things…and the objectives today are as follows: Talk about the important role of the board of directors and some issues to consider as a director We are going to transform the way you view yourself and others when it comes to nonprofit board composition. We’re going to have some fun and you’re going to get a chance to do something you probably have always wanted to do but perhaps never had the chance….until today. And we’ll have plenty of time for questions
Surprisingly, some people don’t understand the concept, and others lose sight of it over time…but ownership is really what differentiates for-profit from nonprofit corporations. Nonprofit has no shareholders or owners, it serves the public or its targeted group of beneficiaries. A fiduciary duty is generally viewed as the highest level of obligation you can owe to someone else…it is the requirement that you put someone else’s interests above your own. Generally broken into 2 duties: Duty of Care (are you acting reasonably in a manner that you believe to be in the best interests of the organization) and Duty of Loyalty (means that you act for the benefit of the organization and its mission, not in pursuit of self-interest…Conflict of interest issues) Legal protections—Federal and state immunity/volunteer protection statutes, corporate governance document protections (indemnity and advance of expenses), insurance, contractual transfer of risk.
D&O insurance is protection against a breach of "duty" by the directors and officers. D&O pays for actual or alleged wrong decisions, what the policy calls "wrongful acts." Although each insurer defines coverage in its own way, D&O insurance generally includes: "any actual or alleged act or omission, error, misstatement, misleading statement, neglect or breach of duty by an Insured Person in the discharge of his/her duties.“
D&O insurance is protection against a breach of "duty" by the directors and officers. D&O pays for actual or alleged wrong decisions, what the policy calls "wrongful acts." Although each insurer defines coverage in its own way, D&O insurance generally includes: "any actual or alleged act or omission, error, misstatement, misleading statement, neglect or breach of duty by an Insured Person in the discharge of his/her duties.“
D&O insurance is protection against a breach of "duty" by the directors and officers. D&O pays for actual or alleged wrong decisions, what the policy calls "wrongful acts." Although each insurer defines coverage in its own way, D&O insurance generally includes: "any actual or alleged act or omission, error, misstatement, misleading statement, neglect or breach of duty by an Insured Person in the discharge of his/her duties.“
D&O insurance is protection against a breach of "duty" by the directors and officers. D&O pays for actual or alleged wrong decisions, what the policy calls "wrongful acts." Although each insurer defines coverage in its own way, D&O insurance generally includes: "any actual or alleged act or omission, error, misstatement, misleading statement, neglect or breach of duty by an Insured Person in the discharge of his/her duties.“
D&O insurance is protection against a breach of "duty" by the directors and officers. D&O pays for actual or alleged wrong decisions, what the policy calls "wrongful acts." Although each insurer defines coverage in its own way, D&O insurance generally includes: "any actual or alleged act or omission, error, misstatement, misleading statement, neglect or breach of duty by an Insured Person in the discharge of his/her duties.“
D&O insurance is protection against a breach of "duty" by the directors and officers. D&O pays for actual or alleged wrong decisions, what the policy calls "wrongful acts." Although each insurer defines coverage in its own way, D&O insurance generally includes: "any actual or alleged act or omission, error, misstatement, misleading statement, neglect or breach of duty by an Insured Person in the discharge of his/her duties.“
Self-actualize = the full realization of one’s potential.