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Good Nonprofit Leadership

  • Reduce liability

  • Leadership roles are key

This is a summary of considerations for good nonprofit leadership. While not an exhaustive description, these are generally accepted practices for good stewardship of a nonprofit organization. Today more than ever, governance of corporations, including nonprofit corporations, is under greater scrutiny and directors and officers of these corporations should be concerned with liability issues. All nonprofit organizations should:

  • Practice Sound Management

  • Develop comprehensive by-laws

  • Make conflict-free business decisions

  • Consider legal standards and industry practices

  • Create a culture of integrity at all levels

  • Establish codes of business conduct

  • Institute compliance programs

Role and Responsibility of Senior Management
Senior managers are responsible for the daily operation of a nonprofit organization. The Chief Executive Officer, the most senior manager, is ultimately responsible to the Board of Directors for operations of the organization. Senior managers are responsible for:

  • Effective and ethical operations

  • Business and budget planning

  • Risk management

  • Financial reporting

  • Public relations

Role and Responsibility of Nonprofit Board Members
Board members should not become involved in daily operation of a nonprofit but rather should develop the standards of organizational behavior by which operations will be conducted by senior management and others.

  • Select and evaluate a Chief Executive Officer

  • Oversee the CEO and other senior management

  • Participate in strategic planning

  • Review financial statements

  • Approve contracts and policy

  • Plan for succession including the board and senior management

A board of directors of a nonprofit corporation has a duty of care, a duty of loyalty and a duty of obedience to the organization. State laws vary and but each state specifies what it considers an acceptable level of behavior in determining if board members are acting in the best interest of the nonprofit organization.

A Duty of Care generally includes the discharge of duties in good faith utilizing a degree of diligence, care and skill a person of prudence would exercise under similar circumstances.

A Duty of Loyalty generally includes an allegiance to the organization, a level of confidentiality, a responsibility not to use position for personal gain, and an obligation to act in the best interest of the organization at all times.

A Duty of Obedience includes establishing the mission of the organization and remaining loyal to it, following the articles of incorporation and by-laws, and assuring the organization's compliance with law.

Every nonprofit organization must take steps to practice sound management and assure that the mission of the organization continues to advance. Be certain to obtain legal counsel to review your practices.
 

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