Category Archives: Why boards fail

Yes Virginia, Nonprofit Directors Really Can be Held Liable for An Insolvent Nonprofit’s Debts

When serving as a director or an officer of a nonprofit organization, a director’s duties shall be discharged: (i) in good faith; (ii) with the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (iii) in a manner the director reasonably believes to be in the best interests of the corporation. These duties are owed not only to the corporation, but also to its creditors. In discharging duties, a director is entitled to rely on information, opinions, reports or statements, including financial statements and other financial data, if prepared or presented by one or more officers or employees of the corporation whom the director reasonably believes are reliable and competent in the matters presented as well as certain experts and committees. However, a director is not acting in good faith if the director has knowledge concerning the matter in question that makes otherwise permissible reliance on others unwarranted.Continue Reading

Advantages and Disadvantages of Term Limits

When forming a new nonprofit corporation, one important consideration for incorporators is whether or not term limits should be imposed on members. Additionally, incorporators need to consider whether or not terms should be successive or staggered. There are many pros and cons for both sides of these arguments. However, in our experience, there are more advantages to term limits in the vast majority of cases. Also, we tend to favor staggered terms.Continue Reading

Lessons to be Learned From the Arizona Fiesta Bowl

Could one man really do that much damage to an Arizona institution as high profile and important as the Fiesta Bowl? More likely, the nonprofit scandal of the year was a group effort fueled by a dysfunctional board. The Fiesta Bowl board bears all the hallmarks of a board more interested in administering than governing the organization. Still, there are lessons to be learned from the Fiesta Bowl’s governance and oversight failures.Continue Reading

Nonprofit Coup d’Etat

We are used to hearing about hostile takeovers of for-profit companies but a lesser known phenomenon is the hostile takeover of a nonprofit organization. Nonprofit takeovers can occur anytime factions develop within a nonprofit. Sometimes incumbent board members are removed in favor of new board members with a different policy agenda. In other cases, a…Continue Reading

Top 10 Smart Moves Great Nonprofit CEOs Make

Asks Forgiveness, Not Permission. I receive calls from nonprofit CEOs who are struggling with their boards. I am also asked by boards to intervene when there is a an issue with the CEO. What I have learned is that great CEOs do not overly confer with the Board. Instead, great CEOs understand that it is their job to implement the Board’s strategy within the scope of the strategy, policies, and budget the Board has set. Too much “checking-in” can have the unintended consequence of inviting the board to micro-manage. Conversely, scribbling too far outside the lines of the board approved strategy, policies, and budget can get a CEO fired.Continue Reading

Top 15 Non-profit Board Governance Mistakes (From a Legal Perspective)

This list was started as the inaugural post to CharityLawyer Blog. The post struck a nerve, was mentioned by the Chronicle of Philanthropy, the Nonprofit Quarterly, and numerous bloggers and twitter users. San Francisco tax-exempt organizations lawyer and publisher of the Nonprofit Law Blog, Gene Takagi, reviewed the list and added five more governance mistakes…Continue Reading