Boards are increasingly setting their own high standards and taking action to meet them.

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The State of the Not-for-Profit Sector in 2015
For effective governance, boards must set a stronger tone
Larry Ladd, Director, Not-for-Profit and Higher Education Practices
On whom can we depend to make sure that not-for-profit
organizations have a clear mission and are successfully achieving
it? Regulatory scrutiny helps prevent abuses. Management
and staff attend to the tasks of strategizing and implementing.
Stakeholders watch and provide critical feedback. But ultimately,
the most critical responsibility — achievement of mission — falls
to the board. If the board isn’t doing its job well, and if it doesn’t
have the right membership, nothing else matters. Boards are
increasingly setting their own high standards and taking action to
meet them.
The new look of fundraising
We anticipate that boards will focus more on fundraising than
they have in the past.
Board members know that the organization’s mission can be
better achieved with more resources. Trustees also understand
that more funding is available as a result of an improving
economy. Individual donors’ wealth has increased. Foundation
resources are also on the rise. The only funding source not more
flush is the government, which, while tax receipts are on the rise,
continues to face extraordinary demands on those receipts.
Fundraising is also becoming more varied and complex, with
the emergence of online platforms, mobile giving, social media
and crowdsourcing.
1
Independent Sector, Principles for Good Governance and Ethical Practice, 2015. See http://independentsector.org/principles for the report.
For many organizations, board responsibility for fundraising
is embedded in the governance culture. But other boards have
an ambivalent attitude toward fundraising, viewing it as a staff
responsibility. Unless those organizations are satisfied with
their current resource base, their boards need to become more
actively involved in obtaining funds. A board does not need to
lead fundraising initiatives; that is more naturally the CEO’s job,
supported by the head of development. But the board needs to set
the tone and be present for critical tasks when appropriate. Board
members have the stature to effectively represent the organization
to the community; their willingness to volunteer their time to
steward the organization makes a compelling case to donors
and funders about the importance of the organization’s mission.
Board members can open doors to potential donors by using
their connections and their influence. They can demonstrate their
full commitment to the organization by accompanying staff to
donor solicitations. They can set an example, especially by their
own personal commitment of money. A major statement is made
when there is 100% board participation in giving.
Taking ethics beyond compliance
Independent Sector, a leading trade association for the not-for-
profit industry, highlighted the emerging critical importance of
ethics in updating its Principles for Good Governance and Ethical
Practice, generally considered the single guide to best practices.1
The update was issued, the association explains, because of
changes that have occurred in the past seven years, such as
significant refinements in codes of ethics and whistleblower best
practices based on experience, stronger emphasis on enterprise
risk management, heightened use of technology and its incumbent
risks, rebalancing transparency and privacy, and the new business
opportunities that not-for-profits are sometimes now pursuing.

2. 19
Recognizing value in diversity
Boards are showing renewed energy toward expanding their
diversity, recognizing that proper composition is critical to board
and mission performance.
Diversity is manifesting itself in a number of ways, as boards
acknowledge that a variety of skills, styles and experiences is
essential to mission fulfillment. Boards are seeking out new
members who are especially talented at imagining the future
and brainstorming on strategy. They are adding those who
can function as contrarians, who are skeptical and who feel
no reluctance in raising hard questions. They are also adding
members who understand the professional challenges faced
by management in implementing the organization’s programs,
and who bring a broad range of cultural and racial experiences.
Boards are making sure their tables seat individuals with specific
technical and professional skills, such as program expertise, IT,
legal and financial knowledge.
The rules are now in place. It is increasingly rare to find a board
that hasn’t established (and revised based on experience) a conflict-
of-interest policy, a code of ethics, whistleblower policies, and
other policies and procedures to set the highest standards of ethical
conduct for boards and for the rest of the organization.
The remaining challenge is actual leadership behavior, setting the
“tone at the top” for everyone in key governance roles, modeling
the best possible example, and communicating the board’s
commitment to high standards.
A healthy “tone at the top” can be set when the CEO and the
board chair address these principles:
• Ethical considerations in regular reports
• Consistently applying policies rather than making toxic
exceptions
• Judiciously balancing transparency and privacy protection
• Honoring whistleblowers, rather than just protecting them
• Conducting an annual survey of how staff and other
stakeholders perceive the organization’s culture of ethics
• Verifying the effectiveness of the fraud prevention program
• Assuring the accuracy not only of financial reports, but also
marketing and fundraising materials
• Annually assessing how the organization’s commitment to
these high standards is being maintained and strengthened

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The State of the Not-for-Profit Sector in 2015
It’s all about leadership
High-performing boards require leadership from the board chair,
as well as the CEO, each in his or her prescribed role. A board
cannot be successful without strong, differentiated leadership
from both positions.
Ideally, the board chair sets the agenda, not only by preparing the
literal order of business, but also by having a clear understanding
of the board’s role in policymaking without interfering with
management’s role. The board chair should be highly organized
and sensitive to each board member’s unique contributions. And
it’s the board chair who ensures that each important board-level
role is fulfilled, including getting the right mix of talent on the
board and regularly assessing performance, often accomplished
through the work of a nominating/governance committee.
The CEO, like the board chair, is aware of the distinction
between board and management roles; he or she provides
valuable information and advice to the chair in preparing
the agenda. The CEO also confirms that the board has the
information it needs to make knowledgeable decisions.
In governance, a prime requisite for success is a good relationship
between the board chair and the CEO. If they are on the same
page — and, just as importantly, make it clear that they are — and
the board upholds the high standards it sets for itself, then the
organization has a foundation for effective mission-based service.
We recommend these additional resources
Survey of not-for-profit governance practices, BoardSource: Leading
with Intent, January 2015. See http://leadingwithintent.org/
for the survey.
Article about the BoardSource survey, The Chronicle of Philanthropy:
“Nonprofit CEOs Say Board Members Need to Be Better
Fundraisers,” by Holly Hall, Oct. 29, 2014. See https://philanthropy.
com/article/Nonprofit-CEOs-Say-Board/152331 for the article.
Article with advice that applies to all not-for-profit boards, The
Association of Governing Boards of Universities and Colleges:
Trusteeship, “The 10 Habits of Highly Effective Boards,”
by Rick Legon, March/April 2014. See http://agb.org/
trusteeship/2014/3/10-habits-highly-effective-boards for the article.