This is a guest post by Sara Speer Selber.
Your business and community leadership has been recognized and you’ve been asked to join a corporate or non-profit board of directors. Before you agree, it’s important to conduct the same due diligence you would when buying another company.
After all, your name will be associated with this organization and you want to make sure ethical behavior is its norm. You want to avoid board membership at the helm of a for-profit or non-profit led by self-serving leaders who act recklessly or illegally.
If you are asked to join a corporate or non-profit board, what questions should you ask before saying yes? How do you know if you are joining a board of directors that is behaving in a responsible manner? Here are a few questions to ask:
1. Does the board have a conflict of interest statement? In other words, if you are sitting on a non-profit board, you or your company should NOT be financially compensated for services. On a for-profit board, it is fine to refer qualified organizations; however, responsible organizations requests several bids through an official RSP process and board members are not involved in contracts. That is a staff function.
2. Does the board have directors and officers liability insurance? This seems to be common sense, and yet few ever ask this question, especially in the 501(c)(3) world.
3. Do board members insert themselves into the hiring and firing of staff? The only person a board is supposed to hire or fire is the CEO. If a board member has HR or legal experience, they may certainly provide guidance to a director on the appropriate steps to letting an employee go.
4. Has the organization adequately planned for succession? Is the current CEO grooming a successor or preparing for their departure? Has their been a sudden flight of key staff members? Did you ask why?
5. Does the board engage in big picture issues and bring in others to support the organization to help it move forward? It is usually clear when there is a personal conflict of interest versus a board that spends appropriate time in due diligence, visioning and mission-based conversations. Smart boards engage with management of an organization to form a team. Together they research the value of and understand duplication of programs, potential collaborations and how some consolidations can save money.
6. If it’s a non-profit board, are board members only volunteering for the organization? For non-profits with an advisory committee or board, those members should also support the organization in a non-self-serving manner. If you are an advisor and wish to be financially compensated, remove yourself from any voluntary role. Once your work is over, you may choose to volunteer again.
7. Have you seen a few years of branding history, financials, CEO evaluation processes, organizational history, board member meeting attendance, meeting notes, and the mission and vision of the organization? Ask to see a board commitment document as well as the conflict of interest document. Do not join a board that is growing a friends group. Always check to see who the funders/investors are and if there are diverse sources of revenue. This should be standard as part of board orientation.
8. Are you willing to voice your opinion, even if it is not popular? Every organization and its board face difficult times. When your inner voice says something is not right, speak up! Being the voice of ethics is never easy, and there may be unpleasant personal consequences, but prevention of a bad decision may save the organization.
9. Does the board understand and embrace its role? Ensure the organization you associate with understands the serious nature of the work you are engaging in. Board rooms require results, not just pictures of people that like to be perceived as leaders. Positive cash flow and reserves are the goal of both businesses and non-profits. Solid financials will sustain necessary services and programs like nothing else. To grow based on data-driven needs requires capital…period.
10. Does the organization have sustainable funds? If you are looking at a non-profit position, consider its sustainable funds. Do not base your budget on a special event or the people that chair 10 events a year. With time, people say no to the same people asking over and over again. Today, an organization may actually be better served using fewer funds than a gala or event would cost and instead pay a good PR agency to keep the mission in the public eye rather than try and compete in the social event scene.
11. What does your gut say? If you are accepting a board seat, remember, ethics matter, no matter what. If your gut is telling you something is not right, ask more questions.
Sara Selber Speer is president of The Project Management Team, a Houston-based consultancy that helps organizations improve efficiency and business development processes. A version of this post originally appeared on LinkedIn.
© 2016 Generational Equity, LLC. All Rights Reserved.