Wednesday, August 13, 2014

Fiduciary to Whom?

A chair of a nonprofit recently described the board's "fiduciary responsibility to our organization."

But does a nonprofit board have a legal duty to act solely in the interests of the organization? Wouldn't we be better served if a nonprofit board viewed its primary responsibility to be to the charitable purpose of the organization, not the organization itself?

One of the biggest challenges facing the nonprofit sector is accountability. In the business marketplace ineffective organizations will (eventually) be abandoned by their customers. In the nonprofit marketplace, there technically is nothing to stop funders from funding an ineffective organization forever.

I expect it is exceptionally rare for a nonprofit to be sustained by board members despite long-term failure. But as Mario Morino points out in his book Leap of Reason (and the invaluable web site, the percentage of high performing nonprofits is relatively small.

Mario says this is the case because nonprofit leaders and their boards fail to ask the question all good businesses ask before they launch an initiative, "To what end?" The answer should be found somewhere in the charitable purpose of the organization; it should not be found in the interests of the organization itself.

No comments:

Post a Comment