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Nonprofit boards are weird

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Re: Nonprofit boards are weird

#51

Post by UIUC_06 »

toast0 wrote: post #42
UIUC_06 wrote: post #40

Earlier quoted context omitted.

An opportunity for me to not hijack the conversation! You brought up for-profit boards! OK, a pet peeve. They don't seem to suffer any consequences, and yet they really should. Let's look at Yahoo [1]. This is not just a story of Yahoo losing a technology race. It's a story of an incompetent board. The race was already over in 2008: > Yahoo had a chance to sell for $44.6 billion in early 2008, when Microsoft made an…

Comparing Microsoft's offer to Verizon's is a smidge unfair, because Verizon didn't buy the whole shebang. I'm having trouble figuring out the numbers, but the Yahoo Japan and Alibaba holdings were worth several billion and proceeds from their sales were distributed to shareholders. Of course, I'm personally sad Microsoft didn't buy Yahoo, because I was sure I'd get a free Xbox if they did. OTOH, I think Microsoft wo…

OK, good point. I recall that their stock holdings were worth quite a bit.

Still, $44B!

Re: Nonprofit boards are weird

#52

Post by caturopath »

compiler-guy wrote: post #26

The assumption that boards aren't engaged seems really strange to me. Of the two nonprofit boards I've been on (one very well functioning, one not so much), both have had highly engaged board members. He also seems to be assuming mid-sized or larger nonprofits. For nonprofits with very few employees, or low budgets, board members often are brought in for their expertise, and their willingness to get in and do the wor…

> He also seems to be assuming mid-sized or larger nonprofits.

I think that's really the kind of org he's trying to talk about, even if he doesn't spell it out as well as he could. Some of these small orgs tend to be more tight-knit and the board is more of a formalism, overlapping in large part with the operations. There are certainly some small orgs that I think you can hold his analysis up to, though.

Mostly paying attention to large nonprofits aligns with his experience founding one of the best-known charity evaluators in the world and then spinning off to co-found a multi-billions-backed grantmaker which is giving out hundreds of millions a year and trying to ramp it up.

Re: Nonprofit boards are weird

#53

Post by snowwrestler »

thaumasiotes wrote: post #41
yardie wrote: post #6

I'm on a few non-profit boards and one of the things I don't see the author mention at all or specifically is the primary directive of the board is the financials. The CEO/Director is in charge of the day to day operations. The board has very little interest in that. A non-profit will have some or most of it's money from donors and those donors want to make sure that donation is being spent effectively. And that is w…

> You can't operate a non-profit the same technique as a for-profit. > A true non-profit has to spend almost every dollar it takes in. Can it spend them on... salaries? Wasn't the New York Stock Exchange a nonprofit organization for quite some time?

Yes it can spend on salaries. In fact this is one of the failure modes of a nonprofit that a board has to watch out for: the staff (especially the executive staff) soaking up all the fundraising with raises.

Nonprofits don’t have investors who are watching their own personal financial returns carefully. The “returns” of a nonprofit are the mission. So the board has to do the work to verify that the money coming in is being used to advance the mission. You have to pay salaries to do that of course… but not overpay.

> Wasn't the New York Stock Exchange a nonprofit organization for quite some time?

Yes and the NFL is a nonprofit today! It exists as a neutral body to organize the league. The individual teams are for-profit.

Re: Nonprofit boards are weird

#54

Post by caturopath »

kayson wrote: post #4

More like "bad nonprofit boards are weird", though there's definitely some truth to - great power, low engagement, unclear responsibility, and zero accountability. But a good board and CEO/ED will address all of these. First and foremost, board members are volunteers. They need to be people who are invested in the organization and its mission, and would be available to help as needed. They're also consultants. The bo…

> Maybe the board I'm on is just a unicorn...

Karnofsky co-founded a very successful charity evaluator 15 years ago then moved on to co-founding and leading a grantmaker that has a budget in the hundreds of millions a year. I doubt any flaws in his analysis come from not seeing enough orgs and hastily judging.

Re: Nonprofit boards are weird

#55

Post by caturopath »

rvba wrote: post #28

If someone is a board member for few non-profits, is it hard to make the jump into for profit companies? If a for profit compaby goes belly up, do the board members suffer any real consequences, apart from perhaps not being invited into other boards?

> If someone is a board member for few non-profits, is it hard to make the jump into for profit companies?

It is hard to get onto big corporate boards, but being on nonprofit boards is a common stepping stone.

Re: Nonprofit boards are weird

#56

Post by hintymad »

> Try to articulate what's so weird about nonprofit boards, fundamentally. I think a lot of it is the combination of great power, unclear responsibility, and ~zero accountability; additionally, I haven't been able to find much in the way of clear, widely accepted statements of what makes a good board member.

This can be by design if what's in the TV show Ozark reflects the reality. Powerful people need a charade to exert their influence while avoid accountability.

Re: Nonprofit boards are weird

#57

Post by frivoal »

The notion that non profit boards are self appointed and answerable to nobody doesn't seem universal. In the model I am familiar with (the French one), non profits typically have broad and open membership, and that membership elects the board. In fact, I find it difficult to find non-profit with self appointed boards to be quite as legitimate. While the board doesn't actually own equity as shareholders would in a for profit, since they are answerable to nobody, they effectively run the organization for their own sake. They might have a charitable agenda, but there isn't much holding them to it.

Re: Nonprofit boards are weird

#58

Post by jessriedel »

frivoal wrote: post #57

The notion that non profit boards are self appointed and answerable to nobody doesn't seem universal. In the model I am familiar with (the French one), non profits typically have broad and open membership, and that membership elects the board. In fact, I find it difficult to find non-profit with self appointed boards to be quite as legitimate. While the board doesn't actually own equity as shareholders would in a for…

Who would be the members of a non-profit that fundraises and awards grants for scientific research? Or a non-profit that runs a food bank?

Re: Nonprofit boards are weird

#59

Post by Cupertino95014 »

UIUC_06 wrote: post #40
rvba wrote: post #28

If someone is a board member for few non-profits, is it hard to make the jump into for profit companies? If a for profit compaby goes belly up, do the board members suffer any real consequences, apart from perhaps not being invited into other boards?

An opportunity for me to not hijack the conversation! You brought up for-profit boards! OK, a pet peeve. They don't seem to suffer any consequences, and yet they really should. Let's look at Yahoo [1]. This is not just a story of Yahoo losing a technology race. It's a story of an incompetent board. The race was already over in 2008: > Yahoo had a chance to sell for $44.6 billion in early 2008, when Microsoft made an…

Another example, harder to pin down, is Hewlett-Packard from pre-Fiorina on. Since they're now three different companies, it would be an exercise to compute valuations (anyone?), but for me the real loss is the HP culture, or "the HP Way" if you will.

HP used to be a proud, if boring, company, the flagship of the Valley. Their people were great to work with. They were ethical. You could spend your whole career there and many people did.

Then they had Fiorina, the diva and drama queen, and then Mark Hurd and more mergers and would-be mergers than you can shake a stick at. There was a public shareholders' meeting at Flint Center because interest was so high. Where was the Board in all this?

Re: Nonprofit boards are weird

#60

Post by nanis »

yardie wrote: post #6

I'm on a few non-profit boards and one of the things I don't see the author mention at all or specifically is the primary directive of the board is the financials. The CEO/Director is in charge of the day to day operations. The board has very little interest in that. A non-profit will have some or most of it's money from donors and those donors want to make sure that donation is being spent effectively. And that is w…

> You can't operate a non-profit the same technique as a for-profit.

Keep in mind that profit maximization subject to a budget constraint and cost minimization subject to an output constraint are equivalent problems. A non-profit ought to minimize the resources expended to achieve a given "mission" or maximize the amount of "mission" it can achieve for a given amount of resources (depends on the circumstance), but achieving those does require it to act like a profit-maximizer.

In reality, non-profits are promotional vehicles and power exercises for people behind them with "mission" being secondary. And, obviously, people who are involved in non-profits do personally profit (reputation, influence, networking -- and in some instances by steering non-profits to spend money on things that benefit their other directly profit making activities).

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