I was training a new set of board members for a client recently and the question that I always hope will get asked came up. One of the trainees said, “I think we really need to stand up for our executive director and take some of the heat off of them.” These are words that will warm the heart of any executive director. Why I like this particular question is that it reveals the confusion that members have about board responsibilities and who they were really established to protect. Is it wrong that a board wants to “take the heat off of their executive director?” Probably not. But many times I have seen that sentiment grow into a misunderstanding that protecting the executive is their primary duty. It is informative to ask what is similar about the two kinds of corporations that are required to have boards of directors in the U.S. Publicly held for-profit and nonprofit organizations are both required to have boards. What could be similar about them? I submit that they both have investors and that the board responsibilities involve managing someone else’s money. Investors entrust their money to publicly traded companies on the stock exchange and the return that they seek is monetary. Donors entrust their money to nonprofits and the return they seek is some value that they want to see created or maintained in their community or world. Recent scandals and the external regulation that quickly followed (e.g. Sarbanes-Oxley and Dodd-Frank) make it clear that it is the investors who were harmed and should have been protected by the boards of directors that were entrusted with the oversight of their investments. Through these external regulations, the government essentially says, “If you won’t protect your investors, we will.” So is it wrong to “take the heat” for your executive director? No, as long as you understand that you, the board, were established first and foremost to protect your investors/donors.
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