Board Director Role

 

Overview.

 

The Board of Directors (“Board”) is the governing body of a non-profit organization. As such, it has overall responsibility for the organization’s mission, governance, assets, and operation. The Board is required to facilitate the organization’s mission through meaningful oversight of operations and guidance as to strategy and policy in a way that ensures integrity and effective management but does so without requiring undue or counterproductive Board involvement in the organization’s day-to-day activities.

The Board is responsible for directing the affairs of the organization in accordance with its mission. In practice, the Board delegates responsibility for managing the day-to-day activities of the organization to managers or staff; however, fiduciary duties cannot be delegated and, therefore, the Board retains oversight responsibility for matters that have been delegated. Board service should not be viewed simply as an honor – the oversight responsibilities are real and failure to discharge these legal duties can have unwelcome consequences for the organization and its Board members.

CPCNH’s By-Laws set forth, in general terms, that: “[t]he affairs, activities, and property of CPCNH shall be managed, directed, and controlled by, and its power exercised by and vested in [the Board], which shall have all powers enumerated in the Articles of Agreement, the laws of the State of New Hampshire as amended from time to time, and all other powers conferred by these By-Laws and the Joint Powers Agreement.”

 

Specific functions of the Board of Directors.

 

The primary functions of the CPCNH Board include:

 

• Select, monitor, evaluate, and compensate, and – if necessary – replace the Chief Executive Officer (the “CEO”), and develop and approve succession plans with respect to senior executives of the organization.

• Define and reevaluate from time to time the long-term strategy by which the organization fulfills its mission and monitoring the performance of the organization in implementing the strategy.

• Review and approve material capital allocations and expenditures and major transactions.

• Create and/or approve budgets, financial plans and financial statements; monitor and ensure the integrity of the organization’s financial reporting processes, internal control systems and auditing; hire any independent auditor(s) and assure itself of the independence of the auditing process.

• Balance constituency interests in a manner that is consistent with CPCNH’s mission.

• Understand the organization’s risk profile and reviewing and oversee the organization's management of risks.

• Ensure compliance with all applicable laws, regulations, policies, governing agreements, and ethical standards of the organization.

• Contribute to the continued existence of an effective and diverse composition of the Board and its committees, and to the determination of CPCNH’s governance practices.

 

Important Board Considerations.

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The Board should look for and implement oversight “best practices” that embody practical solutions for CPCNH. The goal of such “best practices" is to promote good governance, active oversight, and objective and informed judgment by the Board. This includes thoughtful selection and high-level monitoring of the CEO and senior staff, retention of outside experts and consultants as may be appropriate, ensuring effective Board committee roles and operations, implementation of a sensible and productive organizational structure, and reliable means to oversee financial activities and corporate assets.

The mission is the reason the organization exists and has been granted legal status as a non-profit. Hence, the Board needs to understand CPCNH’s mission, develop (together with management) a strategy for carrying out that mission, and monitor and assess management’s efforts to carry out that strategy in line with the mission.
The roles of the Board and of management are distinct. The Board’s role is one of oversight, while the role of management is to carry out the day-to-day activities of the organization. Board involvement in operating activities can lead to tensions between the Board and management/staff. Therefore, the Board should consider the extent to which their involvement, if any, in operating - as opposed to strategic – activities could benefit or hinder the ability of management and the organization to perform.

Active Board oversight requires that management performance be evaluated against the specific operational goals that the Board has determined will further the agreed strategy in line with CPCNH’s mission. The Board should then define with management the specific benchmarks (both long-term and short-term) that would indicate successful performance and monitor results achieved by management against those benchmarks.

 

Overseeing CPCNH’s finances is a critical part of the Board’s role. Fulfilling this oversight responsibility begins with ensuring that the organization has an effective Chief Financial Officer or other equivalent officer or entity. The Board is also responsible for monitoring and ensuring the integrity of CPCNH’s financial reporting processes (including record-keeping), internal control systems and auditing, and the hiring of independent auditors as may be necessary or appropriate.

An effective Board requires accurate, relevant, useful, and timely information relating to the organization. The Board should identify what information it needs and work with management and advisors to ensure that it obtains such information.

 

Legal Duties of Directors.

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Non-profit Board members have the legal responsibility to meet the duty of care, the duty of loyalty, and the duty of obedience. Under well-established principles of non-profit corporation law, a Board member must meet certain standards of conduct and attention in carrying out their responsibilities to the organization. These duties of individual Board members are discussed further, in Section 1.2 below.

New Hampshire law provides that no unpaid director of a charitable organization may be held liable for personal injuries or property damage for acts committed in good faith and in furtherance of the organization's charitable goals (RSA 508:16). That immunity, however, is not absolute: directors may still be liable for intentional, reckless, or grossly negligent conduct.

CPCNH’s Articles of Agreement provide that: “There shall be no personal liability of a director, an officer, or both, to the corporation for monetary damages for breach of fiduciary duty as a director, an officer, or both, except with respect to: (1) Any breach of the director’s or officer’s duty of loyalty to the corporation; (2) Acts or omissions which are not in good faith or which involve intentional misconduct or a knowing violation of law; [or] (3) Any transaction from which the director, officer, or both, derived an improper personal benefit.”

 

Board Independence.

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The CPCNH Board should be organized in a manner that encourages directors to be appropriately engaged and to form and express objective judgments about certain issues, such as: (a) evaluation of management performance, compensation, and succession planning; (b) approving CPCNH’s financial objectives and major plans, strategies, and actions; (c) oversight of audit, accounting, financial reporting, and risk management; (d) review and approval of conflicts of interest and related party transactions; and (e) determination of Board composition and governance processes.

In furtherance of such independent, objective judgment and oversight, the Board should include a number of members who have no material business relationships with CPCNH, and also those who have no material business or family relationships to senior management and/or key constituents (including to other Board members).