The Handbook of Board Governance, 2nd Edition

51The Best of Boards, the Worst of Boards: The Not-for-Profit Experience

Adam Quinton

Board Member, Adjunct Professor, and Start-Up Investor/Advisor

Introduction

The not-for-profit (NFP) sector in the United States is, most people sense, a substantial part of the U.S. economic and social structure. Arguably many do not know that the sector is, collectively, a giant! Consider the following:¹

• There are 1.6 million 501(c) organizations in the United States.
• They employ over 10 percent of the total workforce.
• 25 percent of the U.S. population volunteer time to NFPs.
• NFPs are the beneficiaries of approximately $400 billion of annual giving.

With this scale and reach into the lives (and wallets) of so many citizens the good governance of NFPs is crucial to ensuring their ongoing impact and public support.

The legal construct and hence roles and responsibilities of the board of a NFP bear many similarities to those of their for-profit cousins, including the duties of care and loyalty. However, there are also significant differences. Most important is the overarching importance of the board's fiduciary duty since NFPs are custodians of contributed funds. In the United States, regulatory oversight is primarily conducted at the state level by the charities offices of the various states' attorney generals either on their own (27 jurisdictions) or with another state agency (in 24 others).²

Day-to-day decision making is the responsibility of the staff. The role of the NFP board is to ...