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THE NEW STANDARDS FOR NON-PROFIT BOARDS
Article by Herb
Rubenstein
President and Founder, Herb Rubenstein Consulting
Introduction
It is often
said that we learn from failure and mistakes. However, the question
remains, "What do we learn?” If all we learn is not to
make that mistake again, that is not a really powerful “learning.”
The way we ultimately learn from mistakes and failures is that we
set new standards as a result of analyzing mistakes and failures.
Boards of Directors, in 2003, obviously need new standards.
Current
Failures – New Standards
The failures
of Enron, Anderson and mistakes of United Way, MicroStrategy, The
Washington Teachers Union, Illico, Tyco and other modern day business
and non-profit tragedies have much to teach us. One lesson is clear.
In each one of these situations a big part of the problem was a
failing of the Board of Directors. However, since in 2000 there
was very little written on standards for boards of directors, those
boards may not have realized prior to their mistakes that they were
on the road to self-destruction. This article sets a new tone in
the literature on boards of directors. Rather than discuss board
of directors’ philosophy (Carver, et. al.), discuss best practices
(Anderson, et. al.) for board, this article creates a new standard
for boards of directors. There is much detailed work behind each
of the twelve elements of the Board of Directors Standard and a
thorough evaluation framework for Boards of Directors that formalizes
this standard. However, this article is designed to give Boards
of Directors of businesses and non-profits a new, clear standard,
a north star, if you will, to guide their creation and operation.
Standard
Number 1
Every business
and non-profit organization shall have a Board of Directors with
written role descriptions for each board position and for the board
as a whole and shall set and ensure compliance with all key standards
which define the organization’s identity.
Standard
Number 2
Every Board
of Directors shall have an election/selection process that guarantees
that every skill, competency and aspect of human capital that the
business or non-profit organization needs to be successful is acquired
at the Board level for the organization.
Standard
Number 3
Boards of Directors
shall on a regular basis (no less than annually) evaluate their
operations and contribution to the organization and replace board
members who are not performing their jobs as board members at an
outstanding level.
Standard
Number 4
Boards of Directors
must be supported by organizational processes that give board members
timely, accurate information and clear and cogent analysis so that
the board can make intelligent decisions free of undue influence
of self-interested individuals or groups within the organization.
Standard
Number 5
Boards of Directors,
as a group, shall make at least ten decisions and take 10 distinct
actions that contribute significantly to the improving the quality
of the organization and the ultimate success of the organization
each year.
Standard
Number 6
Each board member
shall originate or sponsor at least one major action or idea each
quarter that contributes significantly to improving the quality
of the organization and the ultimate success of the organization.
Standard
Number 7
Every board
shall be allocated sufficient resources, including financial resources,
access to reach, independent advisors and __, in order to perform
their job admirably.
Standard
Number 8
Every board
member shall take forceful action immediately to discover, eliminate
and permanently remove any lack of integrity, ethical violation
or failure by the organization to follow the laws and highest ethical
standards of the society (ies) in which they operate.
Standard
Number 9
Every Board
of Directors shall guarantee that the historical and contemporary
financial books and records of the organization are accurate, and
kept in accordance with the highest accounting standards. Further,
every Board of Directors shall guarantee that the financial projections
of the organization are well informed and serve as a excellent roadmap
for the future of the organization.
Standard
Number 10
Every Board
of Director shall be responsible for providing input into and approving
an annually updated business plan and annual budget, monitoring
financial and programmatic performance of the organization and providing
input into and approving long-range (3-10 years) strategic plans
for the organization.
Standard
Number 11
Every board
member shall take at least one action monthly to enhance the reputation
of the organization and every Board of Directors shall develop an
annual plan to improve the reputation of the organization in the
community.
Standard
Number 12
Every Board
of Directors shall be actively involved in bringing substantial
resources to the organization and in creating, supporting and sustaining
strategic alliances for the organization. Each board member shall
take at least one successful action quarterly that brings in new
or additional resources or creates a new strategic alliance for
the organization.
Conclusion
This is the
new standard for Boards of Directors. This new standard applies
equally to boards of directors large and small for-profit companies,
non-profit organizations and applies equally to large boards and
small boards. This standard will evolve and become more informed
over time. The point of this article is to make a clear statement
that a simple standard can and must be created that applies universally
to all Boards of Directors. We welcome your comments and suggestions
for refinements and improvements in this new standard for Boards
of Directors.
Biographical
Information
Herb Rubenstein
is an attorney and the CEO of Herb Rubenstein Consulting, a leadership
and management consulting firm. He is co-author of Breakthrough,
Inc. – High Growth Strategies for Entrepreneurial Organizations
(Prentice Hall/Financial Times, 1999). He also serves as an Adjunct
Professor of Entrepreneurism at George Mason University, is a founding
director of the Association of Professional Futurists, and is the
author of numerous articles on futures studies, leadership and strategic
planning. He has his law degree from Georgetown University, his
Master of Public Affairs from the LBJ School of Public Affairs,
a graduate degree in sociology from the University of Bristol in
Bristol, England and was a Phi Beta Kappa/Omicron Delta Kappa graduate
from Washington and Lee University in 1974. His email address is
herb@herbrubenstein.com
and he can be reached at (301) 718-4200 in Bethesda, Maryland or
(202) 236-7626 in Washington, D.C.
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