A board of directors is one of the most important groups in a non-profit organization. These elected individuals represent the interest of the community and make decisions that impact the overall organization. Even though there’s no legal requirement for nonprofits to have a BoD, most choose to have one for operational efficiency.
If you’ve ever wondered what a board does, here’s a brief guide detailing the main functions and roles in a respective company.
Involved In Recruitment and Compensation Decisions of Executives
One of the main functions of a board of directors is to find managers and executives to help them run the day-to-day operations of the business. The board plays an important role in supervision, recruitment, and deciding the compensation for these executives. Furthermore, they also play a crucial role in evaluating the performance of these managers.
Devise A Governance System
Another important function of a board of directors is to develop an efficient
governance system for the organization. Even though the governance article helps the organization with the framework, the board must develop a comprehensive policy for effective governance.
The policy identifies the roles and rules of the group and how it will function to run the business effectively. The policies developed should be implemented organization-wide and shouldn’t be limited to a group of people.
Provide Leadership to The Organization
The board of directors are entrusted to provide direction and leadership to the organization. Their governance system helps them carry out their day-to-day operations and maintain key relationships with the community.
Their interactions and relationship with the CEO are key as it helps to devise a leadership plan for the organization. Even though the board convenes once a month or even less, they are continuously kept in the loop about important occurrences and are involved in all major decisions.
Protect The Shareholders’ Interest
As mentioned, a board of directors are entrusted to govern the organization. Therefore, they have a fiduciary duty to protect the interest of the nonprofit at all times. Furthermore, they must also protect the organization’s assets and all the donations that donors have made in the organization.
They should make decisions focused on the sustainability and vision of the welfare organization and not ones that harm the reputation of the charity. Moreover, they are also expected to take care of all the organization’s human capital, equipment, and facilities.
Starting up a nonprofit organization can be quite difficult. You need to comply with various rules and regulations and handle all the tax affairs of your newly established organization. Therefore, it is always recommended to get the help of an expert who can guide you in your nonprofit formation and handle all your tax affairs.
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