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Governance as leadership Reframing the work of noprofit boards - Ñhait R.

Chait R. , Teylor B.E. Governance as leadership Reframing the work of noprofit boards - Wiley publishing , 2005. - 226 p.
ISBN 0-471-68420-1
Download (direct link): governanceasleadership2005.pdf
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Whether focused primarily on trustees’ qualities or skills (or some combination), nonprofits generally acquire, rather than develop, these assets—almost like corporations that expand by takeovers rather than by product development, or universities that “steal” star professors from the competition rather than promote from within. On the whole, boards harvest, rather than cultivate, trustees with attractive traits and talents. Second, these assets appreciate modestly, if at all.An honest, polite trustee does not become more honest and more polite.An able lawyer or banker does not become markedly more proficient. And certainly, a male or female, or black or white trustee does not become more so over time. These trustee assets resemble an investment grade bond—a reliable, steady performer with virtually guaranteed dividends, but without significant upside potential. We know what we have, and we know, more or less, what this will yield.
WORKING CAPITAL THAT MAKES GOVERNANCE WORK 139
The analogy to financial markets has relevance because trustees can be reframed as a source of multiple forms of capital, and not merely as pro bono consultants to the organization. A board contributes various types of capital, and then invests those resources in the governance of the institution, ideally at a favorable rate of return to the organization. In the best cases, the capital represented by the board appreciates substantially over time.The most valuable boards contribute and invest more capital from more sources in more forms than other boards. The boards with the most capital provide the organization with a comparative edge, the ability to “outgovern” the competition, just as the most astute and industrious staff can outsmart and outwork the com-petition.The emphasis on capital underscores one other consideration: to generate value capital must be deployed. Money under the mattress, or boards under anesthesia, are idle capital. For the purposes of governance as leadership, trustees must be working capital. (See Exhibit 7.1, which calculates the monetary value of a board’s time when we convert voluntarism into real dollars.)
When boards are conceptualized as a source of capital, money leaps to mind, and we do not underestimate the importance of financial capital. Nonprofit organizations cannot do much without money, and much of this money flows directly or indirectly from trustees. However, trustee largesse and excellent governance are not synonymous, nor does institutional wealth negate the need for an effective board. Even the most affluent nonprofits require governance.
Board members and senior staff must learn to recognize, appreciate, and capture the value of four no less crucial forms of capital, beyond money, that trustees can provide.These are intellectual, reputational, political, and social capital (see Exhibit 7.2). Each form of capital can be generated by trustees and
140 GOVERNANCE AS LEADERSHIP
EXHIBIT 7.1 THE DOLLAR VALUE OF THE board’s TIME
Consider the board of a college, museum, school, symphony orchestra, hospital, or regional or national social service agency. There are perhaps 30 members on the board which typically meets five times a year for eight hours at a time. Now do the math.
Assume that the trustees, mostly successful professionals or executives, earn on average $200,000 a year. At that rate, the board “burns” about $120,000 a year. Many nonprofit boards have more members and meet more often, especially in committees, or for longer periods of time. In these cases, the “billable hours” can easily exceed $150,000 annually. On elite boards, where the average annual income might be twice as much, the board’s contributed services could easily exceed $300,000. If the calculation were based on the trustees’ net worth, the dollar value of the board’s time would soar.
For that amount of money over the course of a year, trustees would expect a lot from lawyers, accountants, consultants, or other professionals the organization retained. In this sense, most nonprofit organizations leave a lot of money on the boardroom table. As fiduciaries, trustees strive to maximize the rate of return to the organization on facilities, endowment, personnel, technology, and other institutional assets. Ironically, few calibrate a rate of return on the board or even ask whether trustees represent an underutilized asset.
invested on the institution’s behalf. And while every nonprofit board contributes some capital to the organization, sometimes unconsciously or passively (for example, the very existence of a board generates some legitimacy) and sometimes through gratis technical expertise, the strongest boards generate more capital more actively, purposefully, and productively.
The assets of a highly capitalized board should be balanced and diversified. Like a mixed-asset allocation model, the multiple forms of capital offer a template to analyze whether the board
EXHIBIT 7.2 THE FOUR FORMS OF BOARD CAPITAL

Form of Capital Resource Optimized Traditional Use Enhanced Value
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