The governance structure of your foundation determines who makes decisions, how these decisions are made, and how you and your board will act as stewards of the foundation’s assets. This structure also determines how key stakeholders who do not serve on the board—family members, outside experts, nonprofit practitioners, and the constituencies you serve—can play an important and ongoing role in the life of the foundation.
Kelin Gersick, lead investigator for the National Center's Generations of Giving research project notes that philanthropic families often make the mistake of under-investing in governance. Whether it's due to an intense focus on grantmaking or a desire to keep perceived “overhead” costs low, families often neglect governance issues, limiting their own effectiveness. From your choice of board members to your decisions about how best to train and select future trustees, it is important that you spend sufficient time thinking about your options for effective governance structures.
Family dynamics, the management of philanthropic assets, and effective grantmaking depend very much on a clear, effective system of governance. In fact, NCFP Senior Fellow Alice Buhl recommends creating a governance committee to monitor the structure, leadership, and practice of your foundation, similar to the ways you monitor investments.
Clear policies regarding conflicts of interest and compensation ensure your foundation adheres to the law. Directors’ and officers’ liability insurance protects your board. Guidelines on quorum, meeting agendas, and meeting schedules promote productive practice. Clear, fair policies regarding qualifications for board membership, board member job descriptions, and nomination and removal procedures govern family expectations and ensure that the board has access to the talent and resources it needs to succeed.
Although it may be hard to imagine now, if you plan for your foundation to continue more than one or two generations into the future, there are likely to be many situations in which clear guidelines regarding board structure will make all the difference between a smoothly functioning philanthropic institution, and one where perceptions of unfairness and uncertainty abound. Planning ahead for who will participate on your board, when and for how long, will keep such decisions from becoming personal, and will make transitions easier, will make your governance stronger.
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