IL Estate Planning Blog

Tuesday, May 22, 2018

What to Consider Before Joining a Nonprofit Board

What to Consider Before Joining a Nonprofit Board

The position can be rewarding. But it also can be a lot of work and expensive

Dec. 10, 2017 10:10 p.m. ET
It may feel like an honor to be invited to join the board of a nonprofit. But don’t let ego cloud your decision.
While being a board member can be rewarding—especially if you’re passionate about the charity—it’s important for potential members to first understand what’s expected of them.
Don’t be afraid to ask questions before committing, nonprofit experts say. It’s crucial to make sure you’re comfortable with the organization’s mission, governance and finances before you sign on.
Here are five key questions to ask:
1. What’s the financial commitment?
Unlike directors of for-profit companies, nonprofit board members are typically called on to make financial contributions.
“Everyone on the board should contribute, so make sure you’re aligned about the amount,” says Nicole Sebastian, director, U.S., UBS Optimus Foundation. 
For example, the minimum contribution for a certain board may be $100,000 whereas you were planning to give $25,000, says Ms. Sebastian, who is also senior strategist-family and philanthropy advisory at UBS Americas.
There also may be fundraising expectations, she says. If you have a prominent position in a corporation, for example, the group may assume that you have the ability to secure donations from your company, or that you have wealthy friends whom you will ask for help, Ms. Sebastian adds.
Some organizations have a “give or get” number, which means a target for each board member to hit in terms of direct contributions or money raised through friends. Ask if an introduction to other donors will count to your overall give-or-get number, says Laura Fredricks, a fundraising consultant in New York.
Ask if other board members will know how much you give, and, if your organization hosts a gala, whether your contribution for the gala counts toward your yearly gift, Ms. Fredricks says.
If you have an expertise, the board also may be hoping to enlist those skills. Make sure you’re on the same page as to what your talents really are, and what demands will be placed on your time.
2. What’s the duration of my term?
Sometimes people think they’ll be on a board for a year, but the commitment can be much longer.
Karen Altfest, principal adviser at Altfest Personal Wealth Management, says at the end of her first year on a board, she was surprised to find out she was expected to stay on for another year. “No one asked if I was available,” she says.
Ms. Altfest enjoyed the work and ultimately agreed to renew several times. 
She tells clients to make sure they are clear on the nonprofits’ expectations before they sign on to prevent any misunderstandings or last-minute requests. 
3. How active are your board members?
It’s important to know what kinds of jobs you will be expected to perform, says Ms. Altfest. Knowing such details will help you gauge your level of interest in the work and see if you have enough time to devote to it. 
For example, will you be assigned to a committee or can you select your own projects? In addition, will you have a voice or will you be rubber stamping others’ ideas?
“It can be uncomfortable when you join a board and find yourself seated on a committee that holds no interest for you,” she says.
The longer you remain silent, the more difficult it is to change later on, she says. 
4. Does the organization have proper liability insurance coverage?
In the past 10 years, 63% of nonprofits experienced a directors and officers liability claim, according to a 2012 Towers Watson survey.
While not all claims have merit, the cost to defend the claims can often be more than the actual damages, says Steve Wittenberg, director, legacy and philanthropy at SEI Private Wealth Management.
It’s particularly important for board members with significant assets to make sure the nonprofit has a Directors and Officers insurance policy, he says. This policy should protect the assets of the organization, the assets of its directors and officers and those of spouses, domestic partners and estates, if a director or officer has died, he says.
If the D&O policy is inadequate, consider personal umbrella coverage, Mr. Wittenberg says.
5. Where is the board working well and where does it need to improve?
Have a clear understanding of any problem areas before you join, says Matthew Wesley, director at Merrill Lynch Private Banking and Investment Group.
For example, a Merrill Lynch client got recruited to a board but found out later that the board was indecisive. 
Because she was a “go-getter,” she found the board’s lack of direction very annoying, Mr. Wesley says.
Mr. Wesley advises finding out if the decision-making process of the board is one that fits your own approach and personality. Attend a meeting, he suggests.
Understand the strengths and weakness of the executive director and professional staff too, he says. “Ask yourself if the weaknesses in the leadership of the organization are likely to generate drama in your life, and if the strengths will support your sense of enjoyment,” he says. 
Speaking to a few people in the organization can help you determine if it’s the right fit.

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