I sometimes say that my beliefs about nonprofit governance span the gamut from very traditional to highly non-traditional. (There are also quite a few issues that I do not have strong opinions on.) For example, one of the “out of the mainstream” views I hold is that term limits for board members often do more harm than good. I have come to believe that they are at best a crude and slightly effective way of dealing with the issue of “dead wood” on nonprofit boards – and issue than I think can be dealt with much more effectively in other ways. However, as far as I can tell, most people who have given thought to issues of nonprofit governance believe the opposite. (I explain my rationale and alternative approaches in chapter 12 of my book, Changing the World Without Losing Your Mind).
Another of my nontraditional views is that setting minimum annual donation levels for board members is usually counterproductive. The argument for this policy, as far as I can tell, rests of the idea that it helps ensure that there are no “free loaders” who don’t contribute financially (because, for example, they volunteer a lot of their time or serve as a spokesperson for the organization in the community and believe that is a sufficient “contribution”). Moreover, such a policy avoids the pitfall of some board members giving a token amount, and it makes it unnecessary, or less necessary, for the CEO or Board Chair to personally solicit each board member every year (thus freeing up some of their time and making what for many is an awkward conversation feel superfluous).
For most boards, I strongly prefer the following approach: making it an explicit part of the board member job description (also known as director responsibilities) that each individual on the board is expected to make a “stretch financial donation in accordance with their means” on an annual basis.
Below I will give my top reasons for preferring this to having minimum giving levels. But the common thread to a number of those arguments relates to this dynamic: many donors and board members feel that professional staff, especially in medium to large sized organizations, undervalue their ability to contribute to the mission in ways other than making monetary donations.
Over the years, dozens if not hundreds of board members have complained to me that the organizations they govern “leave value on the table” by relegating them to doing two things: (1) attending meetings (during which there is often scant room for authentic discussion and debate about the organization’s future and during which few real decisions are actually made) and (2) making financial contributions.
In short, they feel like they are treated like a human “ATM” rather than as a fully committed resource with significant monetary and nonmonetary value to bring to the organization. As a result, I go to great lengths to engage board members in as many ways as possible so as a curate a meaningful experience – which also, by the way, helps ensure that they give as much money as they possibly can, for as long as they can. (I describe one great example of this approach working well in chapter 13.)
With that general notion as an essential piece of background to my philosophy, here are my top reasons why I prefer my approach to the one advocated by most nonprofit governance experts.
1. By setting a minimum quantitative threshold for financial stewardship, but not for other elements of board service (e.g., meeting attendance and preparation, committee participation, being an ambassador for the organization in one’s circles of influence), the organization is implicitly saying that donating is significantly more important than other aspects of board service. (Setting quantitative goals for these other areas is one way to address this, but in practice I think it would be unworkable.)
2. People of limited financial means who have many other things to offer will be unable to meet the minimum donation threshold (unless it is so small as to be meaningless). The result will be either that they won’t join or that they will be granted an “exception” from the policy (which is likely to become highly problematic for reasons that I may explore in detail in a future blog post and which I touch on briefly as part of point #4 below).
3. For one’s wealthy board members, the minimum donation amount is likely to be far below their capability. If that is the case, they may pre-emptively give that minimum amount as a way to forestall any other discussion of their donations in a given year, or in general.
4. Bringing a policy like this in effect years after a board is formed will lead to the temptation to “grandfather” older board members in – meaning that they do not have to meet the new minimum donation threshold. This can, however, be highly problematic for many of the reasons that the “exception” mentioned in #2 above can be – in that it creates two categories of board members with different rules applying.
5. It creates an excuse for CEOs, Executive Directors, Board Chairs and Development (Fund-Raising) Committee Chairs to avoid open and action-oriented discussions with board members about their financial stewardship of the organization – including around what would constitute a “stretch donation” for them each year.
6. It does not take into account that fact that some board members have significant changes in their income and ability to give during the course of their board service – which might make the minimum giving level too high some years and far below their capacity at other times.
7. Most organizations that have minimum donation levels do not have a clear policy or approach for what to do when a director fails to meet the minimum giving level, and as a result do nothing in such cases. This considerably weakens the ability of the policy to achieve its objectives.
8. It helps ensure that most if not all board members come from a similar socio-economic strata of society, which often leads to collective blind spots and poor decision-making.
A common alternative to setting minimum levels for board giving is to say that each board member is responsible for “giving or getting” (meaning, contributing or raising from others) a certain amount of money. But I find this also to be problematic. First, board members who lack their own financial resources often similarly lack easy access to people from whom they can raise significant funds. Even more important, it creates incentives for board members to “appear” to be raising money by exaggerating their relationship with a prospective donor or by insisting that they be involved in cultivating or soliciting a someone in cases where it may not make sense. Ultimately, attributing donations to individual board members can be divisive and/or a waste of time, especially when fund-raising is best thought of as a team sport.
In my mind, it is far better to have an explicit expectation of a “stretch financial gift” each year (based on each director’s means during that year) and to have leaders of the organization speak to each director annually about what that would look like so they make the largest possible gift in the most satisfying way for both the board member and also the organization. It takes time, but it will usually result in more money for the organization and a more unified board, all other things being equal.
In reality, nearly half of the 1.5 million non-profits in the United States (according to a 2007 survey by the terrific organization Board Source that is summarized here) do not require either a minimum donation or any donation at all. However, I suspect that the estimated 28% that do have minimum giving requirements constitute some of the largest and most influential nonprofits, and I believe that many of them would be better served by the policy that I advocate.