The Board of Directors
“The Board of Directors plays a pertinent role in determining a company’s social performance” (Bai, 2013, p. 174).
In this article, a study was conducted that concludes evidence that board characteristics such as board independence, diversity, number of women on the board, stock ownership (if applicable) and whether or not board members are elected, are all directly associated with that company’s social performance (Bai, 2013). In this study both for-profit and not-for-profit businesses were examined. Since I am in the beginning stages of starting my not-for-profit, I was curious to see what the differences were in structuring a board (for-profit versus not-for-profit). I was not surprised to find that in for-profit organizations, executives are provided with strong incentives to focus on short-term financial performance and tend to seek opportunities to maximize personal gain. This makes sense, as these organizations and their board members are looking for the easiest ways to make the most amount of money in the shortest amount of time. In the non-profit organizations, enhancing social performance was usually the key mission for the board.
Just as I am hoping to set up within my board, the not-for-profit boards in this study, have a respectable interface between the organization they were serving on and their communities, and in turn, exchanging information and monitoring executives to serve social needs. The article then goes on to discuss more differences between for-profit and not-for-profit boards such as compensation, perks and benefits, stock-holding, and how government officials and diversity on a board can hurt or help an organization. Overall, the article was packed full of useful information and even a great chart that can be referred back to for statistical information.
As I think about the types of individuals that I would like to have on my board; diversity, experience and innovation are the three characteristics that stand out to me the most. Since my non-profit is small, I could start out with a board that had only five or seven members. Currently it only has three. When you are starting up any type of business that requires a board, be sure to choose board members that are prepared to work hard and potentially meet often. Start-ups are not always easy and require a lot of creative thinking, branding and marking to get your mission and cause out into the public.
If you have started your own company, small business or non-profit, how did you select the members that you wanted to serve on your board? Did gender, race, and/or professional background come into play at all? If so, what was your reasoning?
Sooner than later,
The Tiny Professional