Board Cafe: Nonprofit and Corporate Boards: Same or Different?

Board Cafe

Nonprofit and Corporate Boards: Same or Different?

By Betsy Rosenblatt

Nonprofits and for-profits have more opportunity to learn from each other than either might traditionally think, and both seem to be becoming more like the other. Nonprofit boards have the mission of their organizations in mind when they do their work, while for-profit boards focus on the bottom line: ensuring that the company is doing its best to make money. What leaders in both sectors have in common, however, are some of the current motivations to change the way the board works, including its composition.

According to Roger Raber of the National Association of Corporate Directors (NACD), and Judith O'Connor, of the National Center for Nonprofit Boards (NCNB), both nonprofits and for-profits face the same key challenges: constantly changing technology, the growth of e-commerce, and an increased emphasis when recruiting board members on core personal and professional competencies.

Nonprofit boards are made up of unpaid volunteers. The board chair and executive director (top staff position) are typically separate people and few, if any, staff are board members. Many boards emphasize fund-raising and their diverse backgrounds lead to broader ownership and perhaps greater stakeholder activism.

In contrast, for-profit board members are paid. Often the board chair and CEO are the same person, although NACD recently has recommended that they be different. Company insiders (top staff managers) sit on corporate boards, although NACD now recommends that a majority of board members be outsiders with no ties to management. Corporate boards have no fund-raising responsibility, although they may represent financial interests that have brought capital funds to the firm.

However, Roger Raber notes, shareholders, customers, and employees are beginning to demand greater inclusiveness on corporate boards. Similarly, nonprofit boards are increasingly recruiting professionals and individuals with successful track records (of all types) to their boards. Both nonprofits and for-profits are striving to get away from the old-fashioned inner circle method of board recruitment, where current board members ask their friends, family, and associates. Boards are also trying to leave tokenism in the past, and move from inviting one minority, or woman, or young person, or constituent to serve on the board - expecting that person to serve as the voice of an entire population - toward genuine inclusiveness that brings a wide array of perspectives into the boardroom while maintaining a threshold for talent, skill, and expertise that undergirds other selection criteria.

Both for-profit and nonprofit boards are putting more emphasis on strategic thinking as a capability in board members and a priority of the board. At least some members of any board must come in with financial literacy, or be willing to obtain it. They must have industry knowledge and expertise to bring to the table, whether airline management (for an airline board) or nonprofit human service management (for a human service organization).

Nonprofits and for-profits exist in the same universe. Both kinds of board would do well to seek members from the other side to balance out their vision.

Original publication date: 12/21/2000

© 2000 CompassPoint Nonprofit Services/National Center for Nonprofit Boards