A guide to joining your first NFP board

Before you say yes to your first not-for-profit board, find out what you need to know, the questions you should ask and what can happen if governance goes wrong.

Some see a seat on an NFP board as the first step to a boardroom career. Experienced directors may be keen to “give back”, while others are drawn to a particular cause as a result of personal experience with, for example, disability or chronic illness. 

Whatever your motivation, the day you join your first NFP board, you become legally part of the leadership team, exposed to the directors’ liabilities and responsibilities. These risks are not to be taken lightly, as Steven Bowman FAICD, managing director of Conscious Governance, explains.

Due diligence 

Never accept a board seat without sighting the paperwork, clarifying expectations and being satisfied with the governance processes. Enthusiasm is important, but due diligence protects both you and the organisation.

The conversations you have before your appointment can provide useful additional information. Asking the right questions of the chair and CEO will often reveal more about the organisation than polished documents.  

Questions to ask the chair

• What about this organisation keeps you awake at night?

• How do you and the board handle serious disagreement?

• What do you expect of me in the first 12 months?

Questions to ask the CEO

• How do you want the board to add value beyond compliance?

• What would success look like if I joined and did my job well? 

You should also ask both about how their relationship works together.

Alignment to the cause

If the cause, culture or purpose don’t sit well with you, you will struggle to contribute constructively over time. That said, if your primary goal is to build boardroom capability, then a short, clearly-defined mentoring role, or a role on an advisory board in a reputable organisation can be a valid stepping-stone. But that is only after you’ve checked that the right governance standards, induction support and mentoring are in place. 

Insurance and risk

Insurance can provide financial protection for defence costs and certain settlements. However, it does not remove your legal duties. Directors and Officers (D&O) insurance may not even be a must-have in your particular NFP. However, a strong culture of risk management and good governance is always essential. Examine the risk management processes to satisfy yourself that these protections are in place.

Pay and expenses

Remuneration practices vary. Many NFP directors are volunteers, but some large charities, social enterprises or specialist boards pay sitting fees or for specific roles — for example, chair or treasurer. Nearly all will reimburse reasonable expenses. The position description or constitution should clearly state whether a role is paid and this should align with  sector norms and conflict-of-interest rules. 

The price of poor governance

Poor governance can leave directors personally exposed. A regulatory investigation or third-party claim can generate legal defence costs that, without appropriate insurance, fall on the organisation. In extreme circumstances, they will even threaten the organisation’s viability. Governance failures such as poor financial oversight, safeguarding lapses or unmanaged conflicts can trigger loss of funding, regulator action and a rapid decline in stakeholder trust, possibly leading to insolvency or a forced change in leadership.

Time to reflect

You’re satisfied with your due diligence and have been offered the role. Now it’s time to ask yourself the hard questions. If you struggle to answer any of these with a clear “yes”, think carefully. It is better to decline a board position than to join and underperform or be forced out later. 

• Why do I want this role — purpose, skills development, reputation, a network — and is this the right way to achieve that ambition?
• Do I honestly believe in this organisation’s vision and methods?
• Can I commit the time, mental energy and emotional bandwidth required? 
• Am I willing and able to be held to high standards of conduct and to declare/resolve conflicts of interest?
• Am I comfortable being jointly responsible for the organisation’s decisions, even those I personally disagree with?
• Do I have the relevant skills, and will I accept a mentoring/onboarding process if I don’t?

Due diligence checklist for your first NFP board

Governance documents

• Constitution / Rules of Association
• Board Charter, Code of Conduct, role description for directors

Strategic context

• A strategic plan for the next three to five years
• Board reports against the strategic plan
• The top five risks and current mitigation plans

Financial health

• Audited financials for the past two to three years
• The current budget and funding model

Board operations

• Recent board and committee minutes
• Board evaluation results if available
• The induction and mentoring program for new directors

Legal and regulatory

• The legal structure and regulator status of the organisation — charity, company limited by guarantee, incorporated association 
• Any notices, investigations, disputes, regulator correspondence or outstanding legal issues

Insurance

• Certificates of currency for D&O, public liability, professional indemnity
• Details of exclusions, retroactive coverage and run-off provisions