Module 1: The Nonprofit Board of Directors |
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Following is an excerpt from Nonprofit-KnowHow's The Nonprofit Board of Directors. which explains what you need to know about nonprofit boards and what makes them successful. This module covers the history of nonprofits in the US, how the nonprofit board differs from the for profit board, the board's essential responsibilities, key pitfalls to watch for, and so much more....
Introduction |
The nonprofit board is one of the most crucial assets of any nonprofit organization. Too often, though, the nonprofit board is underutilized, or worse, simply tolerated. The root of a nonprofit board not functioning at its peak potential is generally a fundamental lack of understanding about its role – how it is the same and how it differs from the for profit board, and how the board and staff can best interface in running the nonprofit organization.
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US Tax Code and the Nonprofit Organization
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Frances Wisebart Jacobs, founder of United Way
In the early days of United States tax code, developing in the late 19th and early 20th centuries, the distinction was made between those endeavors that benefitted the public good and those that benefitted their owners. This difference was fundamental to the discussion over what kinds of organizations would be considered exempt from the, at the time, new income tax.
What’s important about this is not the vagaries of tax code development, but rather how the many groups working to benefit the public good became classified as “nonprofits.” This unfortunate moniker has been the source of confusion and misconceptions about nonprofit organizations – some of which include that a nonprofit organization may not make money, may not pay its employees, and must appear a bit raggedy to classify. None of these, of course, is true. To be clear, tax exemption of various kinds did fuel the proliferation of nonprofit organizations, creating a clear and highly productive third sector in this country that operates between government and private enterprise. However, long before there was a tax code giving exemptions, there were people working for the social good. In fact, many of this country’s well-known nonprofit organizations have their roots in the philanthropic and community welfare efforts of people more than 100 years ago. For example, Boys and Girls Clubs started in 1860, the Metropolitan Art Museum in 1870, and United Way in 1887. All of these predate the establishment of the nonprofit organization. The social impulse to congregate for a purpose to benefit the common good, the achievement of which is more important than pecuniary gain, is as old as humanity itself. And this impulse is at the heart of all of what are commonly referred to as “nonprofit” organizations. While a better appellation for these businesses might be “for good organizations” or “social profit corporations,” for the time being, the name “nonprofit organization” is what is most commonly used. * * * * * * * * * |
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