Beth Chase Blog

By Craig Chase
President, Chase Advancement Inc.
Certified Governance Trainer

I want to address an issue that, thankfully, I only occasionally find while teaching and consulting with hundreds of boards of directors.

My concern is that these situations, however infrequently I may have observed them, bring great risk to the board members and rarely, if ever, do they seem to perceive it as being risky at all.

When most board members think of risk or liability or being sued, they are usually worried about mishandling or wasting donated money, messing up with the IRS, breaking some law they are not aware of, medical malpractice law suits or a personnel law suit such as wrongful termination.

But here’s what needs to be understood about these potential threats.  First of all, the vast majority of board members are concerned about and aware of these threats so they protect the organization with effective policies as well as adequate systems so mistakes are greatly reduced.  Then, as a second layer of protection, good insurance is put in place, just in case.  And if all else fails, board members are protected by their organization’s corporate veil from being exposed to a law suit against them personally.

So, if you are a board member, sleep at night.  No need to fear.  If you behave yourselves and follow the rules and the laws and always do what is in the best interest of the organization, you will be fine.

It is rare for board members of non-profits in general to be personally sued and extremely rare.

A RISKY SITUATION

With that said, however, there have been a few times in my career where I have witnessed situations on boards that have greatly concerned me because, in my opinion, board members had high exposure to personal liability.

This dangerous situation is legally defined as:

The domination and control of the corporation by one or two parties to the extent that it becomes their alter-ego

Put another way, any time you have a board of six, eight, twelve people that is being run by one person, or even two people, to the extent that all the other board members pretty much vote the way the “leader” wants, you have a very dangerous set-up.

The actions of such a board are in direct opposition to the very purpose of the board.  When populated with people of various backgrounds, training, experience, occupations, knowledge, etc., who speak their mind at meetings and are willing to listen to other board members share their opinions and perspectives, a well-run board of directors brings a huge amount of safety to a non-profit organization.

Taking that a step further, it is extremely difficult for a well-run, Spirit-led, Christian non-profit board of directors to commit serious mistakes.  If each board member is doing their job, the Holy Spirit will ensure that someone will see the error if there is one.

But much of that safety and the Spirit’s leading goes out the window when one person becomes the “boss” and pretty much makes all the decisions.  Oh sure, the rest of the board votes on things, but the vote is just a rubber stamp on the decision the “boss” has already made.

No matter how wonderful, experienced, gifted, smart, educated, etc. “God’s-gift-to-the-board” may be, this bully is not always going to be right nor have God’s mind on things.  At any given board meeting on any given subject, any given board member may be given God’s insight on an issue before the board.  A well-run, Spirit-lead board understands that and would never allow one person to make all the decisions for the board.

Therefore, allowing someone to dominate and control the board dissolves the built-in safety that the concept of a board affords and can also thwart the Holy Spirit’s ability to lead.

But, it gets worse.

Board members of non-profit corporations enjoy an awesome protection called the Corporate Veil.  The Corporate Veil is a strong, legal wall of separation between the corporation’s debts and obligations and the board members, meaning, board members cannot be sued regarding a debt or obligation that the corporation is unable to satisfy.

Any non-profit board of directors is protected by the Corporate Veil.  That protection is iron-clad unless there is misbehavior by the board and a classic misdeed that could lead to the loss of the Corporate Veil is:

The domination and control of the corporation by one or two parties to the extent that it becomes their alter-ego

In the wake of a court’s decision to Pierce the Corporate Veil, each member of a board, no longer having the protection of the Corporate Veil, would be open to law suit by the entity who brought the original suit.

Although having their corporate veil pierced is not a common occurrence for most pregnancy center boards of directors, avoiding such a disaster should be a high priority for any member of a board.

FOUNDERS AND BOARD CHAIRS  

In working with nonprofit organizations, I have seen two instances where I have either observed this issue occurring or the potential for such.

It has usually either been the situation where the founder of the organization is still very much in charge or a board chairman that misunderstands his/her role.

When it comes to founders, I get it.  I do.  They started this organization, been with it in good times and bad, praying for it without ceasing.  They love it like a child.  No one could ever care for it like they do.  They have nurtured this baby for 30 years and now sit on a board of people that have only been around for one or two years.  They really believe they know better than these newcomers what is best for their baby.

But the reality is usually quite different.  Often, they still run the organization like they did 30 years ago in spite of how different the world is today.  And regardless of how much they may know, they don’t know everything and definitely don’t possess the only hotline to the mind of the Holy Spirit.

Founder or not, they are still putting the organization and each individual board member at risk when they are guilty of domination and control..

And in situations when board chairmen are the concern, I find it almost always stems from a misunderstanding of their job description.

Sometimes I find that they think they are the boss of the board and in other cases they think they are the boss of the whole organization. In either instance, they are in error.

As far as running the organization, that is the role of the executive.  Whether the title is center director, executive director or chief executive officer, that is the leader who oversees the organization.

It is neither wise nor does it work well to have the board chairman run the organization or assume the position of the direct supervisor of the executive.  By far the best practice is for the entire board as one to supervise the executive.  Individual board members should never give directives to the executive—that includes the board chairman.

And when it comes to the role of the board chair on the board, it is best regarded as being that of a servant leader.  The main goal of the chair is to create a positive culture amongst the members and an atmosphere at board meetings where good decisions will flow naturally from the board members.  This means monitoring the meetings to ensure everyone is respected, appreciated and valued.  The chair strikes a balance between making sure everyone is heard while also keeping things moving.

In truth, great board chairmen of well-run boards of directors testify that they rarely find the need to express their own opinions, thoughts and desires because they are that skilled at drawing what they need from their board members.  These humble servant-leader board chairmen understand that it is far more valuable to hear from their board members then that the members hear from them.

Founders and board chairmen are in a position to be used by God to bring immeasurable blessing to a pregnancy center organizations, but when they dominate and control, not only is there no blessing, but the risk meter is vibrating off the wall.

Therefore, before I go any further, I want to be as clear as artic air.  If you are behaving like a board bully, STOP IT!!  You are exposing everyone to great risk.

TAKE ANOTHER LOOK

Now that we are all clear on that, I am going to flip this whole subject on its head for just a moment and view it from another angle.

As tough as this article may seem to be on self-inaugurated “leaders”, “bosses”, and “bullies” that dominate and control and expose everyone to increased risk, they are not the only ones at fault.  They are at most 50% of the problem.

You see, the only people that can be bullied are those that allow themselves to be bullied.  For every board chair or founder guilty of domination and control, there is an entire board allowing it to happen when all the while they have the power, and the duty, to stop it.

When this is happening on a board, we are talking about a problem board, not just a problem individual. We are also talking about a high level of risk that this problem board is exposed to, equally.

I can almost guarantee you that anyone who is on such a problem board, reading this right now, is thinking, “Is it my place to stand up to this person and shut this problem down?  She’s the founder.  He’s the board chair.  Do I have the authority?”

Simply put, you never, ever want to be in a position of responsibility with no authority.  And in this case, you are not.  Just as you are absolutely responsible as a board member, you absolutely have the authority to rein this person in and put an end to all this acting out.  If not you, then who?

So once again, I will be as clear as I can be.  If you are allowing anyone to bully your board, STOP IT!!  You are exposing everyone to great risk.

FROM RISK TO BLESSING

In an effort to conclude on a positive note, I offer a final thought.

I think in some ways the bullies that dominate and control are like children pushing their limits.  Children that are emotionally healthy have usually been given well defined limits by their wise parents.  Though they may not know it yet, these limited children with clear boundaries are also happy children.  They are happy, secure and loved within those boundaries.

And keep in mind that these boundary testers are quite often the very people that end up accomplishing amazing things—even things that everyone thought impossible. The very same God-given wiring that literally causes them to continually push against their parent’s boundaries is what will someday motivate them to never give up, never take “no” for an answer until they achieve greatness.

I think in the same way, it is the loving thing to reel in board bullies and give them clear, consistent boundaries.  Although we’ve seen the rare occasion when the bully is not a good fit for the organization and just needs to go, usually these are not bad people at all.  They are often very gifted and beneficial to the organization.

It is entirely possible that God has placed this very “bully” on the board to be molded and guided, even mentored by a wise board into the leader the organization needs to move to the next level.

If your board has a bully, pray for your bully and give clear boundaries.  It is actually possible to morph this from being a risky situation to one of blessing.

Craig Chase may be reached at 509-886-4894 or craig@chaseadvancement.com.