The Importance of Accountability

 

“Everyone knows that corruption thrives in secret places, and avoids public places, and we believe it a fair presumption that secrecy means impropriety” – Woodrow Wilson

 

The secrecy and appearance of conflicts of interest in the United States Chess Federation governance structure are just symptomatic of a lack of accountability. Board members are heard blaming the USCF President, the board majority, the CFO, legal, the executive/publications director, the office, or a committee for poor results. Our leaders are first to assure us that none of what is wrong with the organization is the fault of the board or of the delegates. But that is not the Board's fault” has become the rallying cry of the organization. Additionally, all too often we hear it’s not my responsibility as I didn’t vote for that, or I didn’t know about that, or it didn’t benefit me personally, or it was decided by others, or I only am one vote. Regardless, issues do not get addressed or fixed, poor results continue, and secrecy and apparent conflicts of interest are felt to be justified.

 

It is important to note that all nonprofit directors are legally responsible and accountable to defined classes of persons or entities. Accountability in the not-for-profit world is defined as being answerable for the effective discharge of the mission of the organization. This is characterized as the degree to which leaders are independent, open, responsive and responsible, and the degree to which the corporate direction reflects the preferences of those to whom the director is accountable in the discharge of the mission. The public insists that those who represent them function openly and explain their decisions. It is thought that those in positions of authority should publicly account for their actions, decisions as well as the use of public corporate resources has long been a tenet of not for profit management. The information revealed by systems of accountability, it is argued, will permit the electorate to judge the quality of policies and the integrity of implementation so that the most able and honest can be selected to govern. Public accountability, it is postulated, leads to the selection of policies that will promote development and ensures that membership resources are used to yield their greatest return on investment at advancing the mission.

 

Volunteers, board members, employees and donors voluntarily become involved with a nonprofit corporation because of its public benefit mission. Therefore, a nonprofit must be transparent and makes information about its mission, program activities, and finances available to its constituencies. A nonprofit must be accessible and responsive to public inquiry and must reach out to interested parties. Those who are in positions of responsibility and act on behalf of the nonprofit must be able to answer for their conduct and obligations.

 

However, accountability is more than just reporting results information or disclosure; it is a means to improve performance. An accountability framework identifies intended results, ensures the measurement of actual performance and assigns responsibility for using this information as the basis for making changes to achieve the intended results. Reporting includes rationale for decisions, current results compared to planned objectives, plans for improvement and performance trends over time. Increasingly, the membership is asking for better information on what they and society are getting for their membership dollars. Moreover credible information on performance is needed even more to ensure that membership dollars are being spent well. Accountability is enlightened by independent third party oversight and review of corporate actions.

 

In a nutshell accountability is qualitative information about how the leadership is advancing the MISSION of the corporation. All directors should have an equal responsibility for the management of the corporation’s activities. Being accountable is about accepting total responsibility for the corporation’s results as well as the lack thereof. In one word accountability is about RESULTS. Accountability to whom one might ask? Under not-for-profit corporate systems with a membership structure it is viewed that the membership are like owners of the corporation. Thus accountability is enforced by the membership by the process of being able to elect or reject the leaders and their policies that oversee the direction of the corporation.

 

The Board Member's First Duty: Accountability

 

Bringing Personal Accountability on Board

 

 

Living in Glass Houses

 

It is not good enough for nonprofits to meet the requirements imposed by our legal system. We have to rise to a higher standard, one that reflects the special role non profits play in our society and one that earns the public's trust.

 

The current public debate about the responsibilities of nonprofit boards and board members stems from a multitude of recent newspaper articles exposing excessive or improper compensation for chief executives and board members, transactions rife with conflicts of interest, questionable tax deductions, and unethical behavior. Make no mistake about it, our sector is being watched by legislators, regulators, the press, and the general public.

 

Good thing, too. The public has every reason to expect nonprofits and their boards to act with integrity, transparency, and accountability. We operate in the public interest, serving our communities and advancing societal values, all with special tax status. For all the right reasons, nonprofits live in glass houses.

 

We all have a stake in ensuring that the public's trust is justified. When some of us fail to live up to standards of good behavior, the reputation of all non profits suffer. Donors, taxpayers, legislators, regulators, colleagues, and competitors, all become stone-throwers when nonprofits or their boards act illegally, irresponsibly, unfairly, or unethically.

 

Accountability starts in the boardroom. As leaders in their organizations, boards play a special role in setting standards of behavior that will ensure that they and their organizations operate legally and ethically. Principled behavior starts with the board itself, with policies that address compensation, conflicts of interest, travel, and expense reimbursement. Boards and chief executives must ensure adequate and accurate financial reporting. All CEO compensation should, at a minimum, be based on an evaluation of performance and benchmarked to comparable studies for CEOs of similar institutions. Board policies that set and enforce standards provide a self-regulatory frame that support and reinforce those glass walls.

 

Others strengthen their internal structures by redesigning their board committees to meet new expectations, or by adding advisory councils to strengthen ties with important individuals and organizations. Still others take the courageous step of an annual board assessment, identifying ways to improve board effectiveness and organizational performance.

 

Whichever path they take, strong boards are the first and best line of defense in these tumultuous times. At BoardSource, we are committed to giving you - board members and CEOs of non profits - the ideas, the resources, and the tools you need to meet the challenges of today.

 

Deborah S. Hechinger President and CEO BoardSource