Nonprofit Governance: Are Related Board Members Bad for Nonprofits?

Following recommendations from a Congressional panel tasked with improving nonprofit governance, in 2005, the IRS began requiring nonprofit organizations to report the existence of family and business relationships among board members. We study these relationships and find they are common in U.S. nonprofits and not associated with assumed detrimental effects. Rather , we find that organizations reporting relationships between board members have less management spending, lower levels of excess cash, and better reporting quality, while receiving higher contributions. Further, using detailed disclosure information, we find that while both business and family relationships among board members are associated with less administrative spending, lower levels of excess cash, and higher contributions, family relationships are also associated with better reporting quality. Overall, our evidence supports the idea that relationships among board members do not harm nonprofit organizations.

Ethical Dilemmas in Nonprofit Governance: ARNOVA Governance Section Case Studies for Use in the Classroom and Practitioner Training

The three case studies presented in this issue continues the exploration of contemporary ethical dilemmas in nonprofit governance authored by members of the Governance Section of the Association for Research on Nonprofit Organizations and Voluntary Associations (ARNOVA). In the first two case studies in this series, published in recent issues of the Journal of Nonprofit Education and Leadership, Ruth Bernstein and Toni Aspin explore the challenges of governance when a nonprofit must consider compromising organizational values to provide services to a vulnerable population. In an examination of the collapse of a $40 million nonprofit agency, Yvonne Cafik Harrison considers a failure of board governance to protect critical constituencies and the very existence of the organization. The cases below expand the conversation regarding ethics and nonprofit governance. First, Jeff Aulgur considers the ethical challenges in contemporary presidential searches at public institutions of higher education. His exploration of the University of South Carolina System’s search for a new president in 2019 applies Karl Weick’s theory of sensemaking in organizations to nonprofit governance. Next, Dean Black, through the lens of a networked membership organization, discusses the ethical questions raised by non-financial conflicts of interest and how such disputes may damage a nonprofit’s reputation and legitimacy. In the last case, Louise Coventry explores the efficacy of the universal application of governance best practices and how scholars and practitioners must consider cultural boundaries and cultural appropriateness.