The controversies involving the National Rifle Association ramped up- again- over the weekend, with the announcement that the District of Columbia’s Attorney General has subpoenaed the records of the NRA and its Foundation. According to the reports, AG Karl A. Racine is probing whether or not the NRA violated the city’s Nonprofit Act.
If all this sounds vaguely familiar, it’s because this latest investigation seems almost a mirror image of the investigation launched by New York Attorney General Letitia James earlier this year.
This latest investigation is said to be focusing on “among other things, their financial records, payments to vendors and payments to officers and directors. ”
Like New York’s AG, DC AG Racine has the authority to bring “court actions” to dissolve a nonprofit corporation that misuses funds or “acts in a way that is contrary to its nonprofit purposes.”
So the essential question to be answered in either case is this: has the NRA strayed from its original charter?
If it has, which will have to be proven in court, the Attorneys General will be looking for someone to face the music for that straying. The first person they’ll look at will be the senior most executive- Wayne Lapierre. Their subpoenaed list of records indicates DC will also be looking at the Board of Directors. That adds 76 other names to the potential list -and considerably more if the investigation were to find longstanding wrongdoing.
All this is nothing more than conjecture, because there’s no problem -for anyone- if the investigations fail to turn up anything.
But the question has been raised -and won’t go away: have the 76 members of the Board of Directors fulfilled their responsibilities?
Not a question I could ever presume to answer.
In fact, it’s impossible to answer without significant insight into what a Director is not only expected to do, but what they’re required by law to do.
There are 76 members of the NRA’s Board of Directors- a huge number that virtually guarantees the impossibility of unanimous decisions. And as someone recently wrote of this particular board “with 76 members, they’ll never get a consensus on which direction to drive to get from Point A to Point B.”
That was funny.
The unfunny truth is that all board positions carry a level of responsibility.
According to the Council of Nonprofits (www.councilofnonprofits.org), the goal of any board is to “steer an organization towards a sustainable future by adopting sound, ethical, and legal governance and financial management policies, as well as by making sure the nonprofit has adequate resources to advance its mission.”
Board duties generally include hiring/firing of Chief Executives (and setting their compensation).
Ultimately, the Council says, a board’s responsibility is the equivalent of “sitting in the crow’s nest scanning the horizon for storms, or rainbows to explore.”
Foresight, insight and oversight, are the three things they say every Board must contribute.
According to the Council, most board members serve without compensation, and are key to addressing -and preventing- conflicts of interest.
The basics from a legal standpoint, are covered by three “duties”:
Duty of Care: Taking care of the nonprofit by ensuring prudent use of all assets, including facility, people, and good will;
Duty of Loyalty: Ensuring that the nonprofit’s activities and transactions are, first and foremost, advancing its mission; Recognize and disclose conflicts of interest; make decisions that are in the best interest of the nonprofit corporation; not in the best interest of the individual board member (or any other individual or for-profit entity);
Duty of Obedience: Ensure that the non-profit obeys applicable laws and regulations; follows its own bylaws; and that the nonprofit adheres to its stated corporate purpose/mission.
Reading the Council of Nonprofits basic descriptions shines a pretty bright light on why there’s almost always some dissension on all Boards.
The NRA’s BoD includes a number of industry insiders, virtually guaranteeing perceived, if not actual, conflicts of interest, especially to outside observers.
Others have held board seats for long periods but are essentially “show up and eat” members, never directly involving themselves in anything beyond enjoying the prestige of Board membership.
One board member who’s long been regarded as a “face” in the gun rights movement, told me in Indianapolis he was “sticking around for the fireworks” (the much-discussed Indianapolis meeting), but he’d not “been to an actual board meeting in the last eight or ten years.” According to the Council’s guidelines, he would fail to be viewed as a good BoD member.
Henry D. Wolfe, author of The Handbook of Board Governance and the book Governance Arbitrage has a far better handle on what it means to be a Board of Directors member than most of us. Recently, I received a note from Wolfe, excerpting a piece he’d written on the question of what it takes to be a good member of a Board of directors.
Wolf says there are eight key things a member must focus on to accomplish what he says should be the ultimate goal of any board member: engaging in, and contributing to, the “value maximization process” of the entity.
Essentially, Wolfe says a good board member leaves the organization in better shape than when he/she arrived.
Here are his eight keys to successful Board membership:
- Intent—the intent to be engaged in the development of the full potential of the organization to best maximize its long-term value,
- Drive— the internal “fire” to drive the organization to be the best it can be,
- Ownership Mindset- making meaningful investments in the organization in order to be fully engaged,
- Knowledge of the Business and Its Value Drivers —a deep understanding of how the company creates value and its dynamics,
- Courage to Rock the Boat — even if it means raising tough questions and pushing for change that is potentially critical of those who invited a director onto the board,
- Insistence on Clarity of Value Drivers and Related Information Flow- after identifying core initiatives, directors need to make sure there’s a plan for execution, and that it’s implemented,
- Engagement- involvement - while not crossing the line into management,
- Willingness to Hold Management Accountable — the basic responsibility to shareholders/members.
That willingness to hold management accountable, says Wolfe, is “as essential to success as blocking and tackling are to football.”
He also says that’s where the majority of directors fail their responsibilities.
If you’re considering a position on a Board of Directors -of anything- it’s worth remembering that there are responsibilities that go along with accepting a directorship- even if it’s “only” a community organization.
A group may tell you that it’s “primarily an honorary title” but that’s not necessarily the case should anything go wrong.
The responsibilities of officers and directors are not governed by “honorary” descriptions.
If something goes wrong, your non-involvement in the day-to-day or overall governance will likely work against you. If you’re a director, you’re presumed to know what’s happening - especially if/when something bad happens.
The present controversies at the National Rifle Association are why I began researching the general duties of a Board of Directors.
What I’ve learned offered an insight: being a good board member would require more work than I’d imagined, and require more time than I have to invest elsewhere.
—Jim Shepherd
