The Problem with Boards
Richard M. Biery, M.D.

During the height of attention on the Enron collapse, a review of yet another book on board governance stated, "If the 19th century was the age of the entrepreneur and the 20th century was the age of management, the 21st century will be the era of corporate governance." Yet, with recent events exposing board ineffectiveness, poor methods, inability to appropriately control management, and the futility of piecemeal solutions, board governance appears to be in great trouble, even conceptual trouble. The venerable institution, as we know it, is being rethought.

Charitable and religious organizations have not been left out of this scrutiny. In fact several nonprofits have also been caught recently in serious malfeasance. Where were their boards? Henry Goldstein, in a recent issue of Chronicle of Philanthropy, writes "governance counts … Boards are entrusted with the task of acting, first, in the public interest, as the stewards of funds and other assets. The board not only sets the ethical tone, but also has an obligation to make sure the charity lives up to the highest ethical standards."

He makes the very telling point: "The role of the charity board is even more critical, because it is the public's only real protection." Sobering words for a board. Even more sobering is the ultimate spiritual accountability of Christian trustees to God for their stewardship of the organizations they oversee.

A Call to Excellence

Board literature, both secular and Christian, is filled with exhortations to vision, wisdom and excellence. Boards are told they should be strategic, visionary and values-based leaders. They're constantly reminded of their fiduciary responsibility—a modern term for stewardship.

Robert Greenleaf, in his writings on servant leadership, urged trustees to lead in a heroic way, bringing excellence and vision to governance and the organization. He holds the board, not the CEO (or whoever runs the organization), responsible for its own performance. We agree. Good governance—structuring it and doing it—is fundamentally an issue of board leadership. The board must take responsibility for its own performance.

Unfortunately, one's personal board experience rarely lives up to anything near that level of rewarding performance, much less leadership. Should we capitulate to our less than satisfying board processes and assume there's nothing better? Or are our concepts of board governance fundamentally flawed and in need of overhaul?

Certainly Biblical principles should pertain to good governance, but sadly, most boards, while composed of dedicated people desiring to serve well, don't have a clear model for effectively governing, much less one incorporating biblical principles. All board members have is their experience and some occasional training, typically in fundraising or planning.

Dabbling in Details

Knowing no better way, boards fall into such usual practices as dependence on the CEO, reviewing reports, approving management requests and plans, asking questions arising from (usually unstated) concerns, poking around in operations, attempting to advise and "help," and dabbling in structure, such as inventing more or different committees.

Leadership is not reviewing last month's report, or as Dr. John Carver states, "spending time on the wrong questions and/or on details far below that merited by the board's valuable time." Such practices lead to micromanaging or, alternatively, becoming too passive, but in any case reactive. This rarely results in "setting the moral tone," much less the purpose-based strategic ends for the organization. None of this activity amounts to proactive leadership, burning out members in the process.

Furthermore, traditional board literature and training are founded in the same history and mental model—providing advice with incremental improvements to current methods—not the logical, coherent system implied in the basic concept of governance. In fact, board literature presents

a rather confusing and conflicting array of governance ideas: oversight, leader, spiritual leader, servant-leader, CEO led, watchdog, cheerleader, not a watchdog, advisor, strategic, visionary, more involvement, "help the CEO," not meddling, less involvement, not rubberstamping, manager, planner, or "hire and fire the CEO and get out of the way."

Confusion and Conflict

To compound the problem, the usual mode of board operation, being inherently unstable as a system, can get a board into difficulty. It can lead to troubled, even adversarial relations with the CEO, or in placing too much trust in a CEO, simply rubber-stamping without effective monitoring. Failing to adequately constrain executive power, ineffective boards become inadvertently complicit in creating an environment corrupting for the CEO. Many Christian boards have discovered that fact too late to prevent serious damage or even catastrophe. "Unfortunately, history books are full of boards who knew too little too late," observes governance expert Robert Monks.

In fact, board literature often discusses the "tension" between CEO and board as if it's to be expected. However it frequently leads to complications, even conflict. And someone ends up being blamed when the relationship collapses—the chair, the CEO, other board members, or even the board's "personality."

Tension and Turnover

Church literature speaks repeatedly of troubled board-pastor relations—the most common reason for pastoral turnover. Christian schools suffer high headmaster turnover for the same reason. And if we surveyed Christian organizations, we'd probably find similar phenomena.

A governing process with integrity and congruency should not systematically create tension and dissatisfaction, but rather a productive partnership derived from well-defined and distinct roles. Unfortunately, virtually all the recently proposed solutions have been structural and/or piecemeal, but not the coherent logical system implied in the basic idea of governance. The fundamental problem is a flawed idea of governing. The process needs a new paradigm. Tinkering with structure won't correct the ineffective process. Structure should be designed to support effective board process.

The Board's True Role

What, indeed, is the board meant to do? What is its fundamental purpose?

The governing board, since its inception, was intended as a way for multiple owners (real or moral) to oversee their organization through a representative body that acts with full authority as their "agent." The use of the board was also incorporated into the nonprofit and religious worlds where boards were usually composed of individuals having some vested moral or spiritual interest in the organization. Nevertheless, the idea of ownership and oversight has remained at the very root of governance. Governance is ownership one step down, not management one step up.

As the concept of multiple owners governing through a board developed, the law was adjusted to ratify board governance and protect the board from personal financial liability, while stipulating legal conditions for that recognition. Board governance is now taken for granted as the corporate governance method throughout the English-speaking world. And its attendant problems are similar around the world.

Ideally, governance should be the method by which a board clearly and wisely expresses its collective values and expectations for the organization, and sees to it that the expectations are met. Its goal is to achieve the organization's intended purpose, producing something ultimately of value (tangible or intangible, and spiritual in the case of Christian organizations) to the ownership, by producing something beneficial (tangible or intangible) for clients, constituency, patients, recipients, members, etc.

Allegiance and Accountability

The board of a Christian organization governs with allegiance and accountability both to a temporal ownership and to the final Owner, our Creator. And the board is accountable for that organization as the ownership's "agent." (A leadership that denies or doesn't recognize temporal accountability is dangerous, operating without constraint on its power.)

As noted, boards have a hard time governing in the full sense. They do many things that are not governance, good things certainly, such as fund raising or public relations. Governance by nature assumes collective board leadership of the organization with intentionality and initiative. Often we try to pin the board's performance on the CEO, burdening the CEO with both the board and the organization!

The challenge occurs because a governing board, acting as a small group with all the challenges of group dynamics, must delegate its authority while sustaining accountability. How can a board delegate its authority to achieve optimized effectiveness without losing control and accountability, especially when it meets only a few days a year and yet is totally accountable for the organization?

The Carver Model

Dissatisfied with the lack of governance excellence, effectiveness, accountability and integrity, a growing number of ministry boards are switching to Policy Governance® as set out by Dr. John

Carver in Boards That Make a Difference. All Carver did—although it was a tremendous conceptual breakthrough—was approach governance using a principle-based, logical rigor.

He created an integrated system of principles and methods, preserving congruence and integrity of authority and accountability. When a board follows the principles, it results in accomplishing everything boards should be doing, but aren't. Contrary to its detractors, it provides immense flexibility for a wide variety of organizational structures and sizes while providing a framework for quality governance.

Christian organizations using the Carver method have discovered it contains and enables important biblical principles. Carver seeks excellence in governance based on the application of commonly shared core values. He insists the board can and should add value for ownership.

 

Policy governance provides an integrated process to satisfactorily govern according to biblical values and basic governance principles. It insists on integrity of clear values, policies and accountability through regular scheduled monitoring. It provides role clarity, engendering trust.

It provides the board with tools and logical methods to: 1) develop and clearly express its vision and values, focusing primarily on ends or results; 2) convert them to policies; and 3) monitor organizational and board performance against these policies, providing for accountability for both management and the board itself.

It enables proactive leadership, while valuing freedom for management with appropriate limitations set by the board—enabling a balance between freedom and control. The CEO is optimally empowered to run the organization according to the board's expressed values and stated expectations of performance. Hence, board and management can function as a team. The pieces fit together, having coherence—the whole makes sense.

The Board-CEO Partnership

As Larry Winger says, it gives the board "leadership leverage through a few well-crafted policies." The board's written words—their accuracy, veracity and dependability—become important. The board makes and keeps promises both with itself (how it functions and relates to management) and with management. The policies express both the purpose and desired strategic results (or ends) the board wishes—after extensive discussion with owners, staff and experts—and prohibition of any actions that are contrary to board values.

The chair serves the board to optimize its performance, keeping it on track. The CEO runs the organization to achieve the established ends while avoiding the prohibitions. The board empowers the CEO by staying out of operational details—the best kind of encouragement.

There are three things unique to the board that can't be delegated:

• The organization's linkage to the ownership.

• Explicit governing policies.

• Assurance of executive performance.

The board, not the CEO, must bear responsibility for the integrity and quality of governance. "Primary responsibility for board development," exhorts Carver, "does not rest with the CEO, staff, funders, or government." It rests with the board.

Conceptually, it's that simple. And when implemented correctly (not piecemeal), it's extremely powerful and satisfying for both board and CEO. The CEO and staff are free to use the best methods to achieve the ends while avoiding prohibited means.

Finally, careful and regular monitoring against the stated policies closes the accountability loop. The board, then, is reasonably protected from nonfeasance. This makes governance reassuring to those "invested" in the organization, rewarding for the board, and empowering for the CEO.

Dr. Richard M. Biery is president of The BroadBaker Group, Ltd., Kansas City, Missouri, which offers consulting and coaching in health strategy and governance. He served as director of Health for Kansas City for 23 years and is a graduate of the Carver Academy in board Policy Governance.