Giving by NFP Board Members Divided - Report

Only half of Australia’s Not for Profit board members believe that directors of charitable organisations should contribute financially to their organisations, according to new research.

The research, by investment and trustee group Perpetual, explored the attitudes and process of directors of charitable organisations, revealing that 51 per cent agree that they should give further, but just under a third (31 per cent) disagree with the notion.

The remainder of the 64 chairman of Not for Profit organisations who were surveyed were either neutral or unsure.

Perpetual’s General Manager of Philanthropy, Andrew Thomas, said that the range of views reflects the complexity of the issue.

“Charities in the United States are known to take a ‘give, get or get off’ stance with board members, but this prescriptive approach belies the realities of running an NFP in Australia,” Thomas said.

“It’s an ongoing challenge to find board members with the skills, time and willingness to serve the organisation, so putting financial hurdles in place may restrict access to talent that is genuinely needed.

 “Nevertheless, some respondents feel that it is part of a director's role to support their chosen cause and to be prepared to ask others as well.”

Perpetual said the survey results highlight several opportunities for charitable NFPs to strengthen board effectiveness through improved board member selection and review processes.

Other findings include:

The majority of NFPs (73 per cent) recruit members through word-of-mouth, with just 1 in 3 advertising roles, and 1 in 5 employing a search firm.
Only 1 in 5 set ‘key performance indicators’ for the board, while 44% have no formal board performance review, and 30 per cent do not define the roles and responsibilities of board members.

“Boards need to identify which skills, experience and personal qualities they need to deliver on their strategic goals, and then recruit into those gaps,” Thomas said.

“In addition, clear KPIs, regular reviews and clear, defined goals also help NFPs function more effectively at board level.”

The research also found that two thirds (67 per cent) of respondents believe governance is weaker in the NFP sector than in the for-profit sector.

According to Perpetual, the private sector can provide some useful benchmarks for charitable NFPs looking to improve their practices.

“Improving governance shouldn’t be about replicating the private sector, but about creating frameworks that lead to better outcomes. That might mean taking what the corporate sector has to offer by way of best practice, experience, and lessons about what works – then adapting it to the particular challenges of the sector,” Thomas said.

The research also confirmed that jury is still out among NFP boards regarding the impact of the Australian Charities and Not-for-profit Commission (ACNC), set to launch on October 1 this year.

According to the research, 53 per cent of chairmen believe the ACNC will improve outcomes, while a further 28 per cent said they didn’t know. Negative opinions about the Commission were expressed by 5 per cent of respondents.

Thomas said that if the ACNC is able to foster good governance, rather than simply policing the sector, it will become a valuable resource for many charities.

“The fact that many of Australia’s NFP directors are in favour of its creation will provide a good foundation for the future,” Thomas said.