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BOARD TRAINING

GOVERNANCE, P&PS, FINANCIALS

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GOVERNANCE

What you need to know to be an effective board member

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LET’S SET THE TABLE:�PRSA GOVERNANCE STRUCTURE

NATIONAL

Two nonprofit corporations (NY HQ)

PRSA: 501(c)6
PRSA Foundation: 501(c)3

Board elected by Leadership Assembly
Bylaws amendments require Leadership Assembly approval
20,000+ members

LOCAL

501(c)6 nonprofit corp (HQ varies)
Board elected by membership
Subject to local, district and national Bylaws
Bylaws amendments require membership, national board approval (at any time of year)
One or more Leadership Assembly delegates, depending on previous year’s membership count

DISTRICT

501(c)6 nonprofit corp (HQ unknown)
One of 10, oversees chapters in Alaska, California, Idaho, Montana., Nevada, Oregon, Utah, Washington
Board elected by prior year’s board at annual meeting, composition includes chapter presidents
Represents Chapters on Nominating Cmte. to select National Board
Board chair, chair-elect represents Chapters on District Council
One Leadership Assembly delegate

When I was new to PRSA board service back in 2007, these are the things I wish I’d known:

Legally, there is no difference between our chapter and a small business. In practice, our board is the equivalent of the c-suite, but on top of that, we have the legal and financial responsibilities of a business owner.
Designations like a 501c3 or c6 are for tax purposes only, but culturally, when people think of a nonprofit, they’re thinking of a c3.
Since we’re a professional trade association, we’re classified as a c6.
The big takeaway there is that we don’t have donors.
Any income we bring in, from dues to sponsorships, is not tax deductible for the person or entity giving us the money.
This also means we don’t qualify for grants or other services offered to “nonprofits.”

As for PRSA, it’s structured in two ways: by geography and by practice specialties.

We roll up into the geography category.
If you want to collaborate with other chapters in our area, you do that through the District.
If you want to collaborate with other chapters across the country, we can do that through the District Council.

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LET’S SET THE TABLE:�NATIONAL TASK FORCES, COMMITTEES, BOARDS

Accreditation Marketing Committee

ACEJMC

Advocacy Committee

Audit Committee

Board of Ethics and Professional Standards

Champions for PRSSA

Civility Task Force

College of Fellows

Commission on Public Relations Education

Communications Committee

District Council

Diversity and Inclusion Committee

Educational Affairs Committee

Finance Committee

Global Affairs Committee

Governance Committee

Grievance Committee

Honors and Awards Committee

Human Resources Committee

International Conference Committee

Investment Committee

MBA/Business School Program

Membership Committee

Military Task Force

Nominating Committee

Professional Development Committee

Professional Interest Section Council

PRSA Governing Board

PRSA Foundation Board

PRSA Past Presidents/Chairs

PRSSA

Strategic Planning Committee

Technology Committee

Universal Accreditation Board

Contact: https://apps.prsa.org/AboutPRSA/Leadership/PRSANationalCommittees

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TIME FOR A QUIZ

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[CREATE POLL, USE INSTEAD OF SLIDE]

What kind of board are we?

Choose one:

Governing Board
Working Board
Advisory Board
Managing or Executive Board
Cooperative or Collective Board
Policy or Carver Board
Cortex Board
Fundraising Board

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RECONCILING YOUR DUAL ROLE �WITHIN A WORKING BOARD

BOARD MEMBER

Determine mission and purpose
Ensure effective planning
Monitor, strengthen programs, services
Ensure adequate financial resources
Protect assets and provide financial oversight
Fiduciary duty to the membership

FUNCTIONAL (CO-)LEAD

Accountable for your designated functional area of the organization
Recruit, train and manage volunteer staff to support annual goals, scope of work
Provide recommendations, requests, updates to the board

Additional reading: https://boardsource.org/resources/board-responsibilities-structures-faqs/

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UNDERSTANDING FIDUCIARY DUTY

Fiduciary Duty of Obedience
Fiduciary Duty of Loyalty
Fiduciary Duty of Care
Fiduciary Duty of Good Faith and Fair Dealing
Fiduciary Duty of Disclosure

Source: https://www.nolo.com/legal-encyclopedia/fiduciary-responsibility-corporations.html

You may have noticed that working boards have a fiduciary duty.

A breach of a fiduciary duty may result in personal legal liability for the director, officer, or controlling shareholder. State statutory law, judicial decisions, and corporate articles of incorporation and bylaws may also impact a person's fiduciary obligations to a corporation.

Here are the key fiduciary duties owed to a corporation and its stockholders.

Fiduciary Duty of Obedience

The fiduciary duty of obedience recognizes that officers and directors have different responsibilities in a corporation. To fulfill this duty, officers and directors must carry out their duties within the scope of their delegated authority under the law and the applicable corporate governing documents.

This duty may be of particular concern for nonprofit corporations where officers and directors are tasked with carrying out their duties in compliance with their organization’s charitable purposes. For example, an office or director may violate their duty of obedience by failing to comply with donor restrictions on pledges or permitting nonprofit resources to be used for non-charitable purposes.

Fiduciary Duty of Loyalty

Officers and directors owe a duty of loyalty to a corporation and its shareholders. They are expected to put the welfare and best interests of the corporation above their own personal or other business interests. Conflicts of interest, efforts to compete with the corporation, or making secret profits from corporate business dealings are typical examples of disloyalty. Under the corporate opportunity doctrine, officers and directors may not secretly divert or take advantage of business options for their own personal profit.

For example, officers and directors may confidentially learn about a lucrative development opportunity being offered to their real estate corporation. Officers and directors must not secretly profit from this situation or act upon it in a manner that harms corporate interests. In some states, officers or directors may take advantage of certain opportunities if the corporation has waived its interest to such dealings in its governing documents or appropriate prior disclosures have been made to the board of directors. Violations of this duty may result in officers or directors being sued and required to turn over their secret profits to the corporation.

Fiduciary Duty of Care

In a corporate environment, both officers and directors are expected to use appropriate care and diligence when acting on behalf of their corporation. They should exercise reasonable prudence in carrying out their duties to achieve the best interests of the corporation. An officer or director may be held personally liable for failing to exercise reasonable or ordinary care under the circumstances. For example, a lack of due care may be shown when an officer or director fails to undertake a reasonable review of a corporate matter, to regularly attend board meetings, or to adequately supervise staff which ends up damaging the corporation.

Under the business judgment rule, an officer or director may not held liable for business decisions made in good faith and with reasonable care that turn out to harm corporate interests. The courts will defer to erroneous business judgments, provided that the officers or directors did not show gross negligence in their review and decision-making process. Without this rule in place, many individuals would be unwilling to serve as officers and directors and business people might be reluctant to take commercial risks that could benefit a corporation in the long run.

Fiduciary Duty of Good Faith and Fair Dealing

This fiduciary duty is closely aligned with the duties of care, loyalty, and obedience. Under this duty, officers and directors must act with honesty, good faith, and fairness when handling corporate obligations. This continuing duty runs through their daily tasks and operation of the corporation.

Fiduciary Duty of Disclosure

Candor in business discussion is important between officers, directors, and shareholders so that they may assess material risks and make informed decisions. Full and fair disclosure of material facts is essential before seeking board or stockholder approval of major corporate business transactions, such as a mergers with or acquisitions of other companies. As part of their duties of loyalty and care, officers and directors should also disclose any potential conflict of interest that may arise between their individual interests and those of the corporation.

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WHY SPEND SO MUCH FOCUS ON FIDUCIARY DUTY?

The Volunteer Protection Act protects volunteers, not boards.

Lawsuits and potential claims may originate with vendors, donors, government regulators or others.

58%�Percent of D&O claims in the last five years against nonprofits

$35,000�Average D&O claim

Source: https://www.boardeffect.com/blog/do-insurance-nonprofit-boards/

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BOARD MEMBER TOOLBOX�THE 10 DOCUMENTS TO MAKE YOU A MORE EFFECTIVE BOARD MEMBER

Articles of Incorporation

Bylaws

Policy Manual

Board Member Roles and Responsibilities

Board �Committee Charters

Strategic Plan

Annual Budget

Annual �Operating Plan

Most Recent �Financial Audit

Most Recent 990

Articles of Incorporation – The Articles of Incorporation establish the entity and identify its purpose
Bylaws – The Bylaws establish how the Board of Directors govern the entity
Policy Manual – The Policy Manual establishes operational detail on how the entity is managed
Board Member Roles and Responsibilities - The Board Member Roles and Responsibilities is the “job description” for board members
Board Committee Charters – The Board Committee Charters outline the purpose, scope, and responsibilities of each active committee
Strategic Plan – A Strategic plan outlines a multi-year plan with key focus areas and tactics for achieving mission and purpose
Annual Budget – An Annual Budget is a 12-month budget outlining anticipated revenue and expenses
Annual Operating Plan – The Annual Operating Plan is a 12-month plan based on the strategic plan, outlining goals and activities for the year
Most Recent Financial Audit – A Financial Audit is an independent review of financial standing for the last completed fiscal year
Most Recent 990 – A 990 is a public tax document for the last completed fiscal year

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TAKEAWAYS

We are all responsible for Bylaws, P&Ps adherence and advocacy

D&O insurance protects YOU and the Chapter from legal action

At board meetings, you’re wearing two hats; use both perspectives in discussion, voting

People, organizations who support the Chapter are ineligible for tax deductions

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P&P MANUAL

Governance | Professional Development Programs | Financial Policies and Procedures

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P&P MANUAL

GOVERNANCE

Ethics policy
Ethics Officer
Gifts, favors and payments by the Chapter
Gifts, favors, entertainment and payments �received by Chapter volunteers
Conflicts of Interest
Confidential Information
Compliance
Governance maintenance process

PD PROGRAMS

Accreditation program procedures

APR lending library
APR stipends

Chapter events

Guidelines for determining event pricing
Event payment methods
Speaker diversity

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P&P MANUAL

FINANCES

Annual Chapter operating budget
Annual State nonprofit registration
Annual tax filing
Banking procedures
Cash and cash equivalents procedures

Expense reporting volunteer responsibilities
Expense reporting treasurer responsibilities
Meals and expenses
Spending from reserves
Travel
Year-end expenses

Find them online

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TAKEAWAYS

P&Ps mitigate risk and liability

Codifies processes, best practices from year to year

Can be adjusted, expanded by current, future boards

Does not require membership vote �to enact

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PLANNING AND BUDGETING

What you’ll need to know for an effective breakout session

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BUDGETS

TOP-LINE BUDGET

Organization-based P&L
Build and monitor in QuickBooks:

Align with GAAP for 501(c)6
Simplify tax return process
Identify long-range trends
Ensure adequate Reserves funds, overall financial health of the chapter

FUNCTIONAL BUDGET(S)

Program- or project-based P&L
Build and monitor using “projects” �feature in QuickBooks:

Custom budgets that can change from year to year or project to project
Generates full, real-time financial picture
Ladders up to top-line budget

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CHAPTER STRATEGIC PLAN

GUIDING QUESTIONS

Are we engaging our members?
Are we implementing practices that enhance our fiscal and board sustainability?
Are we embedding DE&I principles into our chapter structure and activities?

TOP-LINE GOALS (SAMPLE)

By 2023, 25% of chapter members serve as volunteers.
Create fiscal sustainability with adequate financial cushion, financial oversight, and revenues maximized.
By 2023, all chapter activities and policies will be reviewed through an equity lens with appropriate changes made to ensure that the chapter is inclusive, welcoming and fair to all.
By 2023, 20% of Chapter Board and Committee Members will be PR Professionals of Color, and/or LGBTQ+.