Are Your Boards Really Doing Their Job? A Candid Look at Fiduciary Duty

I'll be honest with you — when Mark introduced me, I was a little relieved. I've never been great at talking about myself, and having him do it spares me the awkwardness. I've been working with not-for-profit organizations since June of 2000, and board governance is one of those topics I keep coming back to because I see it matter so much in practice. Good governance doesn't always show up in the financials. But poor governance almost always eventually does.

I'm not going to pretend this session covered entirely new ground. If you've been in higher education or nonprofit leadership for any length of time, you've heard the words "fiduciary duty" before. But I do believe this topic is important enough to revisit regularly — because I work with a lot of boards throughout the year, and some of them are high-functioning and highly engaged, while others are, to put it charitably, a little passive. I hope that by going over where boards tend to fall short, and what good governance actually looks like in practice, you took something useful away.

What Governance Is — and What It Isn't

I started our session with a somewhat unconventional approach: I asked three different AI engines — Copilot, Google AI, and ChatGPT — to define governance as it pertains to not-for-profit boards. Their answers, interestingly, were remarkably similar. Across all three, the same key phrases appeared: ensuring the organization fulfills its mission, setting the strategic direction, fiduciary oversight, and accountability to stakeholders.

The role of governance is often summarized as: the board sets the mission and hires management to fulfill it. That's accurate, but it's incomplete. Boards also need to guard against mission creep — that gradual drift that happens when grant opportunities or other incentives pull an organization in directions that are only tangentially related to why it exists. And they are accountable not just internally, but to students, faculty, bondholders, accreditors, government agencies, and donors.

Three Modes of Governance

One of the frameworks I introduced — and one that was somewhat new to me as I was preparing — is the idea that boards operate in different modes depending on the situation. The first is the fiduciary mode: safeguarding the organization's assets, reviewing financials, and holding leadership accountable. The second is the strategic mode: setting direction, planning for the future, thinking about where the institution wants to be in five or ten years. Most boards are comfortable in these two modes.

The third mode — generative governance — is the one I'm still working through myself, having recently started reading Governance as Leadership by Richard Chait. The generative mode asks boards to move beyond watching the store and toward actively leading the organization. It's the difference between asking "can we afford a 2% budget increase?" and asking "are our programs doing what they should — and should we reallocate resources between them?" It's asking not just "how is our staff turnover?" but "are we treating our people fairly and respectfully?" I work with a lot of boards that operate almost entirely in the fiduciary mode. There's real value in turning attention toward that leadership dimension as well.

The Real Cost of Not Exercising Fiduciary Duty

I spend a few slides each time I do this presentation on publicly known fraud and governance failures in the nonprofit sector — not to alarm people, but to illustrate what's at stake. In study after study following these events, the systemic cause comes back to the same place: the board was not doing its job. It wasn't exercising fiduciary duty.

And the recovery trajectory for nonprofits after a governance failure is nothing like what you see in the for-profit world. I showed the stock price recovery of BP following the 2010 Deepwater Horizon spill — significant losses recovered over roughly four years. Then I showed a national nonprofit organization that experienced a fraud in 2002. Their revenue dropped from nearly $100 million annually to about $30 million within a year — and as of their most recent 990, they're down to approximately $21 million. Someone I was speaking with just a few months ago, without any prompting, said he would never give to that organization because of what happened in 2002. That was more than two decades ago. For nonprofits, reputational damage sticks.

Where Boards Fall Short

I walked through what fiduciary duty actually requires — the duty of care and the duty of loyalty — and I want to be clear that I don't think this is an unreasonably high bar. The duty of care is essentially asking whether you're behaving as a reasonable, prudent person would: attending meetings, reading materials in advance, completing follow-up tasks. The duty of loyalty asks whether you are acting in the best interest of the organization and placing its interests before your own.

But I shared a personal story to illustrate how the duty of loyalty can quietly slip. I was on the board of a local history nonprofit here in the Harrisonburg-Rockingham area. I was genuinely passionate about it. But my work schedule kept taking me out of state — North Carolina, Pennsylvania, Texas, Illinois — and I think I made two of twelve monthly meetings in one year. If I had truly been exercising my duty of loyalty, I would have gone to the board chair and said: I'm not able to fulfill this. You deserve someone who can show up. I didn't do that, and I should have.

At the board level, I see a few recurring patterns that lead to governance gaps. One is what I call the coffee and donut board — the board that shows up, listens to the executive director report for an hour, and goes home. Earlier in my career, this was more common than I'd like to think. I've personally sat in board meetings where people sighed heavily, leaned back in their chairs, or put their heads down. The engagement just wasn't there. I'm glad to say that has improved significantly over the past two decades, but it remains a risk.

Another pattern is when the CEO-board relationship gets inverted — when a charismatic executive director or president effectively takes on the governance role themselves, setting mission and direction while the board goes along without meaningful scrutiny. When I looked back at the major nonprofit fraud cases I reviewed, I'd estimate that the majority involved this dynamic in some form. It doesn't take outright misconduct; passive boards can enable problems simply by not asking the right questions.

I also talked about the pendulum of board mindset — the tendency to swing toward pure business efficiency on one end, where mission and people are forgotten, or pure mission passion on the other, where financial sustainability gets ignored. I've encountered board members who genuinely believe their endowment should simply be given away because others need it more. I've also seen business-oriented board members push for efficiency without any apparent interest in who the organization serves. Neither extreme serves the institution well. You need both the financial discipline and the heart for the mission.

The Not-for-Profit Distinction

I also want to flag something I feel strongly about: terminology matters. I prefer the term "not-for-profit organization" over "nonprofit" because I think it speaks more precisely to the why. The purpose of a not-for-profit is not to generate a return for shareholders — it is to fulfill a mission. That said, if you're truly nonprofit in the operational sense, you are going to go out of business. Tax-exempt organizations must generate a financial margin if they are going to grow and expand their impact. I shy away from the word "nonprofit" because it subtly implies that financial health is unimportant. It isn't.

Best Practices That Have Actually Made a Difference

I closed our session with what I consider to be the most practical part: things I have personally seen transform how boards operate. These aren't theoretical recommendations — each one comes from something I experienced or witnessed.

Two-way communication between board and president. The president has every right to hold the board accountable too. If a committee chair hasn't met in eight months, it is entirely appropriate for leadership to say so directly. Governance is a mutual accountability relationship, not a one-way street.

Regular contact between the board chair and the president. I have seen boards meeting less and less frequently — in some cases, just once or twice a year. It is very difficult to exercise meaningful governance if you only show up twice. A regular cadence of communication between the board chair and the president gives the chair the information they need to lead effectively, and gives the president a space to share what is hard, what is going well, and what they need. I find this to be one of the most impactful practices on the list.

Starting board meetings by focusing on the mission. I was on the board of Redeemer Classical School here in Harrisonburg for a number of years. When I first started, the meetings were four or five hours long, often starting at 7 p.m. — and we almost never got through the agenda. A retired pastor on the board began taking just the first five or ten minutes of each meeting to read from the mission or vision statement and reflect on it briefly. Without any other deliberate change, our meetings became more focused, more productive, and shorter. They're now down to about two hours and we're actually getting business done. I cannot attribute that entirely to those five minutes, but I genuinely believe the mission focus at the outset was transformative.

Encouraging the contrarian — to a point. If everyone in the room agrees on everything all the time, it's a sign no one is thinking very hard. I work with a farmers cooperative client where the CEO is a high-energy, ideas-everywhere kind of leader, and his CFO is the exact opposite — skeptical, measured, questioning everything. Together, they're hilarious to watch and enormously effective. Those challenging conversations refine the ideas that do move forward and catch the ones that shouldn't. Every board needs someone willing to ask: can we really afford this? Have we considered the other side? That said, there is a difference between healthy contrarianism and pure obstruction. You don't want someone who objects to everything reflexively.

Join boards for the right reason. I'll share my own bad experience here: I joined the board of our local public television station primarily because I was curious about the other business leaders on it. I did not care much about public television and, honestly, the older I get, the more my views on government-funded media lean libertarian. That was probably not a board I should have joined. I dreaded every meeting. I didn't contribute meaningfully. I wasn't exercising any real fiduciary duty. I've encouraged everyone at our firm to be involved in the community and to serve on boards — but we used to just say "join boards." I've tried to be clearer now: join boards where you are genuinely passionate about what the organization is doing. That passion is what makes you show up, engage, and actually protect the people the organization serves.

Final Thought

Fiduciary duty is not a burden — it is a responsibility that comes with the privilege of serving. When boards do it well, organizations thrive and their missions are protected. When they don't, the consequences can follow an organization for decades. I hope the session gave you something useful to bring back to your boards or to your own service. As always, feel free to reach out if you'd like to continue the conversation.