Board accountability

The group

As a precursor to any discussion about stakeholders, it is important to note that all incorporated organisations have their own distinct legal status – they can sue and be sued, receive donations, enter into contracts, incur debts, hire employees, etc. The board merely serves as the "mind" of the group. Board members owe a fiduciary duty to the group itself – that is, the group as a whole, not any individual members, or the organisation's employees, or any other interest group.

In practice, however, it is important to reflect on exactly what "the group" is, and who its stakeholders are.

The "consumers"

A community group's "consumers" can be defined as those using or benefiting from the services the community group is providing. For example, in the case of a not-for-profit childcare centre, the consumers would be the children the centre looks after, as well as the children's parents.

It is also possible to take a wider view of the group's consumers. Take for example a community theatre group, whose mission is to provide an outlet for local drama enthusiasts and to provide low-cost entertainment for the community. The consumers in this case would include not only those who sit in the audience or buy a program, but those who direct and act in the show, make the costumes, put up the sets, handle the lighting and usher the audience. While these people may be volunteers, and therefore also fall into other "stakeholder" categories, they are also consumers of the community group's services as they "use" the community group as a vehicle to derive experience, social interaction, enjoyment, etc.

Similarly, a tree planting group's consumers would include the planters themselves, as well as all the people who use the park, walk along the reserve, or even groups such as the local council that may own the land and will therefore benefit from the greening initiative.

The members

Many community groups encourage and indeed vigorously seek new members. Members can help boost the finances of a group and can help to create a common community around a particular group or cause. They can be drummed up to attend group functions, called upon to operate stalls, sign petitions, help out in the working bee and asked for donations.

Members are therefore vitally important community group stakeholders and imperative to a group's survival. Their views should be sought and listened to.

Funders

This group may include corporate, philanthropic and/or government grantmakers or funders, or individual, group or business donors. While it would be nice to think that funders will be happy to hand over a cheque and let you get on with the work, the reality is usually very different.

Grantmakers take very seriously their duty to make best use of the limited funds available – and expect the same of the community groups they fund. They generally provide strict conditions dictating how their money can be used – often stipulating that funds can only be used for a particular project or program – and generally demand not only rigorous accounting of how the money has been spent, but information about what outcomes have been achieved by the program.

Similarly, there are very few "no strings attached" donations that are made to community groups. Donors will often specify which specific cause or project they consent to their money being used for and most also want to see real results – few people are willing to see their often hard-earned money being used to pay a community group's phone bill.

Even if money is given as general operating support (in the form of ongoing government funding, for example) there are generally implied restraints placed on the funds. Those groups that use money in what are considered inappropriate ways – on "unreasonable" administration costs, for example – will quickly earn disapproval.

Sponsors and partners

Sponsors and partners often place even more explicit demands on the use of their resources than funder stakeholders. These may include public acknowledgement, naming rights, access to membership lists, etc. Usually sponsors' and partners' requirements will be spelled out in an agreement signed by both parties beforehand. However, their interests (spelled out or otherwise) must also be considered by a governing board – that is, if the group wants to continue or expand the relationship.

Staff

In many community groups, staff members – volunteer or paid – are among the most important stakeholders. The board governs but it is the employees and volunteers who really run the show. It is they who have a deep understanding of the day-to-day workings of the organisation, they who are closest to the needs and opinions of the clients and supporters, and they who will have to cope with the implications of an expansion or contraction or change in direction. They are likely to have first-hand knowledge of what kinds of fundraising initiatives have worked before, understand which programs are working and which ones are not, and know what pressures the organisation is facing.

Staff opinions should not be discounted when the board considers what decisions to make on behalf of a community group – after all, they have a deep vested interest in the group surviving and prospering. While some friction between the board and staff is normal, it is important to remember that both board and staff perspectives are needed.

The community

Most not-for-profit organisations receive tax breaks in some form or another, although what sort of concessions will depend on the type of organisation and its function. In return for the financial advantages these concessions provide, there is an expectation by society that community groups will act responsibly, remain true to their missions and in so doing make a contribution to society. Governing boards must take this expectation into account when making decisions for and about their community group.

First among equals

Because of the huge range of competing interests, it may be difficult for board members to ascertain exactly who they are governing for – and what weight to give to those competing interests. For example, a user of homelessness services may have a completely different idea about the best way of addressing his or her needs than the staff that run the service, the business that is sponsoring the program or the government body that is providing operating support.

The view of stakeholders may also be widened to include people and groups adversely affected by the service – so the view of the person who owns the house next door to a noisy animal shelter may also need to be taken into account in board deliberations.

And to complicate matters further, there are also legal requirements to consider.

As mentioned earlier, in legal terms, board members owe a fiduciary duty first and foremost to the group itself – not to individual members or the group's employees. Duties to the group's creditors sit alongside those owed to the community group's members. This effectively acts as a limitation on the board's duty to act in the interests of the members. It means that you cannot authorise an action contrary to the interests of creditors if the group is approaching insolvency. Put simply, when the community group is in financial difficulty, board members must consider the interests of creditors before those of members.

The legal question of to whom a fiduciary duty is owed is complicated by the current trend of the law to consider social responsibilities as well. To date, such considerations have not become established law (and, in any case, have been directed mainly at banks and insurance companies), but not-for-profit board members are advised to stay up-to-date on this issues, as this area law appears to be in a state of flux.

Our tip

At the start of your board term, and several times during your term, make a list of your community group's stakeholders, including its "customers" (all those people or groups who use or benefit from your services), members, funders, sponsors and partners, staff, the community, and any other people who may have a stake in your group's activities, including those who may be adversely affected by them. You might also consider "ranking" them from most important to least important – with "the group" as a whole on the top of the list. This will help you to be clear in your own mind exactly who you are governing for, and what consideration you should give those competing interests in making decisions affecting the group. Don't forget to take into account your legal and financial responsibilities.