You are here

Should we add CFO to the Board?

Your Legal Questions Answered

Should we add CFO to the Board?

Should we add our Chief Financial Officer to the Board of our nonprofit? The CEO is currently on the Board and we are thinking of grooming the CFO to be the successor. The CFO already attends Board meetings but doesn’t vote.

The question I usually get from charities is whether to have the CEO serve as a member of the Board and my answer is that I don’t think it makes much difference.  If the CEO has to cast a tie-breaking vote, the CEO already has serious problems.  A CEO more frequently serves on the Board of large organizations, like universities, medical centers or major cultural institutions, where the prestige is important for fundraising purposes.  It isn’t the norm of small charities to have the CEO on the Board.

Unless the nonprofit is worker-controlled so that most of the Board members are also staff members, I don’t see any particular advantage to adding the CFO to the Board of a nonprofit.  Businesses usually have a lot of “inside” directors and are criticized for not having enough “independent” directors.  I don’t think the business model is one to emulate here.

The purpose of a Board, in my view, is to add diversity to the decision-making process, open access for the organization to the wider world necessary to sustain its program, and oversee the program for effectiveness and compliance.  You already have access to the CFO’s opinion and are already grooming the CFO to succeed the CEO.  The CFO doesn’t add anything for oversight or compliance. That’s already part of the CFO’s job that the Board has to oversee. 

The Standards for Excellence, originally promulgated by Maryland Nonprofits and being replicated currently in many states including Pennsylvania, provide that if an employee serves as a voting member of the Board (which by implication is not a preferred situation), the Board is responsible for assuring that the employee will not be in a position to exercise undue influence.  It might be hard for the CFO to vote against the position of the CEO and you don’t need another vote that would be less likely to be independent of the CEO.  You would have to list another director as not being independent on your Form 990 tax information return, which could raise a red flag with some donors who look at such things.

You also don’t necessarily want a person on the Board who has to recuse himself or herself from the consideration of selecting a new CEO when the time comes.  (You may already have a couple of people on the Board who would be interested in the position and will lose their input on the issue.) 

On balance, although it would not be illegal, I don’t see any particular advantage to doing it, and I do see some downsides.

Tuesday, May 19, 2015

Sign-up for our free weekly Q&A

Add new comment

Sign-up for our weekly Q&A; get a free report on electioneering