Nonprofit Newswire | Funders on Your Board?

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September 29, 2010; Source: Fast Company | A couple of years ago, NPQ sent a minor temblor through the nonprofit sector when it quoted a powerful foundation leader—at the time, the chair of the board of directors of the Council on Foundations—predicting (and advocating) that future philanthropy would be “sector agnostic,” that nonprofits should have no presumption of exclusive or even primary access to foundation dollars. In the wake of that pronouncement, we’ve seen plenty of foundations funding social entrepreneurialism that seems to be all but for-profit business except for the (c)(3) status we assume that the grant recipients hold or held.

This Fast Company blog post by Alice Korngold, author of Leveraging Good Will: Strengthening Nonprofits by Engaging Businesses, lauds the philanthropic giving of eBay founder Pierre Omidyar’s eponymous foundation for its openness to funding non-profits. “Half of the funding we provide is in the form of grants to nonprofits, and the other half in investments—early stage, venture capital—to newly formed for-profits,” says Omidyar Network VP, Amy Klement.

Like a venture capital investor, Omidyar Network personnel take a seat on the boards of the groups they support, whether nonprofit or for-profit, to provide additional human capital assistance. For Korngold, “Participation on boards where ON invests was music to my ears.”  She describes the practice as “simply smart investing and an excellent value-add [sic] for the recipient.”

This author remembers, however, a conference session in Seattle where investors affiliated with Social Venture Partners commented that they faced two problems with their engaged philanthropy along these lines. First, joining the board and offering assistance is not a one-time thing. It requires showing up, and showing up again, and showing up again. Maybe for the Omidyar Network people who work only for ON it’s possible, but for SVP investors who had their own jobs, it’s hard to live up to Woody Allen’s admonition that 80 percent of success is showing up.

Second, SVP investors frequently learned that the knowledge that they gained in business, in the world of high tech, often didn’t provide them with much to offer nonprofits that were dealing with intractable social problems. Frequently, the donors’ high engagement allowed the nonprofits to teach the donors more than the donors taught the nonprofit grant recipients.

But the Omidyar Network invests with some high profile groups, not the local groups that typical SVP’s do, so maybe the skill transfer needs are different. How do NPQ readers feel about funders placing themselves on your nonprofits’ boards as part of their grant quid-pro-quo?—Rick Cohen

  • Ruth Jones

    Another issue which should make funders cautious in accepting or requesting a seat on the board of nonprofits which they fund is the potential conflict of interest this represents. A board member is there to serve the interests of the nonprofit, which they may not be able to do if they have a competing allegiance. The potential is there for board discourse and decision-making to be distorted. We have to be aware of the power imbalance that typically exists between funders and funded organizations.

  • Joe Lawless

    It depends. I’ve had funders on the board before who were fully capable of fulfilling their duty of care to our organization and “wearing that hat”. If their personal interest aligns with the mission and they aren’t there to solely protect the funder’s interest, it could be a good thing. This all assumes that the organization’s established norms and bylaws regarding nominations and election of board members are followed. A funder on the board could be a great addition of new knowledge, experience and skills that will move the organization forward toward fulfillment of its mission. On the other hand, as with any new board member, it could be a situation that all eventually regret.