A Bad Nonprofit Board Takes an Organization Down with It

In this blog, we examine the role of a nonprofit board of directors. We then discuss how this relates to San Francisco LightHouse for the Blind and Visually Impaired.

A person standing next to chart pointing at a graph in decline.

What is the role of a nonprofit board?

 

According to the National Council of Nonprofits, the role of a nonprofit board is to act as the governing body with three (3) main legal duties: “duty of care,” “duty of loyalty,” and “duty of obedience.” Below we examine each duty.

Duty of care

A nonprofit board does not handle the day-to-day management of an organization. Rather, the board hires a chief executive officer (CEO) or executive director. The board then supervises that person, making sure this person faithfully executes policies and oversees day-to-day operations. In short, the board’s duty of care involves ensuring that the organization is fulfilling its mission, and taking appropriate action to protect it from internal and external threats.

Duty of loyalty

This second legal obligation requires a nonprofit board to act in the best interests of the organization rather than the interests of individuals. However, this duty is not limited to the board: everyone in the nonprofit organization must act in its best interests first and foremost. However, the board has the added responsibility of ensuring that official actions are undertaken in advancing the nonprofit organization’s mission and protecting it against internal dangers and external threats resulting from decisions of the officers based on self-interest, and the failure to effectively tackle systematic problems and their harmful effects on the organization.

Duty of obedience

Bylaws are a set of legally binding rules adopted by an organization. These rules govern the internal operation of the organization, and they are typically based on state laws regulating charities like the California Corporations Code.

In addition to the bylaws and state laws, nonprofits are regulated by Section 501(c)(3) of the United States Internal Revenue Code. Because nonprofits do not pay taxes, they must follow certain rules established by the IRS to maintain their tax-exempt status. But the duty of obedience isn’t limited to laws and regulations specifically dealing with nonprofits: all applicable laws, regulations, and ordinances must be dutifully followed.

The LightHouse Board of Directors

There is scant publicly available information about the LightHouse Board of Directors. Transparency is hard to come by, with only the minimum disclosure requirements being met. For example, the last annual report is from 2021, while the most recent IRS Form 990  is from 2021-2022. Unlike other nonprofit organizations, LightHouse does not publish its bylaws or provide any information about its Board beyond listing the names and including brief biographies.

Our understanding is that there are currently sixteen Board members at LightHouse. We do not know the terms of Board members and how they are selected. We believe the public has the right to know these details because LightHouse receives grants derived from American taxpayers, as well as individual charitable contributions.

Is the LightHouse Board fulfilling its duties?

Now that we have a better understanding of what a nonprofit board does, we consider the question of whether LightHouse’s Board is fulfilling its legal obligations in light of recent events at LightHouse. Let us pose the following questions:

1.     Is LightHouse’s Board taking care of the organization by holding the officers accountable for actions that hurt the organization internally and externally?

2.     Are the Board’s actions or lack thereof aligned with the duty of loyalty to LightHouse? That is, are they in LightHouse’s best interests?

3.     Finally, has the Board taken steps to ensure LightHouse fully complies with all applicable laws and regulations?

The information we provided on our Campaign website suggests that the Board is not doing enough to take care of LightHouse. We do not know what the Board says to the officers because there are no published meeting minutes, but there is also no indication that it has taken steps to address the damage that is being done to LightHouse as a result of the officers’ bad decisions.

We also do not know what the Board is doing to ensure that the actions of the officers are truly in LightHouse’s best interests. However, we think that loyal leaders of a nonprofit strive to actively listen to disaffected community members and make sincere efforts to bring about needed change. The current LightHouse officers are doing the opposite: they ignore legitimate concerns, further alienating the communities LightHouse serves. They also either turn their backs on or foster a toxic work culture. This damages LightHouse’s image, leading to the erosion of public trust in the nonprofit organization, and diminished financial support to fund mission-critical activities.

Last but certainly not least, we touch on the issue of whether the Board is actively monitoring and, if necessary, taking steps to ensure compliance with the laws and regulations of the State of California and the United States. We do not even know if the Board is following the bylaws. But what we do know, based on the information we have, is that the Board is doing nothing to address systematic biases against women, disabled people, and other minorities, both employees of LightHouse and members of the public. These are called “protected classes” under various laws. We also know that the current officers strategically hire people who are members of protected classes under the veneer of inclusion, then exploit them and pit them against their respective communities.

Accountability is essential to a sustainable future

A charitable nonprofit organization like LightHouse exists to fulfill a particular mission. For this reason, the organization is exempt from taxation so that its tax-free revenue is used to benefit a specific community or promote a particular cause that is in the public interest.

However, a nonprofit organization cannot sustain itself if its board does not properly take care of the nonprofit, ensure everyone working to advance its mission is loyal to it, and that it is in compliance with all applicable laws and regulations. When the officers fail to act in the best interests of the organization, they must be held accountable by the board. But if the board itself does not properly supervise the officers, external authorities must step in to ensure the nonprofit’s sustainability.