Principle 8

A charitable organization must have a governing body that is responsible for reviewing and approving the organization’s mission and strategic direction, annual budget and key financial transactions, compensation practices and policies, and fiscal and governance policies.

The board of directors bears primary responsibility for ensuring that a charitable organization fulfills its obligations in accord with relevant law, its donors, staff and volunteers, clients, and the public at large. The board sets the vision and mission for an organization and establishes the broad policies and strategic direction that enable it to fulfill its charitable purpose. The board must protect the assets of the organization and provide oversight to ensure that its financial, human, and material resources are used appropriately to further its mission and to establish a level of risk tolerance appropriate for its operations. The board is also responsible for setting policies and procedures to ensure that the activities and operations of any affiliates, chapters, or branches subject to its direct or indirect control are consistent with the organization’s values and mission.

In smaller, un-staffed organizations, the board generally has a direct role in overseeing and delivering programs and services. When the board determines the organization should add paid staff, the board is responsible for selecting, overseeing, and, if necessary, terminating the chief executive officer. The board may hire independent consultants to assist in its governance responsibilities, such as legal and financial advisors, auditors, or in larger organizations, compensation consultants to assist in establishing the fairness of compensation paid to the chief executive and other key staff. The chief executive officer is responsible for hiring and supervising all other staff and consultants within the budget approved by the board.