Should a Foundation Have a Seat on the Board?
Some grantmaking organizations prohibit staff members from serving on the board of any organization they support, to avoid potential conflicts between their role as a grantmaker and their role as a board member with fiduciary responsibility to the organization they serve. Others make a practice of reserving a seat for a representative of the foundation — often a senior staff member or a trustee — on the governing board of any organization receiving significant, long-term support.
Between the two positions is a middle territory, in which grantmakers ponder the pros and cons of serving on boards of grantee organizations on a case-by-case basis. The dilemma is especially acute with start-ups, where deep involvement can sometimes be at odds with the desire to encourage independence. As a corporate funder at the “hands-off” end of the spectrum explained: “We don’t sit on their boards. We are not involved in hiring. We do offer our advice on planning and growing an organizational structure. But it’s their organization. They have to own it.” On the “pro” side of the question of board membership, one foundation president sees her involvement as an opportunity to nurture a sense of responsibility among the other members: “I emphasize that the group is not going to work unless the other board members really take it on...and bring their talents and resources to the table.”
A compromise approach was suggested by a grantmaker who coordinates a network of venture philanthropy partners and has worked with dozens of start-ups: “Our sense is that, in building engaged, long-term relationships, ‘requiring‘ a board seat sets the wrong tone from the start. We think that the funder should not ask for or require a seat on the board but should be willing to step up if asked by the nonprofit. Whenever our members have been asked to serve, it has worked out well.” Another compromise model places the grant maker in an ex-officio capacity, participating in board activities without the potential conflicts of full membership.
If You're On a Board - Behave!
A funder can bring valuable skills and resources to a board of directors or can be a real (if unintended) hindrance to its effectiveness. The difference, argues one nonprofit executive, is often related to the grantmaker’s ability to manage the fact that he or she is not just another board member: “If someone isn’t comfortable with the difference, or if they think they’re there to police the intentions of the foundation, it can be a disaster. It can ruin the confidentiality and trust a board needs to be effective.” One grantmaker who has served on several start-up grantee boards urges fellow grantmakers to be “self-regulating” about the requests and suggestions they make when they serve on boards: “Your voice carries disproportionate weight. Funders sometimes make offhand comments and the grantee’s staff will spend time tracking things down that the funder may have forgotten about.”
Takeaways are critical, bite-sized resources either excerpted from our guides or written by Candid Learning for Funders using the guide's research data or themes post-publication. Attribution is given if the takeaway is a quotation.
This takeaway was derived from Working with Start-Ups.