Get On A Not-For-Profit Board

Puzzle Piece With Not For Profit Written On It - Corporate Governance Canada


Get On A Not-For-Profit Board

David Beatty:

Not-for-profit boards; go on one to save our society and make the world a better place, please. But in doing so, know that you are probably improving your capability as a director in a for-profit corporation as a direct result. Think of that. The not-for-profit has a number of characteristics that really can add to your ability to be an effective director in a for-profit.

Number one, thrift. There’s never enough money to go around, so you’re always thinking of ways to do something better, cheaper, with less impact on the financial statement. That’s a nontrivial point when you come to a large corporation where it might seem there’s a large amount of slack and surplus cash hanging around. Being thrifty is a great virtue.

Number two, the number of stakeholders involved in any not-for-profit are huge, absolutely huge. If you think of yourself in a public company environment as a director of a board, you’re probably spending, I don’t know, 75% of your time. 75% of your time on one stakeholder, and that’s the shareholder. Yes, you have a responsibility for other stakeholders, but that could be the employees, the community, the suppliers. But you’re going to invest 75% of your time only in the shareholder. In the not-for-profit, you have a multiplicity of stakeholders there from day one, all over the place. So learning how to cope with them in that environment should help you cope with them in the environment of a publicly traded company. And if current trends are anything to go by, the publicly traded company is going to have to deal with many more stakeholders than it does today. There’s pressure from ES&G, environmental and social government activists is permeating a lot of publicly traded companies, so the training you get in the not-for-profit might stand you in very good stead in the for-profit.

The third component is that when there’s a crisis in the not-for-profit it lands on your doorstep, there’s no avoiding it. You can think of some recently here in Canada, where sexual harassment was a problem and caused the whole executive team to leave. Nontrivial, you live it 24/7. You’ll learn how to cope with those kinds of crises. It could be the crisis of a financial bankruptcy. It could be the crisis of a departing CEO. Many kinds of things can happen to you in a smaller not-for-profit that could presage some kind of panic stations exercise you’re going to have in a for-profit.

So joining a not-for-profit board, I think she gives you huge training and a number of characteristics that will add value to your career as a value added director in a publicly traded corporation. So besides saving the world, go on a not-for-profit, add value to that organization and know that you will end up being a better director in any for-profit company.

David Beatty is an adjunct professor and Conway chair of the Clarkson Centre for Business Ethics and Board Effectiveness at the Rotman School of Management. Over his career, he has served on more than 39 boards of directors and been chair of nine publicly traded companies. He was the founding managing director of the Canadian Coalition for Good Governance (2003 to 2008). A version of this article will also appear in the Winter 2017 edition of Rotman Management, published by the University of Toronto’s Rotman School of Management.