The extent (and limits) of a board’s authority

The rich “are different than you and me,” F. Scott Fitzgerald famously observed.  (“Yes, they have more money,” Ernest Hemingway is apocryphally reported to have cynically added.)

In the same vein, non-profit boards are different from corporate boards.  They have less latitude to lead.  Even when they have the clear legal authority and are acting entirely consistently with their duties and obligations, they sometimes lack the power to actually execute their decisions.

These thoughts have run through my mind these past days, as I followed the drama over the firing and re-hiring of University of Virginia President Teresa Sullivan. As an alum of the University, I care about what occurred, but I don’t pretend to have any inside knowledge or unique insight into the Board of Visitor’s actions. But observing the process I couldn’t help but recognize something that is a fact of everyday life for every association executive working with his or her volunteer board.

I don’t know, but it is very possible that the UVa Board of Visitors was objectively correct and perhaps even obligated by their duty to serve the best interests of The University to take the action they did in forcing Sullivan’s resignation.  Perhaps she was failing to perform her duties in a satisfactory fashion, or failing to act in a manner consistent with the direction set by the duly authorized board.  If that were the case, the board’s action was not only legally correct, but the only responsible one for them to take.  On the other hand, perhaps it was a political or personality thing, which would make the decision more questionable.

But it really doesn’t matter.  Where a for-profit corporation’s board can take an action and implement it with little need to explain or justify itself, a non-profit board faces thousands of stakeholders who feel they have a right to be fully informed if not directly involved in every decision “their” association/institution’s leaders take, and who are not slow to exert what they perceive to be their right of veto.

Like I said, I don’t know how valid or justified the UVa Board of Visitor’s initial action dismissing their “CEO” was.  But thirty-plus years in the association business has taught me that a board needs more than just the legal authority to take action … it needs to get buy-in from enough of its constituency to make the decision stick, and the UVa Board of Visitors clearly failed in this regard.

Having led trade associations, whose boards are made up of individuals accustomed to serving on corporate boards, this can be a particularly hard lesson for association board members to learn.  They sometimes fail to appreciate the difference in governance realities between their own company’s board and the association’s.  I can easily imagine the surprise and genuine confusion of members of the UVa board (from such companies as Morgan Stanley and Google) to the reaction of faculty and students.  “They don’t have all the information we do … why do they think they know better than those of us with all the facts and data in front of us?” Or more angrily, “What gives them the right to usurp the authority we were elected/appointed to exercise as a board?”

The lesson to be learned, is that in the not-for-profit world, position power, legal authority, even being right are insufficient.  Leaders and boards need credibility and stature and trust sufficient to bring those they lead along with them.  Or they face embarrassing failures.

Just ask UVa’s Board of Visitors.