Document Type

Article

Publication Title

Ohio State Law Journal

Volume

83

Publication Date

2022

Keywords

nonprofit corporations, governance, board capital

Abstract

This Article addresses a critical gap in the literature and current debates about the composition of nonprofit boards. The law of fiduciary duties and nonprofit governance best practices do not provide sufficient guidance on how to compose boards to empower the communities they serve. And even as the corporate sector is seizing on current important moments to debate the inclusion of employees and racial and ethnic minorities on corporate boards, nonprofit boards are largely left out of these debates. The Article introduces the concept of board capital, which originated from the for-profit management literature, but has gained a stronghold in the nonprofit boards’ literature, to provide guidance on how to compose boards of nonprofit organizations that serve vulnerable, often minority communities. Board capital comprises financial, social, and human capital and highlights the importance of having board directors who as a group, possess the skills, knowledge, and professional and personal experiences to not only provide legal and finance expertise, and funding, but also provide strategic advice informed by knowledge of the client population. The Article supports its normative assertions with the empirical example of the 9000+ boards of directors of public interest legal organizations (PILOs). Empirical findings show that boards in these legal nonprofit organizations are largely assembled to focus on legal expertise and fundraising at the expense of social capital affinity with communities served, and human capital skills and characteristics to understand the needs of the client population and be racially and ethnically diverse. A majority of the boards comprise law firm and corporate lawyers who can be far removed from the legal and social issues the organizations represent. For other nonprofit organizations, many board members come from the business sector. This misplaced emphasis may be undercutting nonprofits’ abilities to serve their stated mission effectively. Board members are more likely to hew to their own expertise and abilities to raise financial capital. Boards of directors also tend to replicate themselves, which undermines human capital knowledge of the client population and racial and ethnic diversity. The Article makes suggestions for increasing human capital, particularly expertise on the client population and racial diversity on nonprofit boards. It also addresses board capital implications for for-profit boards.

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