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Abstract

Nonprofit organizations are prevalent in today’s economy, and many are governed by individuals who have been chosen on the basis of their advocacy of or contributions to various nonprofit causes rather than on the basis of business experience or acumen. Yet effective nonprofit governance, while presenting concerns unique to nonprofits, also presents many of the same concerns as does governance of for-profit entities. This article seeks to provide a primer for nonprofit organizations that need to recruit effective governance talent. First, we discuss the nature of nonprofits, their impact on the business landscape, and their similarities to and differences from for-profit entities. We then establish the importance of effective nonprofit governance by presenting a number of high-profile scandals that resulted from ineffective governance. We provide an overview of the state and federal laws that govern nonprofit organizations and that allow for them to acquire and maintain tax exempt status. We then discuss concerns and variables that drive board structure and composition. Finally, we conclude with a process and matrix template to assist nonprofit organizations in assessing their current boards as well as identifying needed skills and expertise to guide organizations in recruiting candidates with the optimal mix of knowledge and experience.

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