The appointment of non-executive directors in non-profit organisations in Australia

Abstract

The recruitment and selection of a member to a board of directors is a largely unexplained and unquestioned process. Generally, non-executive board members in the non-profit sector are unpaid and often appointed via membership of a social network, without any formal recruitment or selection processes. These same board members also play an important and responsible role in the governance and sustainability of a socially responsible non-profit organisation. Hence, there is a real tension between the seemingly informal appointment process and the formal responsibility of such a position. This research aims to shed light on the recruitment and selection processes to Australian boards of directors for non-executive positions in the non-profit sector. The research adopts an interpretivist approach through an analysis of empirical, primary data collected via surveying and interviewing non-profit board members. A survey questionnaire collected demographic information from 65 board members from diverse non-profit organisations. Convenience sampling from publicly available lists of non-profit organizations and directors was used to deploy the demographic questionnaire. Interviews followed with eight board members of non-profit organisations. Thematic analysis was employed to allow for emergence of themes about perceptions of enablers and barriers to the appointment of board membership. The questionnaire indicated that a combination of senior executive and corporate governance experience is a significant enabler of the non-executive recruitment appointment. There was argument against recruiting non-executive directors for their specialist skills alone. Generalist skills that employ strategic thinking are more desirable. Other attributes seen as enablers are business acumen/experience, a capacity to bring a business focus to the non-profit sector and educational qualifications. Passion, to describe a general commitment to both the organisation, and the cause supported by that organisation, is essential. Serving as a non-executive director on a non-profit board is an opportunity to contribute to society in a way that is aligned with the individual's value system, motivation, and passions. Networking capability is a strongly preferred attribute of the non-executive director. There are other networks and network opportunities that may provide opportunity for board appointment. The interviews supported the results of the questionnaire, with most interviewees appointed by word of mouth, at least on the first occasion. Despite some general discomfort regarding the lack of transparency with the word of mouth process that became apparent in the interviews, non-profits continue to use this method of recruitment and selection. The initial recruitment processes, such as job descriptors, person descriptors and so on, utilised by the not-for-profit organisations to identify the key attributes required, reveal that often considerable effort is put into assessing the required attributes of the particular positions to fill board vacancies, prior to commencement of the selection process. The selection processes utilised by these non-profit organisations also reveal that some effort goes into assessing the suitability of the applicants. This often occurs in a semi-formal way such as submission of resumes only, and informal interviews referred to as 'chats'. Personal recommendation from board members regarding the actual 'fit' of the individual continues to be one of the main selection criteria in the appointment process. There is a tendency to 'trial' potential non-executive directors by first recruiting volunteers to board sub committees or board advisory committees. Eventually these volunteers may move on to the board to fill vacancies if seen as appropriate in terms of individual attributes, and their overall 'fit'. The appropriateness of remuneration for non-executive directors in a typically voluntary task is also controversial amongst the respondents surveyed and interviewed. There is discussion in the sector to remunerate directors involved in more complex non-profit organisations as this affects the acceptance of positions on these boards. The amount of time required to fulfil the role of the non-executive director also restricts the capacity of individuals to accept these roles. An additional obstacle to accepting an appointment includes an increasing external pressure for corporate governance requirements in non-profits. The increasing level of personal risk and damage to reputations because of adverse reactions to board decisions is a significant concern, and a deterrent to prospective directors.

Date of Award	2009
Original language	English