Selecting Your South Dakota Nonprofit Board of Directors
When you set up your South Dakota nonprofit, part of the process involves selecting a board of directors. This team of people serves as the governing body of your organization. Ideally, your board should include directors who don’t already work as part of your management team — the paid staff running your South Dakota nonprofit’s daily business operations.
While some small nonprofits may include board members on their management teams, most aim to separate their boards of directors from their management personnel. The majority of South Dakota nonprofit board members serve as unpaid volunteers. However, a small number of South Dakota nonprofits — usually large, complex organizations like health care systems, large foundations, or art institutions — do pay their board members.
The Board's Purpose
The purpose of a board of directors is to help your South Dakota nonprofit organization stay focused on its charitable mission by ensuring all business decisions align with that mission. This team will evaluate each decision and action based on your South Dakota nonprofit’s mission, strategy, and goals.
Board members have formal legal responsibilities as well as other tasks they should, ideally, complete while serving in this role. It’s important to ensure your board members understand their responsibilities and fully commit to them when they accept this position.
Different states have different laws about board member governance and conduct. Because nonprofit organizations must incorporate in the state in which they base their headquarters, it’s important to check South Dakota's specific rules. However, every nonprofit’s board of directors — nationwide — must ensure their organization’s members and staff conduct themselves and the activities of the nonprofit legally and ethically. Most states follow the three key principles of nonprofit corporation law: duty of care, duty of loyalty, and duty of obedience. Here’s a brief overview of each:
- Duty of Care: Because board members actively participate in a nonprofit’s decision-making process, they must exercise “reasonable care” when making decisions. The law defines “reasonable care” as what an “ordinarily prudent” person would do in a similar situation.
- Duty of Loyalty: Board members must always act in the best interests of the nonprofit and avoid using information gained from their position for any personal gain. They also must avoid conflicts of interest as well as the appearance of any such conflicts.
- Duty of Obedience: Board members must act in line with the nonprofit’s mission and goals. That includes ensuring the organization abides by the law, approving all key contracts, attending most (if not all) board meetings, and hiring and supervising the executive director who then hires the staff. They also must ensure the nonprofit stays financially solvent by evaluating its financial policies, approving budgets, and reviewing financial reports.
Depending on your South Dakota nonprofit’s needs, you may task board members with other responsibilities like fundraising, attending certain events, or completing a certain number of volunteer hours. Many South Dakota nonprofit organizations now expect board members to contribute to their fundraising efforts. While board members don’t need to donate large sums of money themselves, most must actively participate in their nonprofit’s fundraising activities.
While individual board members may serve as elected officers within a nonprofit’s board of directors, some organizations choose to elect outside parties to act as officers. The elected officer positions on a board of directors include the president, vice president, treasurer, and secretary. Here’s an overview of each officer’s role:
- President: The president leads the board and supervises its business and affairs. This individual should, therefore, have strong leadership skills as well as a deep commitment to the nonprofit’s mission. Ideal candidates for this role also will have strong relationships throughout the community they can leverage to help promote the nonprofit’s mission and goals
- Vice President: The vice president fills the president’s shoes whenever the president is unavailable. In the event the president steps down or reaches the role’s term limit, this person usually serves as the next president. Some nonprofits’ bylaws even mandate that their vice president will become their next president.
- Treasurer: The treasurer keeps track of a nonprofit’s receipts, spending, and overall financial health. This officer informs the other board members of the nonprofit’s financials on a regular basis. The treasurer, however, does not have the same responsibilities as a nonprofit’s bookkeeper. The bookkeeper records the organization’s income and expenses, and prepares its financial statements. In contrast, the treasurer reports on the big picture. Ideal candidates for treasurer should feel comfortable working with numbers and interpreting financial reports as well as providing strategic counsel on financial decisions.
- Secretary: The secretary takes notes and prepares the minutes for each board meeting. This individual also informs board members about future meetings and updates. In addition, the secretary keeps track of the nonprofit’s activities and ensures those activities align with the organization’s bylaws.
Your South Dakota nonprofit’s bylaws also should set guidelines for board member requirements. You may potentially have as many or as few board members as you wish, but each member must bring something unique and useful to the table.
South Dakota Nonprofit Board Member Requirements
The organization structure of your nonprofit in South Dakota MUST include:
- At least 3 directors not related to each other
- A president
- A vice president
- A secretary
- A treasurer
NOTE: The same person cannot hold both the president and secretary positions.
Recruiting the Right People
So how do you select the right people for your South Dakota nonprofit’s board of directors? While no formal rules exist, you should keep a few things in mind as you evaluate candidates. First, each potential board member should demonstrate a strong commitment to your nonprofit’s mission. Second, you ideally want to create a diverse board of directors that includes people from different backgrounds and who possess different strengths that complement each other.
Here are four key factors to consider in potential board members:
- Their Knowledge of Your Mission: Because nonprofits exist to provide a public benefit or service, your board members must possess a deep knowledge of — and passion for — your organization’s mission. This is important because your nonprofit’s activities directly impact the community and/or those who benefit from your organization’s programs or services. Board members with a thorough understanding of your mission have the ability to make decisions that not only consider your beneficiaries’ needs but also help achieve your nonprofit’s overall goals.
- Their Professional Background: Choosing a diverse board of directors with members from different backgrounds is the best practice because this approach creates a board with complementary skills and assets. For example, you may want someone with an accounting or finance background as well as a South Dakota-based attorney. Accountants or people with experience in a financial profession can advise on financial decisions while attorneys can help review and draft contracts. If your South Dakota nonprofit relates to the arts, you may want to enlist someone from the music industry with a professional network that can help your efforts. If your organization provides drawing or painting lessons for students, you might consider a parent or a teacher. Look for people with unique perspectives that will help your board make decisions that consider your nonprofit as a whole.
- Their Availability: At a minimum, your board of directors should participate in one annual meeting. Depending on your organization’s needs, your board may choose to meet biannually, quarterly, or monthly. Some South Dakota nonprofits also conduct committee meetings that certain board members must attend. In addition, board members may need to appear at specific engagements throughout the year. Therefore, be sure to choose individuals who understand the time commitment and can commit to meeting or exceeding the time requirements of a board member for your South Dakota nonprofit.
- Their Conflicts of Interest (If Any): To ensure your board of directors makes decisions that prioritize your mission and your beneficiaries’ needs, select individuals without any conflicts of interest with your nonprofit. For example, pass on potential board members who have a conflict of interest with anyone on your management team or with other key personnel. Candidates for your board of directors also should have strong values and personal integrity because you want to avoid people who might place their own personal interests ahead of your nonprofit’s.
Introducing New Members to Your Board and Organization
When introducing new board members, be sure each individual fits in well with the current board members and fully understands your South Dakota nonprofit’s mission, goals, history, current condition, and their responsibilities. They should come to their first meeting ready to take an active role.
A detailed orientation process can help prepare new board members for success. Your orientation should include a handbook that outlines all the important information pertaining to your organization, including its mission statement, bylaws, financial data, organizational framework, committee job descriptions with contact details for current chairs and co-chairs, board member duties and responsibilities, and any other helpful documentation. In addition, consider developing an orientation presentation that features key speakers as well as hosting a meet-and-greet for all board members — past and present.
Your new board member orientation process also should include introducing those individuals to your organization as a whole. For example, take new board members on a tour of your facilities and use that tour as an opportunity to introduce them to key staff and acquaint them with key initiatives and programs. Be sure to also share the news in your South Dakota nonprofit’s newsletter and/or website to update everyone involved with your organization about the new board members.
Selecting a board of directors is a critical step in establishing your South Dakota nonprofit because this team makes important decisions for your organization. Your board should include a diverse set of people with different backgrounds who can contribute unique perspectives and/or skills to your organization. Because board members help keep a nonprofit aligned with its mission and goals, a strong board can help propel your organization toward a successful future.