ACNC Guide & NBER Research: A Critical Review of Non-Profit Governance

This essay provides a critical review of two articles: the Australian Charities and Not-for-profit Commission's (ACNC) "A Guide for Charity Board Members" and the National Bureau of Economic Research's (NBER) "The Governance of Not-for-Profit Firms." The review examines the arguments presented by both articles regarding governance standards and challenges within non-profit organizations. It explores the implications of weak governance, the roles and responsibilities of board members, and the importance of governing documents in guiding non-profit operations. The analysis highlights the similarities and differences in their perspectives, particularly in terms of evidence and recommendations for effective governance. The essay concludes that while non-profits face unique governance challenges due to the absence of clear 'owners' and the need to balance stakeholder interests, strong leadership, well-defined roles, and adaptable governance structures are essential for their success and societal impact.

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CRITICAL REVIEW BETWEEN
(ACNC) AUSTRALIAN CHARITIES AND NOT-FOR-PROFIT COMMISSION ON
“A GUIDE FOR CHARITY BOARD MEMBERS”
AND
THE NATIONAL BUREAU OF ECONOMIC RESEARCH ON
“THE GOVERNANCE OF NOT-FOR-PROFIT FIRMS”
By (Name)
Course
Instructor
Institution
Location
Date

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Introduction
. The National Bureau of Research takes a look at the implication of the lack of, or weak
governance institutions on nonprofit behavior. Their main aim is to understand the motives of the
major players in the nonprofit sector and what effect do their relations have on nonprofit firms.
On the other hand, The Australian Charities and Nonprofit Commission have a definite article
outlining Governance Standards for good governance of nonprofit organizations. They also
mention their role extending beyond providing standards but to support good governance.
For the articles, we ask ourselves the question; Is there weak governance in non-profit
organizations and are there governance models or commissions that can aid in governing and
guiding of non-profit organizations? This paper is a critical review of the articles mentioned
above by the Australian Charities and Non-profit Commission (ACNC) and The National Bureau
of Research on their views about the governance of nonprofit organizations.
THE MANAGEMENT OF NOT-FOR-PROFIT FIRMS
Weak Governance
The boards have formal responsibility for the overall control in any organization while
management is just meant to carry out the duties as they have the skills, time, infrastructure, and
resources. The administration has access to power, which guides in carrying out responsibilities
but the danger poses in organizations being run to further the manager's interests rather the single
vision and mission of the entities they're meant to serve. (Spear, R., Cornforth, C. and Aiken, M.,
2009). Nonprofit organizations, just as for-profit organizations, may struggle with decisions to
maximize the founders' welfare just as profit-making organizations struggle with maximization

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of shareholders' wealth. In the case of nonprofits, the interests of the board members may
outweigh the benefits of the founders.
The CEO may make decisions based on the top members in the organization, which
slowly turns the organization to almost resembling a workers' cooperative, where a cooperative
organization may mean that the organization operates where every worker-owner takes part in
the decision-making process in an orderly fashion (Kotter, J.P., 2012). There may be two reasons
for this form of governance, the first being that the CEO may be picked from among the leading
members of the organization. Hospitals are often run by doctors. Universities are usually run by
professors and museums are run by curators (Edward L. Glaeser 2003). The second may be that
the members' power to make the CEO's life more difficult or easy. The sector may still work if
they need to compete in the market for donations which helps keep them in line despite their
weak governance.
A DIRECTIVE FOR CHARITY BOARD MEMBERS
A guide for good governance
The board of directors or trustees are the people in charge of providing leadership and
direction for the organization, helping it stay focused on its objectives through managing of the
nonprofits' assets and ensuring compliance with legal, operational and ethical requirements for
the organization. A proper management ensures that the daily operations of a charity steered
towards the achievement of the charity's purpose. (Dr. Gary Jones, 2018)
Underpaid public board members and volunteers sacrifice themselves in support of what
they believe. There is inadequate space for sufficient credit to the works created by members of
the board in any given community annually. The self-sacrifice of board members has achieved

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formidable tasks. Determination of board members has overcome seemingly emerging barriers.
The impossible has been made possible through the board members (Carver, J., 2011). There are
positive experiences that come with being a board member of a charity organization. It allows
one to make a real difference in the community, but it also comes with responsibilities.
For the success of a charity, board members should know their duties and roles in
helping the charity achieve its goals (Dr. Gary Jones, 2018). Generally, as a nonprofit
organization is being set up, there is a governing document that should guide how the
organization should operate, and the founders often provide it. This includes how the
organization should be run, a governance structure, the mission and vision statements that set out
the organization's purpose (Allison, M. and Kaye, J., 2011). These help build a solid foundation
for the organization and may vary from one nonprofit organization to the next depending on the
need they serve in the society and how the members would like to help their mandate.
SIMILARITIES AND DIFFERENCES
Similarities
Non-profit organizations or charities are business entities geared towards furthering a
particular social cause or advocating for mutual interests. In reality, as a business entity, a non-
profit organization can make a profit. Their defining element lies in the fact that their advantage
is not used to benefit the organization's stakeholders or members financially, instead it is used to
achieve their set goals or mandate towards society. Non-profit organizations may tend to enjoy
tax privileges such as tax deductions from donations made to the organization among other tax
privileges which vary depending on the location and laws of the land in which the Non-profit is
either registered or operating in.

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There are four groups of people involved in the business of a charitable organization: The
board members, the workers which consist of the staff members and volunteers, the donors, and
the customer. Necessarily, non-profit organizations do not have owners (Geer, Maher, and Cole,
2008). The owners are the four players. The board members are the governing body of the non-
profit who can also be referred to as trustees, governors, council, or committee. They do not own
shares in the organization. The board of directors or trustees are the people in charge of
managing the nonprofit's assets and ensuring the organization serves its stated purpose (Carver,
2011).
Board members consist of either people elected by the organization's members or an
appointment to be a member of the organization's managing body, for instance under legislation
or through a trust deed (Burke, W.W., 2017). By being appointed does not guarantee a person the
power to bind the organization, for example, signing a contract on behalf of the organization.
Only the board as a group has this power (Dr. Gary Jones, 2018).
Differences
Board members arrive at the table with dreams, they have vision and values. In many
cases, their passionately held beliefs and sincere desire to make a difference compel them to
board members in the first place. The roles of boards and management are mutually dependent,
and the boundaries between the two are often necessarily somewhat blurred (Rochester, 2003).
Instead of an impassioned discussion about the changes to be produced in the world, board
members are ordinarily found passively listening to committee agendas which are likely to be
filled with staff material masquerading as board work (Carver, J., 2011).

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An organization's legal and governance structure dictates many of the Non-profit's
powers, objectives, and processes. The governing documents help ensure the organization is run
well and on track. It is vital that the Non-profit's legal and governance structure accurately reflect
how it operates. Choosing a suitable legal structure for any Non-profit organization is a complex
activity that requires specialist legal advice. According to governance advisors, poor decisions
come back to haunt several Non-profit organizations (Spear, R., Cornforth, C., and Aiken, M.,
2009).
Conclusion
There are governance challenges experienced in operation and running of nonprofit
organizations. First is in the structure of Non-profit organizations whereby there are no ‘owners'
but quite several stakeholders involved. Rather than having a clear, concise voice as in for-profit
businesses, the needs of the different stakeholders in a Non-profit need to be understood and met;
This then runs the risk of turning into a worker's cooperative when all the voices involved count.
The founders are the foundation of the organization. At the onset, they are the ones to set
governing structures that clearly define roles and the mission of the organization and the role
they play in the society. Flexibility should also be a critical point. Just as the society grows and
changes thus needs and the mode of execution may need to change as well. This may not
necessarily make the governance weak but adaptable. Despite the challenges which require
immediate action, what truly matters, in the end, is the value they offer the society.

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Bibliography
Allison, M. and Kaye, J., 2011. Strategic planning for nonprofit organizations: A
practical guide and workbook. John Wiley & Sons
Burke, W.W., 2017. Organization change: Theory and practice. Sage Publications
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and public organizations (Vol. 6). John Wiley & Sons.
Drucker, P., 2012. Managing the non-profit organization. Routledge.
Dr. Gary Jones, C 2018, A Guide For Charity Board Members.
Edward L. Glaeser, C 2003, Department of Economics, The Governance of Not-For-
Profit Firms.
Geer, B.W., Maher, J.K. and Cole, M.T., 2008. Managing nonprofit organizations: The
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