Chapter 4: Nonprofit Governing Boards

Test Bank

Multiple Choice

1. Elected boards are MOST common in ______.

A. public organizations

B. charitable nonprofits

C. member-serving and advocacy organizations

D. organizations headed by a chief executive officer

Learning Objective: 4-1: Describe various types of boards.

Cognitive Domain: Knowledge

Answer Location: Elected Boards

Difficulty Level: Easy

2. In a self-perpetuating board, new members are selected by ______.

A. a selection committee

B. the chief executive officer

C. the existing members of the board

D. the membership of the organization

Learning Objective: 4-1: Describe various types of boards.

Cognitive Domain: Knowledge

Answer Location: Self-Perpetuating Boards

Difficulty Level: Easy

3. An ex officio seat on a board is held by ______.

A. a randomly selected individual

B. the highest ranking officer in the organization

C. an individual appointed by the most senior member of the board

D. an unappointed individual who holds the seat by virtue of their position

Learning Objective: 4-1: Describe various types of boards.

Cognitive Domain: Knowledge

Answer Location: Appointed and Hybrid Boards

Difficulty Level: Easy

4. Financial penalties that punish individuals who permit improper transgressions are called ______.

A. means to an end

B. give and get policies

C. intermediate sanctions

D. excess benefit transactions

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: Intermediate Sanctions

Difficulty Level: Easy

5. Establishing the nonprofit’s mission is the responsibility of the organization’s ______.

A. board

B. members

C. chief executive officer

D. human resources department

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: The Governing Board’s Functional Responsibilities

Difficulty Level: Easy

6. When a board is operating in the fiduciary mode, it is concerned with the ______.

A. implementation of new programs

B. stewardship of the organization’s assets

C. achievement of the organization’s long-term goals

D. evaluating the chief executive officer’s performance

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: The Governing Board’s Functional Responsibilities

Difficulty Level: Easy

7. Which organizational model places the board at the top of the hierarchy and the chief executive officer as an agent?

A. social-constructionist

B. purposive-rational

C. board-centered leadership

D. the policy governance

Learning Objective: 4-4: Summarize prominent models of the board–CEO relationship.

Cognitive Domain: Knowledge

Answer Location: Herman and Heimovics: Psychological Centrality and Board-Centered Leadership

Difficulty Level: Easy

8. According to BoardSource, exceptional boards ensure congruence between its ______.

A. decisions and core values

B. direction and its financial goals

C. volunteers and members of the board

D. governance duties and organizational priorities

Learning Objective: 4-7: Identify board best practices..

Cognitive Domain: Knowledge

Answer Location: The Search for Best Practices

Difficulty Level: Easy

9. According to Worth, today’s boards are expected to raise money and ______.

A. motivate the nonprofit organization's members

B. be more aggressive in monitoring performance

C. cooperate with the organization's staff and volunteers

D. increase communication levels between the board and the community

Learning Objective: 4-6: Explain the roles of the board chair, governance committee, and board professionals.

Cognitive Domain: Knowledge

Answer Location: The Challenge of Nonprofit Governance

Difficulty Level: Easy

10. Which type of board is commonly found in public organizations?

A. elected

B. advisory

C. appointed

D. self-perpetuating

Learning Objective: 4-1: Describe various types of boards..

Cognitive Domain: Knowledge

Answer Location: Appointed and Hybrid Boards

Difficulty Level: Easy

11. What board duty is defined as members putting the interests of the organization above their personal interests?

A. care

B. loyalty

C. obedience

D. selflessness

Learning Objective: 4-5: Summarize theories regarding board behavior.

Cognitive Domain: Knowledge

Answer Location: Care, Loyalty, Obedience

Difficulty Level: Easy

12. What legal concept states officers cannot unreasonably benefit from the organization’s funds?

A. obedience

B. private inurement

C. conflict of interest

D. intermediate sanctions

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: Care, Loyalty, Obedience

Difficulty Level: Easy

13. An excess benefit transaction occurs when ______.

A. a service contract exceeds financial limits

B. an organization exceeds its fundraising goals

C. an organization goes above and beyond to meet its mission

D. employee compensation exceeds the value of services provided

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: Intermediate Sanctions

Difficulty Level: Easy

14. In 2009, the Internal Revenue Service revised which form to be a financial and governance report?

A. Form 1040V, Payment Voucher

B. Form 1040, U.S. Individual Income Tax Return

C. Form 1023, Application for Recognition of Exemption

D. Form 990, Return of Organization Exempt From Income Tax

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Comprehension

Answer Location: Form 990

Difficulty Level: Medium

15. Which board responsibility requires the MOST effort?

A. administering benefits

B. maintaining salary levels

C. raising philanthropic funds

D. monitoring moral behaviors

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: Ensure Sound Financial Management and the Organization’s Financial Stability

Difficulty Level: Easy

16. In Thornton’s 2012 survey of nonprofit boards, what activity was identified as the most important responsibility of boards?

A. accountability

B. strategic planning

C. ensuring effective programs

D. maintaining the organization’s reputation

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities

Cognitive Domain: Knowledge

Answer Location: Establish Standards for Organizational Performance and Hold the Organization Accountable

Difficulty Level: Easy

17. In Carver’s policy governance model, Carver argues boards should lead focusing their attention on establishing ______.

A. policies

B. advisory groups

C. management positions

D. performance evaluations

Learning Objective: 4-4: Summarize prominent models of the board–CEO relationship.

Cognitive Domain: Knowledge

Answer Location: Carver’s Policy Governance Model

Difficulty Level: Easy

18. Chait, Ryan, and Taylor suggest nonprofit boards focus their attention on ______.

A. policy

B. growth

C. monetary goals

D. critical issues facing the organization

Learning Objective: 4-4: Summarize prominent models of the board–CEO relationship.

Cognitive Domain: Knowledge

Answer Location: Chait, Ryan, and Taylor: Governance as Leadership

Difficulty Level: Easy

19. Who did Herman and Heimovics find as being responsible for the organization’s success or failure?

A. board

B. shareholders

C. marketing department

D. the chief executive officer

Learning Objective: 4-4: Summarize prominent models of the board–CEO relationship.

Cognitive Domain: Knowledge

Answer Location: The Board and the CEO

Difficulty Level: Easy

20. What organization assembled a panel of experts to identify best practices for effective governance in organizations?

A. BoardSource

B. Independent Sector

C. Smithsonian Institution

D. Internal Revenue Service

Learning Objective: 4-7: Identify board best practices.

Cognitive Domain: Knowledge

Answer Location: The Search for Best Practices

Difficulty Level: Easy

21. The chair of a nonprofit board of directors asked the chief executive officer to provide a report regarding fund-raising expenses. The chair is practicing which best practice?

A. revitalization

B. strategic thinking

C. continuous learning

D. ethos of transparency

Learning Objective: 4-7: Identify board best practices.

Cognitive Domain: Comprehension

Answer Location: The Search for Best Practices

Difficulty Level: Medium

22. A nonprofit board asked an outside consulting organization to assess the nonprofit’s program performance. Which best practice is the board applying?

A. revitalization

B. results-oriented

C. strategic thinking

D. independent-mindedness

Learning Objective: 4-7: Identify board best practices.

Cognitive Domain: Comprehension

Answer Location: The Search for Best Practices

Difficulty Level: Medium

23. A lawyer retired from a law firm and then volunteered to oversee a nonprofit’s legal records. The lawyer is performing the duties of a ______.

A. bookkeeper

B. corporate clerk

C. sergeant-at-arms

D. corporate secretary

Learning Objective: 4-6: Explain the roles of the board chair, governance committee, and board professionals.

Cognitive Domain: Comprehension

Answer Location: Board Professionals

Difficulty Level: Medium

24. A nonprofit board hired a consultant to help the directors identify new ways to improve organizational performance. According to Chait, the board is operating in what type of mode?

A. strategic

B. fiduciary

C. evaluation

D. generative

Learning Objective 4-4: Summarize prominent models of the board–CEO relationship.

Cognitive Domain: Comprehension

Answer Location: Chait, Ryan, and Taylor: Governance as Leadership

Difficulty Level: Medium

25. A nonprofit organization’s finance committee is listening to the advice of a financial expert on how to manage the organization’s investments. The board is practicing which duty?

A. care

B. loyalty

C. obedience

D. investment

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Comprehension

Answer Location: Care, Loyalty, Obedience

Difficulty Level: Medium

26. A board of directors is debating if a proposed new program falls within the organization’s mission. The board is applying which type of duty?

A. care

B. loyalty

C. obedience

D. investment

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Comprehension

Answer Location: Care, Loyalty, Obedience

Difficulty Level: Medium

27. A nonprofit board is establishing ground rules regarding what type of fund-raising efforts would not be allowed. The board is setting a policy that Carver would refer to as a/an ______.

A. legal means

B. illegal activity

C. means to the end

D. ends to be achieved

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Comprehension

Answer Location: Care, Loyalty, Obedience

Difficulty Level: Medium

28. ______ means a person is perceived by himself and the board as the organization’s formal authority.

A. Social rationalism

B. Emergent perception

C. Purposive rationality

D. Psychological centrality

Learning Objective: 4-4: Summarize prominent models of the board–CEO relationship.

Cognitive Domain: Knowledge

Answer Location: Herman and Heimovics: Psychological Centrality and Board-Centered Leadership

Difficulty Level: Easy

29. Another name for a nominating committee is a/an ______.

A. naming committee

B. ad hoc committee

C. governance committee

D. stewardship committee

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: Governance Committee

Difficulty Level: Easy

True/False
1. In the study Daring to Lead, researchers found a negative correlation between the amount of time the chief executive officer spends with the board and chief executive officer and board member satisfaction.

Learning Objective: 4-4: Summarize prominent models of the board–CEO relationship.

Cognitive Domain: Knowledge

Answer Location: Herman and Heimovics: Psychological Centrality and Board-Centered Leadership

Difficulty Level: Easy

2. Chait writes that nonprofit boards should manage the organizations they serve.

Learning Objective: 4-4: Summarize prominent models of the board–CEO relationship.

Cognitive Domain: Knowledge

Answer Location: Chait, Ryan, and Taylor: Governance as Leadership

Difficulty Level: Easy

3. The Panel on the Nonprofit Sector issues reports recommending practices similar to those outlined in the Sarbanes–Oxley Act.

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: Sarbanes–Oxley Act

Difficulty Level: Easy

4. Governing boards have the ultimate responsibility for ensuring an organization serves its mission.

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: Chapter Introduction

Difficulty Level: Easy

5. Self-perpetuating board members are elected by the organization’s membership.

Learning Objective: 4-1: Describe various types of boards.

Cognitive Domain: Knowledge

Answer Location: Self-Perpetuating Boards

Difficulty Level: Easy

6. Hybrid boards have elected and appointed members.

Learning Objective: 4-1: Describe various types of boards..

Cognitive Domain: Knowledge

Answer Location: Appointed and Hybrid Boards

Difficulty Level: Easy

7. Elected boards help ensure that organizations are responsive to member needs.

Learning Objective: 4-2: Explain the advantages and disadvantages of various types of boards.

Cognitive Domain: Knowledge

Answer Location: Elected Boards

Difficulty Level: Easy

8. Nonprofits file a Form 990 with the Internal Revenue Service when their annual revenues exceed $100,000.

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: Form 990

Difficulty Level: Easy

9. A board governs the nonprofit organization, while the chief executive officer manages the organization.

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: Chait, Ryan, and Taylor: Governance as Leadership

Difficulty Level: Easy

10. Advisory councils have no legal responsibilities within a nonprofit organization.

Learning Objective: 4-1: Describe various types of boards..

Cognitive Domain: Knowledge

Answer Location: Advisory Boards and Councils

Difficulty Level: Easy

11. One responsibility of a nonprofit board member is to supervise volunteers.

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: The Governing Board’s Legal Responsibilities

Difficulty Level: Easy

12. The board responsibility of “obedience” means the board’s members need to do what the chief executive officer asks them to do.

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: The Governing Board’s Legal Responsibilities

Difficulty Level: Easy

13. The Sarbanes–Oxley Act has a provision protecting whistle-blowers.

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Knowledge

Answer Location: Sarbanes–Oxley Act

Difficulty Level: Easy

Short Answer

1. Outline the pros and cons of a nonprofit organization electing its board members. Discuss the challenges a chief executive officer in such an organization might face.

Learning Objective: 4-2: Explain the advantages and disadvantages of various types of boards.

Cognitive Domain: Comprehension

Answer Location: Elected Boards

Difficulty Level: Medium

2. Examine the three legal duties of a nonprofit board.

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Analysis

Answer Location: The Governing Board’s Responsibilities

Difficulty Level: Hard

3. Give an example of a conflict of interest that may occur within a nonprofit organization. Explain how a well-managed organization might handle such a conflict.

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Application

Answer Location: Care, Loyalty, Obedience

Difficulty Level: Medium

4. Analyze policies requiring board member participation in fundraising.

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Analysis

Answer Location: The Governing Board’s Responsibilities

Difficulty Level: Hard

5. Select a nonprofit organization and apply the four areas of Carver’s model of policy governance regarding the development and maintenance of policies.

Learning Objective: 4-4: Summarize prominent models of the board–CEO relationship.

Cognitive Domain: Application

Answer Location: Carver’s Policy Governance Model

Difficulty Level: Medium

6. Identify and examine the six behaviors that Herman and Heimovics observed among the effective, board-centered executives they studied.

Learning Objective: 4-4: Summarize prominent models of the board–CEO relationship.

Cognitive Domain: Analysis

Answer Location: Herman and Heimovics: Psychological Centrality and Board-Centered Leadership

Difficulty Level: Hard

7. Examine the provisions of the Sarbanes–Oxley Act that apply to nonprofit organizations.

Learning Objective: 4-3: Explain the governing board’s legal and functional responsibilities.

Cognitive Domain: Analysis

Answer Location: Sarbanes–Oxley Act

Difficulty Level: Hard

8. Compare and contrast the various types of boards discussed in Chapter 4.

Learning Objective: 4-1: Describe various types of boards..

Cognitive Domain: Analysis

Answer Locations: Types of Governing Boards

Difficulty Level: Hard

9. Draw a diagram of Bradshaw's five board configurations.

Learning Objective: 4-5: Summarize theories regarding board behavior.

Cognitive Domain: Knowledge

Answer Locations: Explaining Board Behavior

Difficulty Level: Easy

10. Differentiate between the roles of a nonprofit board chair, governance committee, and board professionals.

Learning Objective: 4-6: Explain the roles of the board chair, governance committee, and board professionals.

Cognitive Domain: Analysis

Answer Locations: Managing Nonprofit Boards

Difficulty Level: Hard