Exploring The Association Between Board Characteristics And Organizational Financial Performance In Nonprofit Organizations

Non-profit organizations play an increasingly important role in our social system,but also faced with financial constraints, and there are great differences in financialPerformance. The previous study made an explanation from the disclosure ofinformation, social networks, and government regulation, didn’t pay full attention tothe role of the board.As the core of the internal governance mechanisms of non-profitorganization，the board is very important. Resource dependence theory suggests thatboards function as a resource for organizations; it can improve organizationalcompetitiveness by attracting resources from the environment. Agency theory posits aconflict relationship between the board and the executives. It is the board’s duty tomonitor the self-interested behavior of management to ensure public interests. Groupdecision theory suggests that the board can enhance the decision-making ability of thenon-profit organizations to complex problems. However, the ability of board isdepending on characteristics of the board, such as board structure.This study explored the association between board characteristics andorganizational financial performance in nonprofit organizations, including the boardstructure (scale, the frequency of meeting, the average attendance rate of meeting,incentive, and the division of work, the number of national staff, the number of seniorofficial, average age, and the proportion of males) and the board speciation.Subjecting to China’s nonprofit organizations information disclosure institution, thesample of this study includes only97foundations, and the data of283U.S. non-profitorganizations.This study found that:(1) In addition to foundations, there is almost no policy on the internalgovernance of social organizations and private non-enterprise units in China. Even ifthe Regulations for the Management of Foundations，the related Provisions on theinternal governance is few. This restricted the development of the board of nonprofitorganization. The Model Non-Profit Corporation Act developed by the American BarAssociation is more perfect, has a very important reference value to China.(2) Foundation’s main income comes from social donations, and the dependenceis very high, the diversification of financing structure is much lower than foundationsin the United States. When the donor market is interfered with accidental factors, the foundation will face large fluctuations of the income and the risk caused by thefluctuation. A significant positive correlation was found between the board scale andnonprofit organizational financial performance, the financial performance of thefoundation with a board more than15persons is better compared with only5-10persons. A large scale of board is stronger of the ability in spanning boundary andabsorbing resources from the environment. Expanding the scale of the board canprovide more information and resources for nonprofit organizations, and enhance theability of nonprofit organizations to control the external environment.(3) The board’s political affiliation has a positive impact on the improvement ofthe financial performance of the nonprofit organization. There is a significant positivecorrelation between the current national staff, the number of senior and nonprofitorganization financial performance, it means that they political network can helpnonprofit organizations improve financial performance, but it may affect theindependence of the board.(4) There is significant negative correlation between the average ages of boardmembers and nonprofit organizational financial performance, but the proportion of50-59has a significant positive correlation with the organization’s financialperformance. In the current environment, the most influential nonprofit organizationsare basically set up by a top-down manner in China, the competent authority controlover the nonprofit organization, the nonprofit organizations subject to more stringentrestrictions governing on the autonomy and independence of the nomination andselection of the board, and therefore, the optimization of the age structure of the boardrestricted in the management system.(5) If the constitution of nonprofit organization in China includes the items onthe dismissal of the board, the degree of the dependent on donation is higher. If thenonprofit organizations clearly define the board member’s obligations in theconstitution, it can produce the expectation effect and improve the organization’sability to raise funds.