The First Word on Governance

By: Mark Athitakis

Why Kenneth N. Dayton's advice about nonprofit boards endures after 25 years.

Editor's note: This article originally appeared in the January 2010 Associations Now Interactive Extra.

The next time you're concerned about your association's dysfunctional board or executive director—or both—consider taking some inspiration from your nearest Target store. From 1969 to 1976 the CEO of the Dayton-Hudson Corporation (now Target Corporation) was Kenneth N. Dayton, who championed principles of good corporate governance and ethics before such discussions became commonplace.

Later, as a regular donor to and trustee of arts organizations, the retail executive adapted his principles for nonprofits. His 1986 essay, "Governance Is Governance," has proven to be a landmark document, in part because its guidance is as simple as the title suggests. By stressing the distinct roles of managers and board members, Dayton strove to bring order out of chaos, explaining in just a handful of pages how the board defines the direction of the nonprofit organization and how the executive director implements it.

Click here to read a "Governance Is Governance." [PDF]

In the mid-80s, that simple but essential separation was a novel idea for many nonprofits. So was the notion that nonprofits deserved to be run as well as any corporation—a message that bears repeating, according to Michela M. Perrone, Ph.D., president of nonprofit consultancy MMP Associates and professor of nonprofit management at Georgetown University. "Sometimes nonprofit leaders see themselves as second-class citizens or the foster children of our community," she says. "So the fact that he's saying, 'Look, being a board member of the Dayton-Hudson Corporation is the same thing as being the board member of your community soup kitchen'—it adds dignity to the nonprofit sector. Coming from a corporate CEO, it carries a lot a weight."

Click to hear more from Michela M. Perrone on the four elements of board-CEO relations. [MP3]

But Dayton (who died in 2003) was also mindful of the particular challenges for nonprofits when it came to board work. Specifically, he understood the importance of volunteering, not just to boards but to the organization as a whole, and underlined it in his essay: "Individuals should not be invited to serve on such a board unless they are totally willing to undertake the volunteer side as well as the governance side of a trustee's responsibility."

Another likely reason why the article has endured is that it challenges the executive director to draw bright lines quickly. The board, board chair, and executive director should each have mutually agreed-upon position descriptions, Dayton writes, and the executive should insist on presenting them at the first board meeting. "Pretty gutsy, eh?" Dayton wrote at the time, but Richard Male, president and CEO of Denver, Colorado-based nonprofit consultancy Richard Male Associates, suggests that Dayton's recommendation anticipated the competitive environment of today's nonprofits.

"There's a lot more competition with for profits now," says Male. "When Ken Dayton wrote the article, there wasn't a lot of encroachment among nonprofits and for profits. Now you're seeing very significant numbers of for profits in the mental-health field buying out nonprofit hospitals and in schools. Nonprofits are a lot more vulnerable than they have been in the past, so I think boards need to be much more on top of it."

Click to hear more from Richard Male on why Dayton's essay remains relevant. [MP3]

Dayton's essay isn't gospel. For instance, Perrone feels Dayton lends too much power to the executive to manage the board. "I encourage my clients and the boards that I work with to not have the CEO manage them," she says. "I say that the board is an entity that has to learn to manage itself."

Also, more flexible theories of nonprofit leadership have emerged since "Governance Is Governance" was published. Edward A. Martenson, chair of the theater management department at the Yale School of Drama and former executive director of Minneapolis' Guthrie Theatre (to which Dayton was a donor), says the essay "wasn't the last word on governance—it was the first word on governance." Martenson believes that "as time has gone on—and I think that Ken would agree—it's possible to have a more supple reading of that [which] doesn't require one to think that one person only does management and another person only does governance. A group of people can do management in one hour and governance in another hour."

Click to hear more from Edward A. Martenson on breaking Dayton's rules. [MP3]

But, Martenson adds, such changes shouldn't diminish the article's importance and continuing relevance. "Implicitly and explicitly, he was saying that charitable organizations were complex entities that deserved to be governed well," he says. "That was a very energizing thing to hear at that time. I think that since then the quality of governance in our organizations has risen considerably. I don't think that anybody should for a moment underestimate the extent to which that was the result of Ken Dayton's influence."

Mark Athitakis is senior editor at Associations Now. Email: [email protected]

Mark Athitakis

Mark Athitakis is a contributing editor to Associations Now.