Reflections on the Challenges of Governance in Non-Profit Organizations


The structure and legal requirements of a Non-profit organization depend on where it will operate. In Canada, both federal and provincial regulations operate.  Canada is a federal jurisdiction with ten provinces and three territories. There are no statutory requirements under either federal or provincial law governing the legal form in which a not-for-profit organization (NPO) must be organized. The most common legal forms are: 

  1. “Non-share” (membership) corporations, incorporated under either federal or provincial law; 
  2. Trusts, which are recognized in common law provinces (Quebec, which is a civil law jurisdiction, also recognizes forms similar to trusts); and 
  3. Unincorporated organizations or associations. With the exception of federal incorporation, the creation of any organization is a function of the applicable provincial law. These vary somewhat—but seldom substantially—from province to province (Council on Foundations, 2019).

However, Canadian Tax law (The Income Tax Act) defines non-profit organizations and also creates the clearest distinction between them and charities. To qualify as an NPO, an entity must meet three tests:

  1. First, it cannot be a charity or an organization that could be registered as a charity. 
  2. It must be organized and operated exclusively for a purpose other than profit.
  3. No part of its income may be paid or made available for the personal benefit of any proprietor, member, or shareholder (with an exception for amateur athletic organizations). 

The category of “charities” is divided into charitable organizations and charitable foundations (consisting of private foundations and public foundations). A charitable organization, whether incorporated or not, must devote its resources to charitable activities carried out directly by the organization. A charitable foundation must provide funding to other charitable organizations, although it can also directly engage in charitable activities. All charities, like NPOs, are subject to the non-distribution constraint.

Role of NPO’s in community building

NPO’s play a very vital role in community building. They provide a platform for articulation of aspirations and translation of the aspirations into reality. For new communities that are beginning to form due to recent immigration, the NPO becomes many different things; the nucleus around which the community grows and the glue that binds the community together. Frequently, such communities are faced with poverty and economic exclusion. As the communities begin to challenge their own poverty and economic exclusion, the NPO becomes the only accessible vehicle to be used in the quest to eradicate those conditions and integrate into the wider society. 

Benefits to Community 

Social inclusion

Most times humans come together due to a common interest, such as an aspired destiny or goal. Another factor that brings people together but less acknowledged is the common origin or beginning. These factors and the existence of common values are important ingredients to human association and formation of a successful new community. People will thereafter join in and stay engaged when they perceive value and relevance in their individual lives. The coming together creates new bonds of friendship and relationships resulting in lasting feeling of inclusion akin to a “family like” setting which becomes the building of a social network.  To cement these relationships communal events like baby showers, birthdays, graduations, weddings, bereavements etc. are held within the community. Members of the community must always feel that “we are all in this together”. That we will stand with each other no matter what or when. 

As Christakis and Fowler (2010) stated in Connected: The Surprising Power of our Social Networks and How they Shape our Lives; “Social networks are driven by the forces of connection and contagion that constitute their structure and function respectively. Each social group has a particular intricate arrangement of ties between its members, and our understanding of that group depends on which of those ties we emphasize, be it blood relations, geographic associations, economic exchanges, or ideological rapport. These ties facilitate the propagation of anything that flows across them, may that be money, fads, religious ideologies, or sexually transmitted diseases. As individuals, we have the ability to shape our networks to a large extent. We decide what ties to create and which ones to maintain or brake; how many people we connect to, in what way, and to what degree; or which ones of our acquaintances we wish to connect to one another. All these choices lead to infinite possible configurations for the structure of our social network and our own position in it.” 

  • Economic empowerment

As already mentioned economic exclusion and poverty are important drivers of those who seek social inclusion. The networks they build are perfect vehicles for mobilization of and harnessing of financial capital that can then be used to bring about economic empowerment and hence elimination of poverty.  A key hurdle to access capital for immigrants and members of new communities is the lack of credit history. Community association makes it possible to channel and pool resources and create credit facilities that can be accessed by new members of the community without stringent lending conditions typically imposed by mainstream financial institutions. 

  • Societal Recognition

Evidently the various ways we are recognised (and recognise others) play an important role in shaping our quality of life. Recognition theorists have argued that recognition can help form, or even determine our sense of who we are and the value accorded to us as individuals (IEP, 2019). 

At the heart of the desire for recognition is also the understanding that acts of kindness beget similar acts from the larger society. A simple example is an act like Fundraising for orphaned children or providing education and service to elders in our society. These are acts of selflessness and empathy that easily win favor and societal recognition from the larger of the society.  This recognition though aspirational initially was calculated to generate a sense of well-being by “doing good” among the community members. 

Unique governance challenges 

Building Trust

Trust is the foundation of all community building endeavors. Without a purposeful and consistent effort to foster trust and build strong relationships at every step of the way, even the best-designed and thoughtful engagement processes will almost certainly either fail or fall far short of the success you seek to achieve (CECD, 2019). Deliberate efforts must be directed at fostering the things that promote trust and avoiding those that erode. Here are the Keys to Building Trust and they can be enhanced or undermined. They include:

  • Effective communication. This includes before, throughout, and following your formal engagement efforts. If pursued effectively, the more the community understands the process, the goals and intended outcomes, the information they need to make an informed decision, the perspectives of each member  and their role(s) and stake in the process and issue, the more trust the engagement efforts will engender and be able to build from in the long-run.
  • Respect. It is absolutely essential that the tone, content and facilitation of  the engagement efforts genuinely respect the input of all members – even if it’s sometimes difficult.
  • Transparency of processes. The entire engagement effort should be clear and well-understood by all stakeholders, devoid of ‘hidden’ or alternative agendas (personal, political, or informational), and honest about the role and influence members will have in the decision-making or implementation of solutions. Many times, community engagement efforts have failed in this regard.
  • Sharing information widely. Effective engagement and trust requires that everyone involved is working from a common understanding of the issue and each other’s perspectives as possible. If participants or members feel that information is only shared with some or does not do justice to all perspectives on an issue, you are unlikely to create the trust you need for effective or sustainable engagement.
  • Meaningful Engagement. When Stakeholders feel they are engaged in meaningful ways, they will show greater trust in the engagement efforts that account for their perspectives, view their contributions, and employ their skills in a manner that they feel is consistent with their perspectives of these attributes.

Role of Leadership

Leadership is one subject that a lot has been written about. Community organizations depend on volunteer leaders a great deal to achieve their goals and objectives more than any other type of organizations. In these circumstances, the community organization becomes the incubator for leadership. A person is a leader merely by suggesting or proposing some actions and others agreeing with it and is willing to go along with it, (Bartle, 2007). Modern scholars have written a lot about the characteristics of a leader however one of the most enduring writing on the paradox of leadership is by Chinese Philosopher Lao Tse (601 BC) who is quoted here below saying:

As for the best leaders, the people do not notice their existence. 

The next best the people honor and praise.

The next the people fear; and the next the people hate … 

When the best leader’s work is done the people say, 

“We did it ourselves”.

Without Leadership creating a conducive, enabling environment for members to participate, the community is rudderless and stalls not knowing when and how to start, what to do and where to go. 

Leadership Succession 

The sign of good governance in an organization is a successful transition from the incumbent to the next team of leaders. Some organizations have structured mechanisms in their constitutions that limit the number of terms each individual may serve while allowing retention of some of the members of the corporate boards for continuity and institution memory.  This does not always guarantee successful handover of information hence weakening the ability of the organization to operate optimally. Transfer of organizations records can be an important way to aid this handover process where such records have been well kept. One other way to prepare for succession in organizations is through system of mentorship, in which potential future leaders are identified and deliberately prepared for their future roles. 

The Promise of Community Organizations 

Regardless of the circumstances pertaining in a community organization, members and society will at some point in time appraise its success or failure based on a few key metrics that have the greatest impact on society. It is therefore important for leadership to establish smart objectives and be aware of these, right from the outset. Such objectives can be captured and contained in a strategic blueprint that guides the organization for a period of 5 or 10 years. With sound, conscientious and transparent leadership, a lot of good can be achieved through community mobilization which can greatly impact not just individuals in the community but the larger society for generations to come. 

~ Everett Wakoli, MBA, BSc. Mech. Eng. 

31 Dec 2019

Although the author is the President of Abeingo Association Canada, the views expressed in this article are the personal views of the author and do not reflect the views of the Abeingo Association Canada on any of the subjects discussed.