ECS Board of Directors
Inside / Outside Director Rewards, Risks, and Controls
Endeavor’s Board was originally set up with ‘inside’ and ‘outside’ directors. Inside directors are employed at the school; outside directors are not employed in any capacity at the school. The current Board does not consist of any ‘founding’ (outside) directors. We recognize that this structure provides both some benefits and some risks. The Board seeks to provide the right controls to maximize the benefits while minimizing the risks. The following outlines the facts, risks, benefits, and controls we believe are needed to ensure the current structure works optimally.
Facts:
1.
Director. Our Director serves on the Board as a permanent member.
2.
Related Parties.
We have ‘related parties’ who serve in various leadership positions in the school and on the Board.
3.
Employee Position. The Director receives applications from interested staff members who are then voted on by the outside directors of the Board.
4.
DPI. DPI does not recommend that inside directors serve as voting members on the Board. DPI also does not recommend having educators as voting members on the Board. DPI has been made aware of our structure and has recommended we ‘don’t change what is working.’
Risks:
1.
Conflicts.
2.
Perception.
This approach can yield conflicts of interest in various areas.
This approach can lend itself to a perception of conflict of interest.
Benefits for Current Structure :
1.
Mission Stewardship.
The Board and administration are charged with protecting the mission. The administration/inside directors provide continuity in this effort. The rotating external Board members benefit from having the administration’s perspective as an integral part of the Board.
2.
Converse Situation. The ECS Board recognizes that an equal, but opposite, threat exists if no inside director sits on the Board. That is, the mission of the school could be irrevocably altered by a few ‘activist’ board members. If the inside directors were removed from the Board, a whole different set of compensating controls would need to be established to protect the administration and school from the possibility that a few
Board members could stray from the mission or have very specific agendas.
3.
Intent. It is the intent of the Board to support the administration. The Board recognizes the complexity of running a school and has put its trust in the administration. While the
Board provides active and independent oversight as required by law, the Board’s default posture is one of delegation to and support for the administrative team.

4.
Recognition. Each director recognizes the potential for conflict and is alert to watch for conflicts. This awareness, in itself, creates a check and balance.
5.
Governance Models. The Board recognizes that having inside directors is a widely accepted practice in corporate America and the nonprofit sector. Many organizations outside the educational arena see great benefit in this approach.
Compensating Controls . Given the risks associated with having ‘inside’ Board members, the
Board acknowledges that the following controls exist to mitigate the risks:
1.
Voting Blocks . The ‘outside’ directors outnumber the ‘inside’ directors 7-2. This overwhelming advantage insures the ‘outside’ directors retain firm control of voting.
2.
Conflict Policy . All members of the Board have agreed to abide by the conflict of interest policy.
3.
Code of Conduct . All members of the Board have agreed to abide by a code of conduct policy.
4.
Public Access.
With the exception of confidential issues (such as personnel matters), all voting records are available to the public through the prior meeting minutes.
5.
Abstentions
. The ‘inside’ directors have been and will be asked to abstain from any votes that pose a conflict of interest. Examples include compensation, promotions, etc.
6.
DPI . The Chairperson and DPI will continue to review overall school performance annually.
7.
“Conflict” Alert
. Any Board member can ask for a ‘conflicted’ director to be removed from a conversation at any time.
8.
Grievance Committee . A specific grievance process has been established to provide a relief valve for employees who believe they have a major issue with administration or that administration has not adequately dealt with. Inside directors are specifically excluded from the initial discussion of the grievance process and only included as needed to resolve the grievance issue.
9.
Job Description.
The Director’s job description is created by the Personnel Committee and approved by the whole Board. Related parties follow the same process.
10.
Annual Review . The Director’s annual review is conducted by the ECS Chair,
Personnel Chair and Corporate Governance Chair. This process also applies to any related parties.
11.
Compensation . The Director’s (and related parties’) compensation may only be changed with a supermajority (vs majority) vote of the Board. All inside directors are excluded from voting on a superior or related party.

12.
New positions/promotions . It is the recommendation of the Board that all new positions and open positions resulting in a promotion of an employee be posted externally on the school website for a period of at least 2 weeks. This ensures that third parties are able to apply for these positions and that these applications are sufficiently considered. Outside directors will have the final hiring authority whenever related parties are being considered for new positions or responsibilities within the school.
The Board, on balance, recognizes the potential benefits and potential pitfalls of the current approach, but believes it has the appropriate compensating controls in place to capture the benefits of inside directors participating as Board members without injecting unnecessary additional risk into our governance.
Prepared by:
Corporate Governance Committee of the Endeavor Board of Directors