The power‐structure model of non‐profit governance

• Published date: 01 July 2022
• Author: Vincent Bruni‐Bossio,Melanie Kaczur
• Date: 01 July 2022
• DOI: http://doi.org/10.1111/corg.12417

ORIGINAL ARTICLE

The power-structure model of non-profit governance

Vincent Bruni-Bossio

1

| Melanie Kaczur

2

1

Edwards School of Business, University of

Saskatchewan, Saskatoon, Saskatchewan,

Canada

2

Canadian Hub of Applied Social Research

(CHASR), University of Saskatchewan,

Saskatoon, Saskatchewan, Canada

Correspondence

Vincent Bruni-Bossio, Department Head and

Associate Professor of Management, Edwards

School of Business, University of

Saskatchewan, 25 Campus Drive, Saskatoon,

SK, S7N 5A7.

Email: bruni-bossio@edwards.usask.ca

Abstract

Research Question/Issue: The Power-Structure Model of Non-Profit Governance

provides an understanding of the types of power exhibited by different stakeholders

in nonprofit organizations.

Research Findings/Insights: This qualitative study involved 21 semistructured inter-

views with board chairs of socially focused nonprofits. A grounded theory-based

approach was used to code extracted data into grouped concepts and to develop the

model. Findings from the study indicate that (1) the reward and legitimate power of

funders trumps almost all the other types of power in a nonprofit organization, (2) a

board's legitimate power over management cannot surmount management's informa-

tional power, and (3) there may be a power struggle between the board chair's infor-

mational/referent power and the board members' expert/referent power.

Theoretical/Academic Implications: The Power-Structure Model of Non-Profit Gov-

ernance, which was conceived using theory and qualitative data, incorporates French

and Raven's (1959) five types of social power to outline the power structure of non-

profits and how it differs from the traditional organizational structure. The model

offers new perspectives on researching power and decision making in organizations

and how appropriate governance can help to reduce power asymmetry between the

CEO and the board.

Practitioner/Policy Implications: The Power-Structure Model of Non-Profit Gover-

nance offers insight for policy makers into the types of power available to different

actors in organizations, how they use this power, and how this power structure plays

out in various organizations.

KEYWORDS

corporate governance, board chairs, board governance, interviews, nonprofits, social power

theory

1|INTRODUCTION

Although nonprofit governance has been well researched, there is still

much to learn about the use of power in these organizations. By

definition, “governance determines who has power, who makes deci-

sions, how other players make their voice heard and how [an] account

is rendered”(Institute on Governance, 2018, para. 2). Power can be

thought of as the ability of one actor to get another actor to do

Received: 10 February 2021 Revised: 26 October 2021 Accepted: 30 October 2021

DOI: 10.1111/corg.12417

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any

medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.

© 2021 The Authors. Corporate Governance: An International Review published by John Wiley & Sons Ltd.

442 Corp Govern Int Rev. 2022;30:442–460.

wileyonlinelibrary.com/journal/corg

something they might not want to or would not normally do

(Dahl, 1957; Weber, 1947). The question of how power is exercised

in organizations is complex, given that power is used in different ways

by multiple actors at various levels.

The use of power is often noted when boards fail to provide over-

sight, exemplified by the fraud uncovered in the Association of Com-

munity Organizations for Reform Now (ACORN). In 2000, CEO Wade

Rathke covered up the embezzlement of $948,670 committed by his

brother, Dale Rathke (Theimer & Yost, 2009; Tillotson &

Tropman, 2014). Later, in 2010, Louisiana Attorney General Caldwell

discovered that the actual amount embezzled was closer to $5 million,

which was a substantial portion of the $25 million-dollar annual bud-

get reported by ACORN in 2008 (Theimer & Yost, 2009; Tillotson &

Tropman, 2014). Ultimately, the Rathke family agreed to make pay-

ments on the funds taken with the caveat that Rathke would continue

to be employed by the organization. Wade Rathke continued as CEO,

and his family paid only $210,000 of the nearly $5 million they owed

(Theimer & Yost, 2009; Tillotson & Tropman, 2014). One can infer

that either the Rathke family wielded some form of power over the

board to attain this outcome or that the board was completely negli-

gent in its legal obligations to protect the organization's interests.

The board's ineffectiveness was in fact partly due to a power

struggle between two factions that had emerged over several years.

There was an in-group privy to information and an out-group that was

not, creating an imbalance of power. When members of the in-group

discovered the theft, they withheld this information from the other

board members for fear of alerting the authorities and causing nega-

tive publicity (Tillotson & Tropman, 2014). In 2008, the whistleblower,

who had alerted the media to the wrongdoings of the Rathke brothers,

stated that when two out-group members tried to investigate the

embezzlement, the board president removed them without consulting

with the full board (Tillotson & Tropman, 2014). This failure to provide

oversight appears to be connected to extreme uses of power by the

president, the CEO, the Rathke family, and the board members. Board

members in the out-group lacked the power to properly oversee these

actions and remove this corrupt CEO. This imbalance of power ulti-

mately compromised the board's ability to effectively govern the orga-

nization, putting the organization at great financial and reputational

risk (Theimer & Yost, 2009; Tillotson & Tropman, 2014).

This paper explores how power is used in organizations by pro-

viding a model that theorizes the types of power available to actors in

nonprofits and examining ways to augment the model to explain the

types of power available to actors in for-profits and different types of

hybrid organizations. From interviews conducted with 21 board

chairs, the study identifies key themes related to the power structure

of nonprofits among funders, managers, board chairs, and board mem-

bers. By mapping out the power structure of nonprofits, we learn

more about the relationship dynamics within these organizations, how

power is used, and in some cases, even the consequences of using

certain types of power at various levels in the organization. Lastly, the

paper discusses how the model may be adapted to explain how power

is used in various types of organizations and how governance strate-

gies can be used to mitigate power imbalances.

2|LITERATURE REVIEW

According to Jensen (2010), boards have thepower to “set the rules of

the game for the CEO. [The] job of the board is to hire, fire, and com-

pensate the CEO,and to provide high-level counsel”(p. 53). Thepower

of boards over management is derived partly from their positioning

above management in the organizational structure (see BoardSource,

Board Responsibilities and Structures, 2016a; BoardSource, The Roleof

the Board Chair, 2016b; Shekshnia, 2018; Stamm, 2017). The role of

the CEO or Executive Director (ED) is tomanage the operational work

completed by staff and/or volunteers that is needed to achieve the

organization's mission (Magloff, 2014). According to Pettigrew and

McNulty (1995,1998), boards alsohave power because of their access

to information,their expertise,and the quality of their relationships with

key stakeholders, in addition to theirpositional power.

While boards have positional power allotted to them, how they

exercise this power varies depending on the context. Research has

shown that power in an organization normally lies with management,

while boards often take over during crises with a proactive, leading

role to restore balance (Cornforth, 1999; Lorsch & MacIver, 1989;

Mordaunt & Cornforth, 2004; Wood, 1992). The ability of a board to

exercise power has also been shown to depend on the willingness and

ability of board members to use their skills in ways that apply to a spe-

cific context (Pettigrew & McNulty, 1995,1998).

Another factor that influences how boards use power is their

assessment of the degree to which a CEO/ED and other managers

value serving the organization (Donaldson & Davis, 1991). Principal-

agent theorytheorizes that since managers are self-interested, they can

be expected to act opportunistically rather than in the best interest of

their organization. If a board adopts this perspective, they are likely to

exert power directly through incentives and controls (Dixit, 2002;

Miller & Whitford, 2002). Conversely, stewardship theory postulates

that some managers are intrinsically motivated to act in the best inter-

est of the organization and will not act opportunistically because their

personal goals align with the objectives of the organization. If a board

adopts this perspective, they are likely to focus on building a positive

relationshipwith management insteadof exerting power through direct

incentivesand controls (Davis et al., 1997;Donaldson & Davis, 1991).

Managers also have power they can exercise over boards because

they obtain information directly from operations and have power to

direct employees, assess program outcomes, and implement organiza-

tional changes (Shekshnia, 2018). Although they are mandated to

relay truthful information to boards, managers have been shown to

provide boards with biased interpretations of data, suggesting that

the organization is performing better than it is (Nadler, 2004).

Research has also shown that board members actively struggle to

counter the use of this informational power by managers

(Nadler, 2004). The board chair, as the person responsible for relating

to management and other stakeholders, can assist the board in over-

coming the informational power of managers by requesting additional

information from management and obtaining supplementary informa-

tion from more informal sources (Cornforth, 1999; Cornforth &

Macmillan, 2016).

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