Board Composition And Accountability Of Non-Profit Organizations

Abstract

Non-profitorganizations (NPOs) are generally subjected to less stringent regulatory requirementsthan for-profit organizations. As such, NPOs are generally reluctant to sharemore comprehensive information with the various stakeholders and may notrecognize the need for accountability. The purpose of this study is to examinethe influence of board composition on the level of accountability for NPOs inMalaysia. Board composition and the level of accountability are obtained fromthe content analysis of annual reports of 234 societies registered withRegistrar of Societies in Malaysia for the financial period 2010. The level ofaccountability (ADI) examined is based on two main components, transparency andcompliance while board composition examined in this study consists of boardsize, board professionalism and board members with political connections.Results of this study provide evidence that the overall level of accountabilityis low. This infers that more comprehensive regulatoryrequirements or at the very least, the existence of best practices with regardsto accountability can be a useful mechanism in enhancing the accountability ofNPOs. In addition, theresults also highlight that an optimum mix of board members mattersin ensuring efficient resource strategy and consequently enhance the level ofaccountability in NPOs. Overall,the findings in this study provide useful information to regulators in theircontinuous efforts to improve accountability in the non-profit sector. This inturn can enhance the credibility and sustainability of the NPOs.