Principles for Good Governance and Ethical Practice

There are two things I really, really like!  Finding excellent nonprofit resource materials and then finding out they are free!  While the "Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations" was originally published by the Independent Sector in 2007, the "Priniciples" remain the same. 

There are four sections to the guide:

1. Legal Compliance and Public Disclosure
2. Effective Governance
3. Strong Financial Oversight
4. Responsible Fundraising

You can download the entire document for free at the Independent Sector website.  I urge you to download it and share it with your Board of Directors.  Consider it a check list for best practices.  The following is from the first section, Legal Compliance and Public Disclosure.  Enjoy!  Bunnie

• A charitable organization must comply with all applicable federal laws and regulations, as well as applicable laws and regulations of the states and the local jurisdictions in which it is based or operates. If the organization conducts programs outside the United States, it must also abide by applicable international laws, regulations and conventions that are legally binding on the United States.

• A charitable organization should have a formally adopted, written code of ethics with which all of its directors or trustees, staff and volunteers are familiar and to which they adhere.

• A charitable organization should adopt and implement policies and procedures to ensure that all conflicts of interest, or the appearance thereof, within the organization and the board are appropriately managed through disclosure, recusal, or other means.

• A charitable organization should establish and implement policies and procedures that enable individuals to come forward with information on illegal practices or violations of organizational policies. This “whistleblower” policy should specify that the organization will not retaliate against, and will protect the confidentiality of, individuals who make good-faith reports.

• A charitable organization should establish and implement policies and procedures to protect and preserve the organization’s important documents and business records.

• A charitable organization’s board should ensure that the organization has adequate plans to protect its assets—its property, financial and human resources, programmatic content and material, and its integrity and reputation—against damage or loss. The board should review regularly the organization’s need for general liability and directors’ and officers’ liability insurance, as well as take other actions necessary to mitigate risks.

• A charitable organization should make information about its operations, including its governance, finances, programs and activities, widely available to the public. Charitable organizations also should consider making information available on the methods they use to evaluate the outcomes of their work and sharing the results of those evaluations.

Beware of Copyrighted Images Used Without Permission

Now here's a subject near and dear to my heart...copyright infringement.  On two separate occasions I've had articles I have written show up in college textbooks without my permission.  Both times I threatened to sue and then settled.  I think what upset me was that I was in the textbooks with some very well known authors, such as Maya Angelou, William Raspberry, even John F. Kennedy.  You can bet they or their estates were asked for permission and they were paid for their work.  There is so much free or fair use material out there, no one needs to violate copyright.  Excellent read and excellent points!  Bunnie

Beware of Copyrighted Images Used Without Permission
by Dan Ehrmann, President, ClubExpress

For most non-profit clubs and associations, funds are always tight. Expenses are carefully managed to stay within budget and you are always working to attract new members, maintain renewals, find donations and solicit sponsorships. So a sudden expense out-of-the-blue can really create problems. Here is an elementary mistake that you should watch out for.


ClubExpress is an Internet platform to help smaller non-profit clubs and associations run their operations, including website, membership database, finances, events, etc. Hundreds of clubs and associations use our platform. A few weeks ago, out of the blue, we received a demand letter from a photo licensing company, requesting a license fee of thousands of dollars for use of a photo on a ClubExpress website. The story of this letter is an important lesson for every non-profit organization because of the potential risk that you might be asked to pay large licensing fees.

Using Google Image Search or similar services, it's easy to find photos on the Internet featuring almost any subject of interest. Once you find a photo, it's trivial to download it to your local hard disk, then upload it to your organization’s website.

Don't. Ever. Do. This.

Photos are copyrighted works, owned by the photographer and sometimes a photo licensing company. These firms (for example, Getty Images), build libraries of millions of photos which they then license out to magazines, advertisers, web designers and others for use in commercial works. License fees can run into the thousands of dollars depending on the resolution desired and on the intended purpose.

Many of these photos appear legitimately on websites because the website owner has licensed the photo and paid the appropriate fee.

The image file (usually a JPG or PNG) is especially encoded by the photo licensing company. They also have bots which cruise websites automatically, looking for image files. When one is found, they download it and look for the encoding. If it's one that they license, they then check to see if you own a license and if you don't, the demand letter is generated. People, companies and organizations that use such photos without a license represent a significant source of revenue for these companies and they will go after you aggressively. And the law is entirely on their side.

ClubExpress is protected under the Digital Millennium Copyright Act because we are considered to be an "Online Service Provider". We are not liable for violations done by our customers on their websites, even though these sites are hosted on our platform. But if an organization’s website manager or officer does this, the organization may be liable for licensing fees for photos which are being used without permission or payment of a license fee.

As administrators, please take a few moments to review all the photos uploaded to your websites, to ensure that you have permission from the photographer or the appropriate licenses to use these photos. Be sure to check every part of your website, including page headers, content boxes and custom pages. You only need to worry about the public side of your site since bots have no way to view members-only content that requires a login. But you should check the whole site.

Photos taken by members and uploaded themselves should not be a problem. When they upload the image, they are giving the club permission to use it for non-commercial purposes. The problem instead is photos that someone has downloaded from another website in order to use on your website. And if the list of website managers changes regularly, be especially cautious of work done on the website by prior admins who may no longer be involved.

Respecting copyrights is not only the law; it's also the right thing to do.

_________________________________________________________

Dan Ehrmann is the founder and President of ClubExpress, an Internet platform to help clubs and associations run heir complete front-office and back-office. He can be reached at dan@clubexpress.com.

The Building Blocks for a Successful Nonprofit Merger

Greetings from the snow covered tundra of Maryland!  Just as we have found ourselves in a deep freeze with snow totals over 40 inches, some nonprofits are finding themselves freezing for lack of membership and funds.  This situation can offer opportunities to nonprofits and associations if they resist the temptation to sit back and do nothing or just conduct business as usual.  Brock R. Landry and Lisa M. Hix, of Venable LLP in Washington, DC, give us a glimpse into what it might take to bring two struggling organizations together to create a single but stronger nonprofit.  No doubt it's not an easy thing to merge two organizations who may have similar goals but very different cultures, however, in today's climate, we must all be ready to explore every option.  Bunnie

The Building Blocks for a Successful Nonprofit Merger
by Brock R. Landry, Esq. and Lisa M. Hix, Esq.
Venable LLP, Washington, DC

Financial imperatives, contractions in membership bases, and consolidation in industries have led to an unprecedented period of growth in interest in nonprofit mergers. As a result, many nonprofits are eyeing current competitors as potential partners. However, mergers can easily fail when organizations mistake a central fact: mergers occur between people, not organizations. Mergers can fall apart for a variety of reasons: unexpected discoveries in the due diligence process, intractable issues that have been ignored, and differences in organizational cultures, among others. The following is a list of "lessons learned" from two association attorneys who have handled a broad range of association mergers.

Establish a Core Group of Merger Stewards. Establishing a group of volunteer and staff leaders to act as stewards of the merger is critical to success. The merger stewards will have two roles: 1) to come to an understanding of the merger plan, and to communicate this plan to the association's stakeholders, including the boards, staff and membership; and 2) to work through the inevitable issues that will arise in the due diligence process and/or as the groups integrate.

Ask the Hard Question Early: Which Organization Survives? Strength of negotiation posture can be measured by financial assets, membership base, industry contacts, and depth of operational expertise. Deciding how, and whether, to acknowledge this power disparity can be key to success in the long run. Early on, the organizations should agree on whether one organization should be viewed as the "surviving" entity, or whether both organizations will combine as equals. Although most mergers are described as the marriage of equals, rarely is this, in fact, the case.

Ask the Harder Question: What Are the Roles of the Respective Staff and Officers? A clear understanding of future roles and authority is central to a successful integration.

Jointly Develop a Merger Plan. The merger stewards from each organization should jointly develop a merger plan. This plan should include an outline of the combined governance structure, mission, core activities, membership categories and dues, and a broad staffing plan. A critical component of this plan is identifying board appointment procedures and the key leaders of the combined organization. The merger plan should include sufficient detail on the hard issues, but should be broad enough to allow for revision and elaboration based on stakeholder input.

Understand Approval Requirements and Dynamics. Once the core elements of the merger plan are in place, each organization should undertake a careful analysis of its respective board and member approval requirements. These requirements will be outlined in the state corporate code provisions of the organization's state of incorporation, as well as each organization's governing documents, such as bylaws. Where high approval requirements exist, early and active communication to the board and members is essential, as is a thorough understanding of permissible voting mechanisms.

Coordinate Internal and External Communication. In organizations with overlapping membership, having a coordinated "sell" document for the staff, board and members of each organization is critical. Release of information should be carefully coordinated between the organizations and each party should agree to give the other notice before making any announcements to the public. Nothing kills a merger faster than being blindsided by an unauthorized communication.

Agree on Coordinated Due Diligence. Merger timelines must allow for thorough due diligence. Associations considering mergers face a multitude of legal, governance, financial, and administrative issues that must be carefully explored and coordinated. To facilitate this process, the parties should agree upon a scope of due diligence and a due diligence timeframe.

Culture Matters. Finally, while it may make good business sense to merge, key stakeholders – including members, staff, and volunteer leaders – will not shift allegiances if the combined organization fails to bridge the cultures of both entities. Mergers work only when associations take the necessary steps to build teamwork and a shared vision of the future.

Brock Landry and Lisa Hix have handled a variety of mergers, including the American Bankers Association/America's Community Bankers merger and the American Electronics Association/Information Technology Association of America merger. For more information, please contact or Mr. Landry at brlandry@venable.com or Ms. Hix at lmhix@venable.com.

This article is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can only be provided in response to specific fact situations.

Nonprofit Executive Contracts: Don't Overlook These Key Issues

Many small nonprofits and even large nonprofits, often overlook the importance of an executive employment contract. And I can't imagine a nonprofit executive taking a position without a contract...but some do. Patrick Clancy and Jeff Tenenbaum, attorneys at Venable, offer point by point advice on what should be in an executive contract. Even if you think your organization is too small, you would be well served (and could avoid potential litigation) by making sure you have an executive employment contract in place. Bunnie

(Top, Jeff Tenenbaum. Bottom, Patrick Clancy)

Nonprofit Executive Employment Contracts: Don’t Overlook These Key Issues

by Patrick Clancy and Jeff Tenenbaum, Venable LLP

Hiring a new executive, especially a president or chief executive officer, is always a major undertaking for any nonprofit organization. A great deal of time and effort are invested in finding quality candidates, interviewing the most promising ones, and making a decision about to whom to extend an offer. Often, monetary resources are invested as well using search firms and similar services.

Throughout this process, both your organization and the prospective candidates strive to appear at their best and make themselves attractive to the other. Typically, the major terms of employment are discussed, including salary, bonuses and benefits. Other details are often left for later discussion following an acceptance of an offer and the preparation of a written employment agreement.

During the courtship process, neither party, understandably, wishes to think about, much less talk about, the divorce. Sooner or (hopefully) later, the relationship between the executive and the organization will end.

For the protection of the organization, as well as in fairness to each party, it is important that the when and how the relationship can end, and what happens when it does end, should be expressly and clearly expressed in the written agreement. It is surprising how often what might seem like basic terms are either overlooked or unclear even after the new executive has been presented with an employment agreement.

Moreover, it is important that the executive candidate be presented with the material terms and conditions of their newly-offered employment prior to their acceptance of the offer and, importantly, prior to the time they notify their existing employer that they are leaving (or prior to the time they decline other offers). Material terms include not only such items as compensation and benefits, the contract term, and under what circumstances employment can end, but also may include such things as post-employment restrictions (e.g., non-compete agreements) and restrictions on outside activities. Courts in some jurisdictions have held that an intentional or negligent failure to disclose a material term and condition of employment, when relied upon by the new executive in leaving their former employment (or potentially declining other employment), can result in liability for the new organization.

This article will discuss some key issues that should be addressed in an executive’s employment contract with a nonprofit organization. Those issues include, of course, the term of employment – How long does the employment last under the contract? While employment can be at-will (meaning that it can be ended at any time by either party without cause or notice), many candidates for president and high-level executive positions will not accept that sort of uncertainty when considering a position. Thus, most executive employment contracts include an express term of employment.

In addition, the agreement should address what happens at the end of the term – How does it expire? What notices, if any, must one or the other party provide? Will the term, or some variation of the term, automatically renew absent some action on the part of one or both parties?

The agreement also should address the ways in which the employment can end other than by expiration of the term. Most agreements include some provision for ending the agreement for “cause,” with varying degrees of detail as to what constitutes cause. However, agreements also can provide that one or both parties may end the employment prior to the expiration of the term upon certain notice, even without cause.

In addition, it is important that the agreement address what happens following termination. That is, are there any particular payments (such as severance) or benefits that will continue or be made to the executive or, as importantly, that no payments or other special benefits are due upon termination? The agreement needs to address this question for every way in which employment might end. These particular points are addressed in further detail below.

The Term of Agreement. As discussed above, most agreements for nonprofit organization chief executives include some fixed term of employment. Many agreements include both an initial term and a renewal term.

a. Initial Term. Often the initial term is two or three years. Many candidates will not consider less security than two years; organizations should be very careful when considering terms longer than three years. A key factor for organizations to consider when assessing the length of the term is the ways in which the term can end prior to expiration, which is discussed below.

b. Renewal Term. The agreement should specify clearly what happens at the end of the initial term. There are several options.

First, the agreement could simply expire upon the end of the term, with no obligation on either party to continue employment (remember that parties are always free to negotiate extensions if both parties desire to continue the relationship).

A common provision in executive agreements is an automatic renewal in the absence of some affirmative notice to the contrary. For example, if one party does NOT provide notice at least 180 days prior to the expiration of the initial term, the agreement might renew automatically for one year. The renewal period could be two years, if desired (although one is probably more typical); more than two years would be unusual, and in most instances, would not be recommended.

The automatic renewal provision could continue for each year of the extension as well (i.e., in the absence of notice during an extension year, the agreement automatically renews for another year). However, the automatic renewal need not continue; the agreement could contain a single renewal of one or two years. Whatever approach is adopted, the agreement should be very explicit as to what happens upon the end of the initial term or renewal term.

A cautionary note regarding automatic renewal provision – It is important that the organization's board remain aware of any approaching deadlines for notices and adhere carefully to the specified procedures for providing notice as set out in the agreement. This need is particularly acute when, as is typically the case in nonprofit organizations, there are significant changes in director and officer composition over time. Do not wait until the last month of the executive's term to consider the question of what happens at the end of the term; it may have already "renewed."

Termination of the Agreement. The agreement should specify how it can end other than by expiration of the term. There are several ways the agreement might end prior to the term expiration.

a. Notice by the executive (no cause or reason). Although by no means required, many agreements have provisions that allow the executive to terminate early – without the need for a reason or cause – by giving certain notice. If your organization agrees to such a provision, the notice period should take into consideration the hiring cycle and lead time required – that is, if the search process takes six months, the agreement might specify a notice period of six months. This lead time would give the organization time to conduct a search; it still might require an interim period before a new executive could come on board, but such time would be short.

b. Notice by the organization (no cause or reason). Organizations should carefully consider including in the agreement a provision that allows the organization to end the agreement early without cause. Establishing cause sufficient for terminating an agreement can be difficult and costly, and result in public embarrassment to the organization (and the executive). The organization may need the flexibility to end the relationship without cause. The executive, on the other hand, will negotiate for sufficient notice to enable her/him to enter the search market, and, thus, the same cycle and timing issues considered above will come into play. From the organization’s standpoint, the shorter the period, the better. If the executive has a notice provision as discussed above, it would be typical for the notice periods to be the same (i.e., perhaps 180 days). However, the organization typically will seek a provision that allows it to provide the executive with pay in lieu of the notice so that the relationship can be severed immediately if the organization deems it necessary.

Does such a "no cause" provision reduce the job security for the executive that might otherwise exist under an agreement for a term of, say, two years? Yes, however, the issue of security can be addressed through the length of notice and severance and/or other benefits.

c. Termination for cause. The agreement should contain a provision for termination for “cause.” Cause should be defined. Typically, it includes such things as malfeasance, breach of the agreement, fraud, embezzlement, dishonesty, gross negligence, etc. Not surprisingly, executives try to negotiate more objective, higher-threshold definitions of cause. The organization would prefer a definition giving it more discretion. For example, be careful of definitions of cause that require convictions of crimes; no organization wants to await the outcome of a criminal proceeding, with the potential negative publicity and other ramifications, before acting upon the employment issue (another reason for a "no cause" provision, as discussed above). It is strongly suggested that the organization consider a definition that includes, among other things, conduct that does or is reasonably determined could bring unfavorable publicity or disrepute to the organization.

What Happens when the Agreement Terminates? The agreement should specify what happens in each of the circumstances under which the agreement can end; in the examples outlined above, this includes four contingencies: (1) expiration of the term (and renewal terms, if any); (2) executive gives notice; (3) organization gives notice; and (4) termination for cause. The interests of the parties here are clearly distinct; the executive is looking for as much security as she/he can get, and the organization wants to have as little expense as possible tied up in a person who is no longer performing services for the organization. The negotiations should find the right balance between the needs of the parties.

If an agreement expires, typically the departing executive does not receive any compensation beyond that earned during the term. However, some agreements include severance as a means of providing some job security to the executive (thus lowering the risk to the executive of leaving her/his current position to join the organization). The shorter the term of the agreement, the more likely there is to be a severance payment upon expiration. For example, if the initial term of the agreement is one year, the agreement might include a six-month severance payment if the agreement is not renewed by the organization. This type of provision gives the executive at least eighteen months of security. As the term of the agreement increases, there generally is less need for this type of security.

If the agreement is ended early by the executive giving notice, typically there is no compensation due beyond that due during the time the executive works for the organization. There is typically no severance in such a situation.

If the organization gives notice (that is, notice prior to the end of the specified term, without cause), there are two alternative approaches that are often taken.

a. Under one approach, no compensation is due beyond the notice period. The theory underlying this approach is that the notice period itself provides the security the executive needs.

b. Another approach might include severance; perhaps a sliding scale of severance depending on how early in the term the notice is given. For example, the agreement might provide that if the organization gives notice during the first twelve months, the executive will receive the notice period plus severance necessary to bring the total of working compensation and severance to eighteen months (again, providing the executive with at least eighteen months’ security). Alternatively, the agreement could provide that if the organization gives notice after the first twelve months, the executive will receive the notice period plus some specified amount (perhaps three months) of severance. In one sense, this approach may be counterintuitive, as the longer the term of service, the less severance is paid. However, considered from the standpoint of how much income security it provides to the executive when viewed from the beginning of the relationship, it may serve the needs of both the organization and the executive.

If the executive is terminated for cause, the agreement typically provides that the executive receives nothing beyond what was due prior to termination.

* * * * * *

Protecting your nonprofit organization while attracting quality candidates for executive positions requires diligence and planning. The details of an agreement are very important, and may become critical to your organization in years to come. Failure to attend to those details prior to the signing of an agreement can lead to acrimonious (and costly) issues down the road.

Patrick Clancy is a partner in the Venable LLP law firm and focuses his practice on labor and employment law. He counsels may of the firm’s nonprofit clients on employment law matters and also represents them in the defense of litigation, arbitration and administrative proceedings. Mr. Tenenbaum is the chair of Venable’s nonprofit organizations practice. They can be reached at plclancy@venable.com, jstenenbaum@venable.com or at 202-344-4000.

Conducting Due Diligence in Your Executive Director Job Search

by Bunnie Riedel, Host

There is no doubt that the competition for jobs is fierce. For some, just having a job is enough. But if you are someone who is Executive Director material, or who wants to be an Executive Director, it may be tempting to take a position with a Nonprofit organization without conducting necessary “due diligence.”

What is “due diligence?”

Due diligence is finding out as much about the organization as you can, especially the financial health and legal status of the organization. If you are under consideration for an Executive Director position remember, if you get the job, you will be the chief officer of the organization and you will be responsible for the organization through good times and bad.

If you have been called for an interview and before you say “yes” to the position, there are certain things you should do. My first recommendation is that you research the Nonprofit on sites like Guidestar or Charity Navigator. Guidestar provides IRS form 990 (the Nonprofit tax return). With the 990 you can see income and expenses, how much Board Members are paid (if anything), how much the Executive Director is paid, how much is spent on program and often what kinds of programs the Nonprofit is conducting. Charity Navigator provides a breakdown of program v. administrative expenses, how much is spent on fundraising and a rating of the Nonprofit (according to Charity Navigator). My caution here is that both sites’ records are typically two to three years behind and in the Nonprofit management world two to three years can be an eternity.

Next, I would Google the organizational name. What press can you find about the organization? Is it good? Is it bad? Is there very little? If you know the sitting or previous Executive Director’s name or Board member names; Google them. You can learn a lot about an organization by searching the internet.

Before the interview, ask the Board for the following:

• A copy of the bylaws
• Minutes of Board meetings (if they aren’t posted on the organization’s website)
• Three years of audited financial statements
• Any literature or brochures or newsletters or journals the organization prints
• An organizational chart (if they have one)

The bylaws can tell you a lot. How many Board members are there? What are their terms of service? How are Board members selected? How are Board members removed? Are the expectations of Board members spelled out in the bylaws?

Just as bylaws can provide a lot of information, so too can minutes of meetings. While minutes really are only supposed to contain action items and how they were handled, many organizational minutes will contain whole conversations. You can frequently gauge how Board members behave and interact with one another or the previous Executive Director from the minutes.

I have had organizations resistant to handing over three years of audited financials, which in my opinion is crazy because financial statements are a matter of public record for Nonprofits. If they don’t have audited statements, that will tell you something. Look at the statements with an objective eye, if you have a friend who is a CPA, ask your friend to look them over. Certainly pay attention to red flags, such as negatives noted in the management letter, but also consider that Nonprofits, like any other industry have good years and bad years. If the financials aren’t that great, the question you need to ask yourself is “Can I work with this?” Maybe you are the wunderkind who can turn the organization around. In my opinion, bad financials are not a deal breaker, the deal breaker is the conversation you have with the Board about their approach to turning things around. If it is sensible and doable, fine; if it sounds wacky…it probably is.

The literature will help you learn more about the organization’s programs and an organizational chart will help clarify the roles of the various players in the organization and may even reveal information that is not readily apparent (for instance, you may discover a field office nobody has mentioned before).

One of the critical questions you will want to ask during the interview is if there is any pending legal action against the organization. Organizations frequently face the prospect of lawsuits, so legal action (in my humble opinion) is also not a deal breaker but you must be aware of any actions so you can make an informed decision about accepting the position. Is the action going to be a huge distraction to you as you begin your new position? And if so, are you willing to deal with it?

In asking for this information you will learn a great deal about the organization. Is it transparent or is the Board trying to hide something? Being fully informed about the organization is important to your career decision; you want to make sure you give yourself the best possible chance for success, even if that means you might have to politely remove yourself from consideration.

By the way, I would love to have comments on your experience in searching for an Executive Director position, please make sure that all comments provide anonymity to the organization you may be commenting about. And if there's anything I left out of this list, let me know that too!

Bylaws Checklist and Checkup

by Bunnie Riedel, Host of Nonprofit Conversation

There’s a great deal of organizational introspection going on right now. Yesterday, I had that conversation with a nonprofit executive who discussed the drop in revenue due to the economy. How many of those conversations have I had in the last few months?

While many organizations are examining their revenues, staffing and how the organization could run better, it might also be a good time to examine the Bylaws. Are your organization’s Bylaws good enough to really serve the organization? Or are you creating a new organization and you’re wondering what needs to be in the Bylaws?

I’ve created a sample checklist of components of Bylaws, things to consider when forming a new nonprofit or evaluating an existing one.

Size of Board

The size of your Board requires a great deal of consideration. Make it too large and nothing gets done, make it too small and you don’t have enough board members to get anything done. I know of a national organization that has 65 Board members! The largest for profit board of a Fortune 500 company has 33 Board members, so why would a nonprofit even think it needed 65 Board members?

My preference is somewhere between 9 to 11 Board members. Large enough to take on projects and small enough not to become unwieldy. Remember if you really feel you need more hands you can form committees of members, you don’t have to have Board members as sole staff of working committees.

Requirements of Board Members

Clearly state in your Bylaws what the requirements are for being a Board member. Is there an organizational membership requirement? Is there a residency requirement? Is there a professional requirement (must be practicing a certain trade or profession)? Is there an age requirement (must be at least 18 years old)?

What disqualifies someone from being on the Board? I had a nonprofit Board applicant send me his application. I called to tell him there was a residency requirement; that he had to live inside the city. The next day he re-sent his application with an in-city address and said that he had moved into the city in the last 24 hours. Mmmm.

Are there special requirements for recruiting Board members? Do you want to enshrine in your Bylaws certain types of people? For instance, do you want to designate certain seats for someone from the religious community, the legal community, the educational community, etc.? These “special talent” seats may help your organization ensure diversity in Board membership and ensure you have a variety of talent around the table.

How are Board members seated? Is it by majority vote or is it by two-thirds of the vote? What will be the Board members’ terms of service? Are the seats for two years with renewal up to a six year maximum? And do include term limits, there is nothing worse than perpetual Board members, like bread, they do go stale.

How will you remove “bad” or unethical Board members from the Board? What is the procedure? One of my favorite Bylaws is automatic removal if someone has missed two meetings in a row and requiring the absent Board member to be affirmatively voted back on the Board.

How are vacancies filled? How are meetings conducted? What is the process for calling an Executive Session and what kinds of things can be discussed during Executive Session? Typically, because of open meeting or “sunshine” laws in various states, Executive Sessions really can only be called to discuss a personnel matter.

Is the Executive Director or Chief Officer an ex-officio member of the Board? Will there be any compensation to Board members, such as a stipend or the reimbursement of travel expenses?

Who Are the Officers?

Typically most organizations have a President (or Chair); Vice-President (or Vice Chair); Secretary and Treasurer. Officers beyond those are up to the organization and should be based on need. Sometimes expanding the Executive Committee can be helpful. Remember an Executive Committee can be empowered to make decisions between Board meetings, so the makeup of the Executive Committee is important. Perhaps the Membership Chair should be part of the Executive Committee or the legal appointee should sit on the committee.

How are these Officers elected and how long is their term? How are they removed from office without removing them from the Board?

Is There a Membership Provision?

If you are starting or have a membership organization, what is your membership provision? What are the requirements for becoming a member and do you want a provision that revokes membership, and if so, what is the procedure for that? Do members have voting rights?

How Do You Make Bylaws Changes?

You want to make sure you can change the Bylaws if necessary. However, you want to make it difficult enough that the Bylaws aren’t constantly changing to suit Board member whims, yet doable enough that they can be changed when needed. Is there a notification requirement? Is it 30 or 60 days? What is the notification requirement? Must it be in person at the Board meeting or should it be by certified mail? Who can propose a Bylaws change and how do they propose one? Does it require a majority or two-thirds vote of the membership?

Some states or countries require that certain things be included in Bylaws in order to get or maintain nonprofit status, check with your state or country for its requirements.

The primary function of Bylaws is to serve the organization. If your Bylaws are interfering with that goal, it might be time to examine them and make necessary changes.

Board Members and Responsibility

I sensed the frustration in her email. A nonprofit Executive Director telling me that she was lucky if she could get three to four of her Board Members to contribute any money to the organization or sign the “conflict of interest statement.”

Sound familiar?

It does to me because I have seen it in person. They love to come to the meetings. They love to create new policies and programs. They love to tell the Executive Director how to do his/her job. And then, they completely forget those nasty little legal and fiduciary responsibilities.

Let us review. Board Members, it is incumbent upon you to contribute to the organization with your time, your loyalty and your money. Otherwise, don’t serve on a Board. Volunteer yourself to another noble task.

This takes me back to my church upbringing. What happens in church every Sunday? The plate gets passed around, sometimes twice or more in one service. Call it an offering or a tithe, most people who attend church (or other religious services) understand that if you want the church to keep going you have to support it with donations. I find that people who care about something deeply will open up their wallets because they understand that nothing runs on good will and happy wishes.

I also understand that for some people, being on a Board is a status symbol, something to tell their friends about or put on a resume. But that’s not what it’s about, it’s not just warming up a seat or finding a new social circle, it’s about committing to the organization’s current welfare and future well-being.

Many years ago a friend of mine served on an AIDS services Board. One of the requirements of serving on the Board was that he had to contribute $1,500. He either could go out into the community and raise that money or write a check from his personal bank account to the organization. It didn’t matter, as long as he was walking in the door with $1,500. I thought it was brilliant and there are certainly many organizations that require Board Members to make substantial donations, but for every one of those there are thousands more that don’t make contributing money a requirement and because they don’t, the Board Members don’t offer donations.

I will be writing a piece on Bylaws soon, but I would like to suggest that nonprofits incorporate Board giving into their Bylaws. Maybe it’s a set amount that gets changed from time to time or it’s a phrase like “Board Members are required to contribute financially to the organization.” I’m not sure and certainly would love people to send me any language they have in their Bylaws regarding Board Member financial contributions.

Some say, and I agree, that raising money is the number one duty of any Board Member. If you are an Executive Director, ask yourself right now, how much money has your Board raised? If you are a Board Member, ask yourself right now, how much money have you raised or contributed out of pocket?

Let’s say you have the kind of organization that requires some grassroots community involvement on the Board. Sometimes in those instances you will have Board Members without a lot of resources but you feel their presence is important. Teach those Board Members how to fundraise. Give them an opportunity to go out into the community, tell your story and yes, pass the plate. Everybody, even in this economy, has a few dollars to put in the plate.

If asking your Board Members to contribute is uncomfortable, get the ones who do contribute to do the “ask.” It’s a lot easier if a fellow Board Member says “I’ve made a thousand dollar donation and I’m hoping you will match that,” than to be the Executive Director doing the begging.

As to the other part of her email about Board Members not signing the “conflict of interest statement,” definitely include that in the Bylaws. Every Board Member must sign the conflict of interest statement or they can’t serve on the Board. There, I’ve made it simple.

No one is entitled to be on a nonprofit organization’s Board of Directors. Every Board Member must remember that they are a “servant-leader,” serving on the Board to serve the organization. And the first order of that service is to ensure that the organization has the money it needs to fulfill its mission. That saying, “Charity starts at home” means that charity begins right here with me and with you and with every single person involved in the nonprofit.