Effective bylaws offer standards for candidate eligibility and selection, as well as board structure, for any nonprofit board. The difficult element, then, is getting from “start” to “end.”
Why Should You Begin with Bylaws?
There are no clear regulations governing board elections for nonprofit organizations under either the federal or state statutes. The IRS “does not care who controls the organization as long as it functions ‘exclusively’ for charitable purposes,” according to Nonprofit Issues. Meanwhile, state laws distinguish formal membership organizations (where members have voting rights similar to shareholders in a for-profit corporation) from non-member organizations (where constituents do not vote and the board is self-sustaining), but it is up to the organizations to decide which structure is best. Similarly, any organization’s bylaws must describe the rules by which it is controlled, including those governing board membership.
What Are the Effects of Bylaws?
Because bylaws are one of the first things charity organizations undertake, it’s easy for people to mistake them for legal papers rather than treasure maps. Bylaws contain crucial information about how organizations are structured to achieve their objectives. According to Charity Lawyer, some of the most important material contained in charity bylaws includes:
Structure of government
Clarification of whether the organization is run by a board of directors or by its members. Members will be able to elect and remove board members if the latter option is chosen. When an organization wants to provide its constituents democratic authority over the entity, voting membership is suitable. Trade groups, chambers of commerce, credit unions, churches, and social clubs are all examples of organizations that exist to assist their members. Because voting members have legal rights, it’s critical to spell out the membership requirements, privileges, and duties, including voting eligibility. Divided membership can lead to election contests in which each side promotes its own cause and candidates in extreme circumstances.
A self-perpetuating board serves as the “ultimate seat of authority inside the business” in the more prevalent board-driven structure. Members of the board elect their own replacements. If board membership is not changed on a regular basis, such boards might become “insular and inattentive to the concerns of citizens.”
Provisions for control
“No one ‘owns’ a nonprofit business,” Charity Lawyer points out, “yet there is always power.” The bylaws include a variety of topics related to control, including whether the organization is run by a board of directors or by members. Nonprofit board members in several states can be appointed by third parties or serve in ex-officio roles depending on their job or office.
Terms and conditions for directors
Knowing when terms of office expire is an important part of the electoral process. Ex-officio directors may or may not be subject to director terms that are consecutive or staggered. Not only should bylaws clarify how board members may be added, but also how they can be dismissed and replaced.
The rules also specify officer posts, responsibilities, and tenure, as well as how officers are appointed, dismissed, and replaced. State regulations may dictate needed roles, but bylaws might be more precise about what’s proper for a particular organization and what qualifies people for them.
While bylaws provide guidance on board election criteria and procedures, they also offer a lot of space for interpretation. Boards frequently adapt their processes within the framework of organizational regulations to reflect the cultural norms and leadership abilities in place.