Day: June 8, 2020

Boards of directors function in interesting ways. Whenever a group of people closely interact, collaborate, form joint decisions, vote, and are held accountable, there exists risk that this group will become dysfunctional and/or ineffective. Successfully blending disparate personalities, viewpoints, experiences, and qualifications into one cohesive and capable unit can be a daunting task. Boards often fall short of their stated goals due to a varied list of reasons. A board should constantly be assessing its performance as a group and on a member-by-member basis. As part of this assessment process, a board may conclude that one or more of its members are no longer suited to serve. As with a tree, careful pruning of dead wood can spark flourishment and growth to new levels. If you’re involved with a board that could use some trimming-down, you have much to consider.

Determining whether or not a Board member should be removed should be based on many factors. What follows is a list of some behaviors that could influence such a determination. This list is far from all-inclusive.

• Breaching fiduciary duties;
• Attempting to micro-manage staff and operations;
• Engaging in prohibited or conflicting transactions;
• Consistently exhibiting an argumentative, disrespectful, and disagreeable demeanor;
• Failing to prepare for and/or attend meetings;
• Creating an atmosphere that suppresses the free exchange of ideas by other board members;
• Ignoring confidentiality of information; and
• Disregarding fundraising requirements and responsibilities.

Practically speaking, boards should exhaust all efforts to remedy challenging members before concluding that removal is necessary. These efforts can include the following:

• Setting very clear expectations of all board members;
• Nipping unwanted behaviors in the bud when they are first presented (board Presidents/Chairs must set the tone of meetings and interactions);
• If Board member agreements or contracts are in place, presenting clear violations to the member in question;
• Hosting an intervention of sorts to bring to light the issues in question;
• Provide one-on-one coaching, possibly by the President/Chair; and
• Asking or suggesting that the board member willingly resign.

Assuming a board intends to move forward with removing a member, it must first understand the legal implications of such a plan. Nonprofits are governed by state laws and corporate by-laws or similar documents. Removing a problematic board member must follow prescribed procedures spelled out within these laws and documents. A worthwhile set of by-laws should clearly describe the process for dismissal of a board member. Seeking the opinion of a reputable attorney to ensure that any applicable clauses do not run afoul of applicable state laws is also well-advised. Also keep in mind the impact on future voting and quorums that removing this board member may create. By-laws should be written to address such unusual circumstances, but they’re not always comprehensive enough.

Term limits are a useful feature that can be built into an organization’s by-laws. One-, two- or three-year terms are common for nonprofit board membership. These limits ensure that a fair and sensible process can be followed to keep board members in place. Term limits help curb complacency and provide a built- in mechanism to remove underperforming members without strict confrontation. Simply put, existing board members can choose to not vote-in a disruptive member when his or her term expires. Many experts advocate taking

term limits a step further by also limiting the number of terms that may be served. These experts argue that boards should strive to be in perpetual motion, exposing themselves to fresh ideas and a diverse pool of members that will stimulate creative thinking and unique thought. Detractors to the limited term number position argue that there is value in consistency, institutional knowledge, and history.

Another option may be a leave of absence. Unforeseen circumstances can impair a member’s ability to serve. Medical issues, career obligations, family matters, etc. can all take a toll on a person’s time that could otherwise be dedicated to the nonprofit. If a board member is disappointing due to reasons out of his/her own control, choosing to pause his/her term instead of outright replacing him/ her may prove advantageous.

When all else fails though and a forcible removal of a board member is chosen to be the best course of action for the organization, expect that the by-laws will require some form of special impeachment-type vote that would require at least a majority (frequently two-thirds, and occasionally unanimous) of existing board members to elect to remove said member. More legal implications come into play, as the board must ensure that this action is clearly documented and supported by contemporaneous meeting minutes. A belligerent excommunicated board member may research his/her own legal options upon dismissal. Boards must ensure that their records clearly detail the reason for termination of the ex-board member and all communications with and about him/her for potential legal defense.

Most board members are deeply and honestly devoted to their organizations and work diligently to promote and advance their underlying missions. For those unfortunate exceptions, board members must remember that their positions are not guaranteed to them. Removal may become necessary, and if it does, as with anything, appropriate planning, preparation, execution, and documentation are essential. The noble purpose of the nonprofit must never be compromised.

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There are generally two types of committees; committees of the Board and committees of the organization. Committees of the Board have the ability to take action on behalf of the Board, while committees of the organization cannot. In deciding how to structure your committees, remember that a committee of the Board can only be made up of Board members (must have at least three) while a committee of the organization does not need to made up exclusively of Board members.

Committees of the Board are an important extension of the Board of Directors and carry out specific functions that are vital to the organization. The organization’s bylaws include the committees to be held by the organization and can include a provision for the establishment of additional committees as needed. As with Board of Directors’ meetings, each committee must maintain minutes for each meeting held by the committee and should hold meetings as often as stated in the organization’s bylaws. The committees report to the Board and typically do not have the authority to exercise any powers of the Board, unless stated otherwise. The New York State Nonprofit Revitalization Act (“NPRA”) focused on certain Board committees to improve overall corporate governance of nonprofit organizations. The most common committees of the Board are summarized below.

Finance Committee

Typically, the Board Treasurer is the Chair of the finance committee.

Purpose – To take responsibility and oversee the financial performance and reporting of the organization.

Powers – The committee reviews and recommends the annual proposed budget, budget modifications, and financial/accounting policies and procedures. The committee also monitors the actual-to-budget operations.
In addition, the finance committee should be responsible for ensuring the organization’s tax filings are filed timely and reviewing the internal controls that are in place at the organization.

An extension of the finance committee is the audit committee. This committee’s responsibility is to select an independent audit firm to conduct the audit, oversee the audit process, accept the audited financial statements, and report findings to the Board of Directors. According to the NPRA, there are additional requirements for an audit committee of organizations that have over $1 million in annual revenue. These requirements are to have discussions with the auditor prior to and after the audit. Prior to the start of the audit, the discussion should focus on the scope and planning of the audit, and upon completion of the audit, the results of the audit. Results of the audit include identification of material weaknesses in internal controls, any restrictions on the scope of the auditors’ activities or access to requested information, any significant disagreements with management, and the adequacy of the accounting and financial reporting process of the organization. This is applicable for financial statement audits, government audits, and pension audits. To the extent that an organization has an internal audit function, this process should also be monitored and directed by the audit committee.

An investment committee can also be an extension of the finance committee. For those organizations that have significant amounts of investments, whether for general operations or an endowment, this committee can be responsible for developing an investment policy that conforms to the goals of theorganization and ensures compliance with the New York Prudent Management of Institutional Funds Act (“NYPMIFA”).

Compensation Committee

Purpose – To establish a compensation policy for determining compensation amounts for the organization’s executive employees.

Powers – The committee can recommend and/or approve compensation amounts for the executive employees. The directors can use a compensation consultant or benchmark compensation amounts for executives of other similar organizations to help determine compensation amounts.

The NPRA prohibits the involvement of the person that will receive the compensation from being present, or from participating in the deliberation and voting on said compensation.

Nominating Committee

Purpose – To ensure vacant positions on the Board are filled and to develop Board succession plans.

Powers – This committee is responsible for seeking candidates for recommendations to fill vacant seats on the Board, as they occur. This is an important function for the organization, as new Board members have a significant impact in the future of the organization.

Executive Committee

This committee usually consists of the Board officers (President, Vice President, Treasurer, or Secretary) and can include members of the Board.

Purpose – To manage the direction of the Board and assist in creating the agenda for Board meetings.

Powers – This committee can meet and make decisions on urgent matters that come up between scheduled Board meetings. The bylaws will include the authority that this committee has over decision-making on behalf of the Board.

Compliance Committee

This committee is highly recommended for health and welfare organizations. Such organizations that receive federal and state funding are subject to more regulations over the programs that receive such funding. This committee is made up of directors and meets with the Corporate Compliance Officer.

Purpose – To oversee the organization’s corporate compliance program and related policies and procedures. The committee also ensures sufficient resources are available to carry out the corporate compliance plan.

Powers – The committee reviews the policies and procedures that involve the code of conduct, corporate compliance plan, and the process for reporting concerns by employees and vendors. The committee also reviews and evaluates the results of compliance audits, as well as management’s plan of action to respond to the audit findings.

Development Committee

Purpose – To establish a plan for fundraising activities so that sufficient financial resources are available for the organization.

Powers – The committee can develop and recommend fundraising plans for approval by the Board. Fundraising plans can include establishment of Board-designated funds, determine the need to raise capital for a specific project, or create a new fundraising event. The committee can monitor the fundraising plan to ensure activities are progressing in the direction intended.

In addition to the above committees, the Board of Directors can also create ad-hoc committees. These committees are created for a special purpose for a certain period of time (i.e. committee established to organize a major fundraising event or capital campaign project). When the purpose or goal has been met, the committee will then dissolve. Having a few committees creates the opportunity for recruitment of new Board members. As committees typically meet fewer times during the year than the Board, individuals can first serve on a committee before making the commitment to serve on the full Board.

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Every member of the Board of Directors has important responsibilities that are unique to his/her position on the Board. It is important that each member of the board understand what his/her responsibilities are so that the Board works cohesively to further the mission of the organization. Below are some of the key board positions along with their respective responsibilities.

Chairman of the Board Responsibilities

• Acts as a partner to the Chief Executive Officer/Executive Director (CEO) and other Board members
• Acts as an ambassador for the organization
• Can be an approved member of all committees of the organization
• Establishes mission and purpose
• Maintains healthy relationships with funders, partners, and other stakeholders
• Monitors annual budgets, audit reports, material business, and planning decisions
• Ensures legal and ethical integrity
• Hires and coordinates annual performance evaluation of the CEO
• Performs periodic consultations with Board members on their roles and helping them assess their performances
• Monitors and strengthens programs and services by reviewing operational effectiveness
• Helps assist the CEO and Nominating Committee in recruiting Board members and Executive Directors to build a competent Board to develop effective future leaders
• Evaluates Board members’ and Executive Director’s progress
• Works with the CEO, Board officers, and committee chairs to develop the agendas for Board of Directors meetings, and preside at these meetings
• Appoints volunteers to key leadership positions including chair of Board committees, task forces, and cultivate leadership succession
• Recognizes his or her responsibility to set an example for other Board members and playing a major role in fundraising activities
• Develop and maintain an effective Board culture
• Works with the CEO and other Board officers to develop both immediate and long-term goals and expectations for the Board that support organizational priorities and governance concerns
• Ensures that committees have the resources needed to do their jobs

Vice President of the Board Responsibilities

• Performs the duties of the Chairman as required in the Chairman’s absence
• Supports the activities of the Chairman including sharing responsibilities as appropriate
• Presides at meetings of the Board of Directors
• Serves as approved member of standing committees
• Plans the organization’s human and financial resources
• Sets an example for other Board members by contributing financially and by playing a major role in fundraising activities
• Works with the Chairman to assist in developing the agendas for Board of Directors meetings
• Advises the Chairman on appointing volunteers to key leadership positions, including positions as chair of Board committees and task forces
• Supports and challenges the Chairman in all his/her responsibilities to ensure organizational priorities and governance concerns are addressed in the most effective and efficient manner
• Represents the Board in the community, especially at events at which the Chairman cannot attend.
• Approves and monitors the organization’s strategies and policies, annual budgets and business plans, evaluates the performance of the organization, and supervises the management of the organization
• Seeks to ensure that all directors are properly informed of issues arising at Board meetings and provided with adequate and accurate information in a timely manner
• Actively encourages the directors to be engaged in the Board’s affairs and contribute to the Board’s functions
• During the period when the Chairman is absent and the normal functions of the Chairman cannot be carried out, the Vice Chairman will take the role as the acting Chairman until a new Chairman has been elected and appointed by the Board
• Hires and evaluates the organization’s CEO along with the Chairman
• Develops long term goals and expectations for the Board with help from the CEO
• Helps ensure that committees have the resources needed to do their jobs

Committee Chairperson Responsibilities

• Provides leadership and ensures committee members are aware of their obligations and that the committee complies with its responsibilities
• In consultation with the CEO or other Board or committee members, schedules dates, times, and location for meetings
• Ensures meetings are called and held in accordance with the organization’s mandate, terms of reference, or bylaws
• In consultation with the CEO, and/or other Board or committee members, establishes and confirms an agenda for each meeting
• Ensures the meeting agenda and relevant documents are circulated to the members of the committee at least 3-5 days in advance of the meeting
• Officiates and conducts meetings
• Consults with other committee members and provides advice and support
• Ensures that discussion on agenda items is on- topic, productive, and professional
• Ensures minutes are complete and accurate, retained, included, and reviewed at the next meeting
• Ensures the organization is managed effectively
• Ensures decisions taken by the committee are clear and not ambiguous, and that responsibility for taking forward action points is properly allocated

Treasurer Responsibilities

• Provides direction for the financial management of the organization
• Facilitates the Board in meeting its financial oversight responsibilities
• Chairs the Finance Committee
• Provides direction for the oversight of theorganization’s record keeping and accounting policies
• Ensures the presentation of timely and meaningful financial reports to the Board
• Ensures the development of an annual budget and its submission to the Board for its approval
• Leads the monitoring of budget implementation
• Oversees development and Board review of financial policies and procedures adopted by the Board
• Ensures assets are protected and invested according to Board policy
• Leads the Board in assuring compliance with federal, state, and other financial reporting requirements
• Presents the recommendation of the auditor to the Board for its approval
• Presents the results of the audit to the Board
• Recognizes his or her responsibility to set an example for other Board members and playing a major role in fundraising activities

Secretary Responsibilities

• Provides direction for the keeping of legal documents
• Certifies and keeps, at the principal office of the organization, the original, or a copy of, the bylaws as amended or otherwise altered to date
• Keeps a book of minutes of all meeting of the Board and committees. Minutes shall record time and place of meeting, and the names of all those present
• Presents minutes to the Board for approval 
• Ensures that all notices are duly given in accordance with legal requirements
• Recognizes his or her responsibility to set an example for other Board members and playing a major role in fundraising activities

Board Members Responsibilities

• Serves as a trusted advisor to the CEO as he/ she develops and implements strategic plans
• Reviews outcomes and metrics created for evaluating its impact, and regularly measures its performance and effectiveness
• Approves annual budget, audit reports, and material business decisions; being informed of, and meeting all, legal and fiduciary responsibilities
• Contributes to an annual performance evaluation of the CEO
• Assists the CEO and Board chairman in identifying and recruiting other Board members
• Partners with the CEO and other Board members to ensure that Board resolutions are carried out
• Serves on committees or task forces and takes on special assignments
• Acts as an ambassador for the organization to stakeholders
• Ensures commitment to a diverse Board and staff
• Organization of the Board of Directors, officers, and committees
• Formulation and oversight of policies and procedures
• Financial management, including adoption and oversight of the annual budget
• Oversight of program planning and evaluation Personnel evaluation and staff development
• Review of organizational and programmatic reports
• Promotion of the organization Fundraising and outreach

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There is always a question as to where a Board’s responsibilities end and management’s starts. There are no hard and set rules; what works for one agency may not be effective for another. Some organizations have a strong executive director and a weak board, while others have a strong board and weaker executive director. One thing is for sure, running an effective nonprofit takes an active board of directors and a dedicated staff led by a strong executive director working in harmony to forward the mission of the organization.

Roles of the Board of Directors

In general terms, the Board of Directors provides oversight and guidance to the Executive Director and the nonprofit’s other staff members. The Board ensures that the organization stays aligned with its mission and values in addition to complying with all federal and state laws.

Specifically, the Board of Directors has oversight over the following areas:

Legal Oversight

The Board ensures that it is operating in accordance with its mission and the purpose for which it was granted tax-exempt status. Board members should constantly re-read the organization’s mission statement to ensure that everything they do on behalf of the organization is in furtherance of the organization’s mission.

As safeguards of the public trust, Board members are responsible for protecting the organization’s assets; ensuring that the organization’s control environment is effective; prudently deploying resources; and providing direction and governance.

The Board ensures legal and ethical integrity and maintains accountability.

Management Oversight

The Board is responsible for ensuring that the nonprofit organization is operating effectively. It is the Board’s responsibility to select the Executive Director and outline his/her role; the Board supports the Executive Director and assesses his/ her performance (should be performed in a written evaluation); the Board determines appropriate compensation for the Executive Director and other executive staff members; and the Board has the power to hire and remove the Executive Director.

Fiscal Oversight

The Board provides proper fiscal oversight, including setting and approving an annual budget. This does not mean the Board prepares the budget, nor does it mean that the Board should micro- manage the budget process. The Board should review and gain an appropriate understanding of the budget, ensure that the organization is establishing appropriate reserves, revenues and expenses make sense and are supportable, and monitor the organization’s fiscal health and actual operations compared to budget on a regular basis. Board members need to have at least a basic understanding of how the organization generates revenue and its cost structure to be able to understand if the proposed budget is reasonable. The fiscal aspects of an organization are not always the easiest for Board members to understand, but they are the lifeblood of any organization.

Part of the role of the Board is to ensure that the organization has the financial resources it needs. As a result, Board members should be involved in helping in the organization’s fundraising efforts. Fundraising is often essential to an organization to provide discretionary funding. Many Boards require a give-or-get commitment from its Board members. This is something you should understand before joining a Board.

Program Oversight

It is the Board’s responsibility to ensure that programs are in place to further the mission and goals of the organization. If there are specific compliance programs that the organization must follow (e.g. Medicaid), the Board should ensure a proper compliance program is in place and should be receiving regular updates of the organization’s compliance.

Roles of the Executive Director

While the Board’s role is to oversee, the role of the Executive Director is to execute the policies, programs, and initiatives established by the Board. The Executive Director is responsible for running the day-to-day operations of the organization. The Executive Director is an employee of the organization whose responsibilities are determined, and performance monitored, by the Board of Directors.

Staff Management

The Executive Director hires, supervises, and motivates the staff of the nonprofit. It is the Executive Director’s responsibility to ensure the organization is properly staffed, all of the staff members have appropriate job descriptions, job performance is evaluated and pay is appropriate within a predetermined scale, staff members are following organizational policies and protocols, and that everyone is properly trained and on the same page in terms of organizational mission and goals. The staff of a nonprofit traditionally comprise more than 70% of a nonprofit’s annual expenditures, so this can be a significant part of the Executive Director’s responsibilities.

Development and Management of Policies and Programs

While it is the Board’s responsibility to set policies, it is the Executive Director’s responsibility to ensure that the Board’s policies are properly implemented. In many organizations, the Executive Director may suggest policy to the Board, but ultimately the establishment of such policies rests with the Board. It is management’s role to put procedures in place to ensure that policies are effectively being followed.

Staff Liaison to the Board of Directors

The Executive Director must also keep the Board informed as to what the organization is doing. The Executive Director attends Board meetings and maintains open lines of communication with the Board of Directors.

Ensure Effective Operations

The Executive Director is responsible for running the day-to-day operations of the organization. It is the Board’s responsibility to provide the overall framework, but it is the Executive Director that steers the ship to ensure the organization stays on course. This framework is often developed jointly by the Board and Executive Director through a strategic plan which provides a road map for management to follow.

In order for an organization to be effective, the Executive Director and the Board must embrace their roles, open up lines of strong interactive communication, and develop a collaborative relationship focused on ensuring the organization’s mission is carried out in the most effective and efficient way. If the Board and management aren’t in-synch, with the Board providing governance, oversight, and monitoring organizational effectiveness, and management, building off the framework provided by the Board, guiding the various components of the organization so that they are functioning in harmony, the organization will not reach its full potential. Like with any relationship, communication and trust are essential.

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Behind every successful nonprofit organization is a Board of Directors that implements and follows best practice policies and procedures. Such policies help to ensure that the Board remains aware of the status of the organization, creates accountability, and helps the Board make unbiased decisions in the best interests of the organization. Outlined below are some practices and key policies that every organization’s Board should consider implementing. It is important to note that effective January 1, 2017 an employee of an organization cannot also function as the “chair” of its Board. Employees can still be on the Board, but this is no longer considered best practice. The actual functions of the Board position, not the title itself (chair, president, etc.), is most relevant.

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1. Define the organization’s mission and purpose. It is the Board’s responsibility to define and review the organization’s statement of mission and purpose, which lays out the organization’s goals, resources, and primary constituents served. Too often organizations move outside their core mission, chasing funding that may not be appropriate. The Board is in charge of keeping the organization on track. We encourage Board members to re-read the organization’s mission before each Board meeting so that they have clear understandings of what’s guiding their decisions.

2. Choose and evaluate the CEO and set compensation. Boards must reach consensus on the chief executive’s responsibilities and perform a thoughtful search to find the most qualified individual for the position. This includes helping to define job responsibilities, compensation, etc. Each organization will have different expectations and skill sets needed depending on the other members of management, where the organization is in its life cycle, the nature of the organization and its funding, etc.

3. Support the CEO. The Board should ensure that the CEO has the moral and professional support he or she needs to further the mission of the organization.

4. Perform Effective Planning. Boards must actively participate in an overall planning process on a regular basis, and assist in implementing and monitoring the plan’s goals. Planning should look at short-term and long-term, and should include “what if” scenarios, especially if your organization relies on government funding that could be tenuous.

5. Monitor and Strengthen Programs and Services. The Board’s responsibility is to determine which programs are consistent with the organization’s mission and monitor their effectiveness. For those programs which are not, the Board should consider if such programs should be transferred to another organization. Management should also continue to evaluate whether it is a buyer (looking to acquire another organization to strengthen/expand its footprint/offerings), a seller (looking to merge into another organization), or whether it will maintain the status quo.

6. Ensure Appropriate Levels of Financial Resources. One of the Board’s foremost responsibilities is to secure appropriate funding for the organization to carry-out its mission. Board members are required to help raise funds for the organization they govern. If you’re not able to, you may want to consider if you will be an effective Board member.

7. Maintain Proper Fiscal Oversight. The Board must assist in developing the annual budget and ensuring that proper financial controls are in place. The Board can only do this if it receives regular, adequate financial information. Once again, this includes “what if” modeling so that the agency is prepared if certain funding is not available.

8. Develop New Board Members. All Boards have a responsibility to identify potential new Board members, orient new members to the Board, and periodically and appropriately evaluate their own performance.

9. Ensure Legal and Ethical Integrity. Remember, Board members have three overriding duties; the duty of care, the duty of loyalty, and the duty of obedience. Board members are ultimately responsible for adherence to legal standards and ethical norms.

10. Enhance the Organization’s Public Standing. Board members need to be ambassadors for the agencies whose Boards they sit on. This includes the public sector (lobbying activities on behalf of the agencies) and the private sector (bringing on new Board members, raising money and support for the agency, integrating with constituents, etc.).

Download the full guide for Nonprofit Board Members

Each Board member, in accepting a position on the Board, agrees to certain duties: the duty of care, the duty of loyalty, and the duty of obedience.

Duty of (Due) Care

This is the responsibility of Board members to ensure that the organization’s assets are properly used, and to supervise the organization’s actions diligently. Members of the Board of Directors are responsible for setting the foundation for the organization, and hence, to enable the organization to move towards greater sustainability. The duty of due care also covers the Board’s responsibility to ensure that all activities undertaken by the organization are those which help the organization move towards those future goals. The members of the Board should also make themselves aware of the affairs of the organization to be able to identify any instances of misappropriation or fraud. Under the duty of care, Board members are responsible to ensure a proper control environment exists; they take the time to understand the operations, funding streams, and underlying regulations; and they provide proper fiscal oversight.

Duty of Loyalty

The Board of Directors should always act with the best interests of the organization in mind and must not use organizational assets or information towards personal gain. Members of the Board of Directors are also responsible for hiring officers of the organization. It is the Board’s duty to ensure that those in charge, particularly the CEO, are competent and able to oversee the day-to-day operations of the organization. The CEO must also share the same principles as the Board of Directors and be expected to act within the best interests of the organization. Pursuant to the duty of loyalty, Board members are required to place the interests of the organization before their own. As such, all conflicts of interest should be properly disclosed and only entered into if they are in the best interests of the organization. Finally, it is the Board’s responsibility to evaluate the effectiveness of the CEO, and where appropriate, other key members of the organization’s management.

Duty of Obedience

The actions of the Board members should also reflect adherence to applicable laws and regulations as well as faithfulness towards the organization. This is accomplished through the adaptation of policies which emphasize a strong,

ethical “tone at the top.” It is also closely related to the other two duties of the Board, whereby the ethical policies and the motion towards future sustainability also aid the organization to act in accordance with its mission as well as any laws and regulations. Duty of obedience requires Board members to establish appropriate policies and provide appropriate governance in running the organization. Board members should have regular communication with the organization’s Corporate Compliance Officer to ensure they understand risks and exposure within the organization.

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Board members will likely have different interpretations as to what is expected from them in their roles. In many cases, not all Board members know the full extent of what is expected of them and what their responsibilities are to the organization. To avoid such confusion and to ensure awareness and understanding of their responsibilities as a Board member, a Board member contract should be implemented to address these concerns. The purpose of a Board member contract is to officially outline and codify the expectation and responsibilities of each Board member.

As with any arrangement that involves a commitment of time (and sometimes money), having an agreement in place is best practice to ensure both the Board member and the organization have a clear understanding of what is expected. The contract will describe the Board member’s responsibilities as well as describe the responsibilities of the organization’s management so that the Board member can fulfill his/her fiduciary responsibility. Prior to a Board member being voted on at the annual meeting, presenting him/her with a sample contract will help ensure that the relationship between the Board member and the organization will start off on the right path.

There are several sample agreements available on the Internet that can be modified to be in- line with the organization’s bylaws and to best fit the organization’s needs from its Board members. The following is a sample of what can be included in the agreement:

• Attend a certain number or percentage of Board meetings;
• Give-or-get financial contribution;
• Volunteer at the organization’s fundraising events; and
• Volunteer to be on one of the Board committees (if position allows).

The agreement can also state what the Board member will expect from the organization. The following is a sample of the organization’s responsibilities:

• Provide timely financial information;
• Provide timely responses to inquiries to management; and
• Provide necessary information to allow the Board member to make wise decisions in governing the organization

For a new organization, the implementation of a Board member agreement will be an easier feat than for a large Board of Directors of an established organization, as all Board members might not be willing to sign the agreement. However, if the decision to require Board members to sign an agreement was made, it can help eliminate those members who are not fully vested in their roles as Board members, which will then give the opportunity for a new Board member to join that is willing to make the commitment that is needed for the organization. For those organizations that do not have Board agreements, the Nonprofit Revitalization Act states that the Board of Directors cannot remove a Board member without cause. Removing a Board member without cause, even if allowed per the organization’s bylaws, is not compliant with current New York State law. However, having a Board agreement in place can help provide support that an ineffective Board member is not fulfilling his/her obligations under the agreement, making it easier to remove that individual from the Board.

Board member contracts are not mandatory, although having them in place is best practice and can help ensure Board members are aware of their responsibilities, what is expected of them, and what they expect from the organization to enable them to more effectively lead.

Download the full guide for Nonprofit Board Members