Effective governance is essential for the sustainability and legal compliance of nonprofit organizations. At the Law Firm for Non-Profits, we believe it is important for a nonprofit board of directors to adopt and follow suitable written policies and procedures. Such documents are vital to steering the nonprofit organization on the correct path and ensuring awareness of and adherence to the laws that regulate them.
The Foundation of Good Governance: Clear and Comprehensive Bylaws
Good governance is anchored in the bylaws of a nonprofit. These governing documents are critical as they outline the operational framework and rules of conduct for the board of directors, committees, and officers of the nonprofit. Compliance with these bylaws is crucial; failure to do so can lead to the invalidation of corporate actions and potential civil liabilities for directors. It is therefore imperative that every director be familiar with and understand the bylaws of the nonprofit.
Modifying Bylaws: A Path to Reflect Organizational Evolution
Amendments to the bylaws may be necessary to reflect the evolving mission and needs of the nonprofit, within the boundaries of state law. Here are some key recommendations to keep in mind when amending a nonprofit’s bylaws:
• Gather Input: Involve board members, staff, and stakeholders in the review process to gather diverse perspectives on needed amendments.
• Follow Amendment Procedures: Ensure any changes to the bylaws are made in accordance with the amendment procedures outlined within the current bylaws, whichwill require a board and/or membership vote, as applicable.
• Legal Compliance: Consult with legal counsel to ensure proposed amendments complywith state and federal laws and do not compromise the organization’s nonprofit status.
• Communicate Changes: Once amendments are made, communicate the changes to all board members, staff, and relevant stakeholders, and update all official copies of the bylaws.
• Update Policies and Training: Adjust organizational policies and training programs to reflect changes in the bylaws, ensuring continued compliance and understanding.
Prior to any amendment, consulting with a legal expert is advisable to ensure compliance with applicable law and adherence to the bylaws’ amendment procedures. Amended bylaws should clearly indicate their updated status, including the amendment date.
Beyond Bylaws: Implementing Additional Governance Policies
While bylaws provide a foundational governance framework, it is often helpful or even necessary for boards to develop additional detailed policies and procedures such as:
• Conflict of Interest Policy: Establishes guidelines to identify, disclose, and manage any conflicts of interest among board members and staff, ensuring decisions are made in the best interest of the nonprofit.
• Whistleblower Protection Policy: Protects individuals who report unethical or illegal conduct from retaliation, encouraging transparency and accountability within the organization.
• Document Retention and Destruction Policy: Outlines the procedures for retaining and destroying records in a systematic and legal manner, ensuring compliance with legal obligations, efficient record keeping, and the safeguarding of sensitive information.
• Gift Acceptance Policy: Defines the criteria for accepting donations, including cash, goods, property, and services, to ensure they align with the nonprofit’s mission and comply with legal requirements.
• Investment Policy: Details the strategies for managing the organization’s investments, including objectives, risk tolerance, and asset allocation, to ensure fiscal responsibility, compliance with applicable law, and the long-term financial health of the nonprofit.
• Diversity, Equity, and Inclusion (DEI) Policy: Commits the organization to fostering an inclusive environment that values and respects diversity among its board, staff, volunteers, and the communities it serves.
Tailoring these policies to the specific needs of the nonprofit enhances management and operational effectiveness. A legal consultation can help identify the most beneficial policies for your organization.
The Consequences of Neglecting Good Governance
Neglect in governance can erode public trust and expose the nonprofit and its directors to a plethora of legal issues, including potential liability. Adopting and adhering to good governance practices is therefore a critical component of a nonprofit’s integrity and sustainability.
Addressing Governance Failures
Should a director identify governance failures, it is imperative to voice objections formally and ensure they are recorded in meeting minutes. This not only upholds the integrity of the director but also provides protection against personal liability should the board’s actions lead toallegations of breaches of duty.
Conclusion
Ensuring your nonprofit organization’s governance structures and policies are robust and effective is central to fulfilling your mission and maintaining public trust. The Law Firm for Non-Profits is committed to helping organizations like yours navigate the complexities and potential pitfalls of governance so that the focus can remain on the mission.