Fundamentals #2: Built on Solid Ground? A Bylaws Review
Updated: Aug 15, 2019
This is the second in a series on non-profit and association fundamentals. In this post, we discuss the importance of making certain your organization’s core governing documents - bylaws and articles of incorporation – are up-to-date and that your actions are consistent with their requirements.
How often do you think about the foundation of your home? Let me guess: “rarely or never”. But if the foundation were to fail, you would be left in rubble. Now, when is the last time you read the bylaws of your organization? Or the articles of incorporation (sometimes called the charter document)? These documents are the very foundation of your organization, which define why you exist and lay out fundamental governance rules for the Board and management. Failure to understand and adhere to them can have catastrophic results, as some of our clients learned the hard way.
All members of the Board of Directors must be familiar with these core documents, which should be included in a Board reference book and covered in new Board member orientation. The three legal duties of non-profit Board members – the Duty of Care, Duty of Loyalty, and Duty of Obedience – require it. Of course, reality is far from ideal and many Boards, and non-profit and association senior executives, may have only cursory knowledge of these requirements.
Over time, organizations evolve, programs change and governance structures morph. As a result, the actions of an organization may be out-of-sync with its fundamental governing documents. The Board of Directors, typically through a Governance Committee, is responsible for making certain that current practices of the organization follow the bylaws and, if necessary, that the bylaws are amended to reflect the actual practices of the organization. Crucially, it is the responsibility of the CEO/Executive Director to make certain that the Board is aware of and acts on this responsibility.
What should be in your bylaws? The regulations for non-profit bylaws are established independently by each state, rather than at the Federal level, so it is important to understand the specific requirements in your state. However, the American Bar Association has a useful general checklist of items which should be in non-profit and association bylaws here.
Why worry about the bylaws and articles of incorporation? In addition to being the foundation of good governance and helping to prevent problems, well-crafted bylaws and articles of incorporation can provide a safety-net when things go wrong.
Next in this series: Board Policies and Procedures.
Want to learn more? Contact us. We’d love to help you ensure that your organization has a solid governance foundation in place.