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Board of Directors vs Membership Governance

Last modified: December 7, 2018
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The governing body of your organization is empowered and responsible for setting direction, corporate decision-making, compliance, operating-policy setting, and overall accountability for the organization in fulfilling its vision.  Choosing the best governing structure is vital to ensuring the success and the growth and development of your nonprofit organization.  It’s critical to understand the difference between a governing structure that is board of directors-only, or also includes a governing membership.

Board of Directors Only

Board members are typically nominated and elected by the existing directors.   The board members accept responsibility for setting direction, making decisions, and managing the activities of the organization, whether they hire others (staff or independent contractors) to carry it out or use volunteers.  In this governing framework, the board is not accountable to another body.

Membership Governance

This typically involves individuals (the members) who are allowed to vote on some or all of the following:  matters of governance, direction, approval of budgets, activities, staffing, and/or substantial financial obligations that the organization might undertake, such as purchase of buildings or equipment, or the approval of long term contracts.  This structure may include members voting to appoint a board of directors or executive committee to manage the day to day operations of the organization and then the membership only votes on specific actions as necessary for the success of the organization.  The Board may bring those types of issues before the members as necessary.  Membership may require membership dues in order to be a voting member of the organization, or not.  Membership may also include benefits, such as discounts to participate in activities of the organization where participants are required to pay fees, or perhaps have access to special activities for members only.  Membership must be defined as to criteria for membership, fees required if any, how fees are set, what are member benefits and responsibilities.

Membership by Affiliation Vs. Governing Membership

There is often a misunderstanding with use of the term membership.  It’s common for many nonprofits to have “members” who are bought into the ideals of the organization and are considered insiders, but they don’t have governance rights.  That is perfectly OK, but there is a legal distinction between such affiliate “membership” and members having governing authority.  Many states require nonprofits to declare whether they have a governing membership when the organization first incorporates.  If membership is affiliate-only, the nonprofit is NOT a member organization by legal definition.

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This Post Has 31 Comments

  1. If a Board of Directors of a Nonprofit sets the pay of a full-time employee, can the delegates change the pay of the full-time employee (not a board member)? We had a Board of Directors set the pay for a full-time employee 8 months ago. At a National Conference we just had the delegates reduce the pay for this full-time employee. Do you know if there is a legal standing?

    1. By delegates, I assume you mean members. Legal standing for an issue like this depends on what policies and authorizations you have in place. Whether it’s in your bylaws or another policy document your organization has adopted, it should be clear who has jurisdiction to set salaries. Yours could be a situation where your delegates have the authority via the member rules to bring up a motion like this and vote to override the board, but that’s both unusual and not very constructive. In practice, pure democracy doesn’t work very well. It’s the reason the US is a constitutional republic and not a democracy, but that’s another subject. Decisions like hiring and compensation is usually delegated to the board or executive management. Membership exercises oversight and influence by selecting the board members that represent them. Allowing the members the authority to change a single employee’s pay rate is, in my opinion, over the top. However, you really have to look at your standing rules, as this isn’t a matter of state or federal law. It’s purely internal to your organization.

  2. I am serving on a Governing Documents Committee for a South Carolina Homeowners’ Association. Each Owner is a member explicitly tasked with electing Directors and approving/disapproving our annual budget. Most other matters are neither reserved explicitly to the Board nor to the Owners in our existing governing documents.
    Thus my question: If there is a duly voted act of the Owners which is contrary to the will of the Board regarding a matter which the governing documents do not explicitly reserve to either party, can the Board legitimately ignore the duly voted act of the Owners, or must the Board generally comply?
    Thanks!

  3. We in the process of starting up a church, The board of directors are made of Pastor and Wife, Co-Pastor and wife. Daughter and son-in-law. Is that ok in the state of Texas. Pastor and Co-Pastor and Co-pastor’s wife are not blood related nor is the son in law.

    1. Texas shouldn’t have a problem with that board makeup, but the IRS probably will. The IRS expects a majority of your governing body to be independent. The Pastor and his wife are related to each other, as is the co-Pastor and his wife. From a standpoint of independence, that’s two votes so far. The daughter and son-in-law are related to each other, AND is related by both blood and marriage (which counts just as much) to the Pastor’s family (or co-Pastor – I wasn’t clear on whose daughter it is). So, you have 4 people related to each other, and 2 other people related to each other. That makes a 2/3 majority of non-independent board members.

    1. Most states that have open meeting laws restrict that requirement to government agencies and related organizations. A non-governmental nonprofit is not typically subject to this. A quick glance at Colorado’s statute seems to confirm this in your situation.

  4. If there is a board of directors in a nonprofit organization, does that mean the board of directors votes for a new president, etc., not members of the nonprofit organization?

    1. Not necessarily. Either could be the case, depending upon the stipulations in your bylaws. It is common to have situations where members elect the directors, then the directors appoint from within who will occupy various officer positions, such as President, Secretary, etc. But members could have authority for both, if that’s what your bylaws say. There’s no rule on how it has to be done.

  5. Hi just wanted to ask if for nonprofit companies, can someone be on the board of directors and also work for the nonprofit full-time? Thank you in advance.

  6. May a membership nonprofit be dissolved by the board without consulting the dues-paying membership? In this case the dissolution clause in the constitution and bylaws only says that assets must be distributed to another 501c3 (that is obviously required by law). There is no other mention in the documents about who can call for dissolution or decide whether or not to dissolve so the board is just deciding this without consulting membership.

    1. I cannot give you definitive counsel on your specific situation since I haven’t seen your corporate charter nor bylaws. However, if the organization is truly a membership nonprofit, it is usually the membership who elects and oversees the board. The board is delegated its authority to govern by the members. If that describes your setup, then no, the board cannot unilaterally dissolve the nonprofit without taking it to the members for approval. Make sure this is done right. Members can sue board members if board members conduct themselves outside their authority under the charter and bylaws.

  7. Should the Board of Directors of a “membership organization “ be dues paying members as well?

  8. Hello, I’m trying to determine if there is a membership requirement for Louisiana nonprofit organizations. The law sets forth information about both members and directors but I can’t find any section that states whether members are required. Any guidance you can provide would be so appreciated! Thank you.

  9. I am currently on a volunteer elected Board of a non-profit association. We are discussing the terms in our Bylaws. The original Bylaws said we would be ruled by a Board of Directors. However, through the years and changes in our association, someone changed Board of Directors to Governance Board. The change came at a time of much stress and a much smaller Board. We are incorporated in New York. Do we need to change the term back to Board of Directors? Since I’m not a lawyer; I’m asking since I don’t see much difference in the terms nor the time it will take to make the changes AND explain why we are changing to the membership. I feel our time could be spent on more timely items of business.

    1. This sounds mostly like semantics to me. But, it is clearly better if you use consistent terminology. You know that both mean the same thing, but others may not. Whether you choose to amend your bylaws terminology or start referring to your board as the bylaws already does, that’s up to you.

  10. Hello–

    Is it a legal requirement that Board of Directors members must pay regular membership annual dues (the ones asked of the public/our patrons)? This seems to be an ongoing issue at my community theatre (of which I am a Board member)!

    Thanks…

    1. I’m not aware of any state that codifies regulations regarding dues. Maybe there is, but we haven’t ever run into that issue. Whether or not an organization has a dues structure, and to whom dues are charged, is most always an issue for the nonprofit to decide for itself. That said, I’ve personally never been part of a membership where board members weren’t charged the same dues as regular members. That seems like a setup that is bound to cause ill-will.

  11. I am registering my non profit and the question is “will it have members” for some reason I am thinking this is different from a board of directors, am I correct? I feel members are something different. I am setting up a recovery resource center so I do not think it would have members, just a board of directors who are elected, but I could be wrong. Please clarify..Thank you

    1. Yes, there is (usually) a difference between “members” and members of the board. All nonprofits should have a board of directors. Some will also have a membership, the members of which nominate and elect the governing board. Many churches operate this way, as well as private schools, PTOs, etc.

    1. In most cases, yes. In a charity, compensation has to be set at arms-length, meaning the person with the conflict-of-interest cannot vote on their own pay. Also, a majority of the remaining board taking the vote must be independent (not related by blood, marriage, or outside business co-ownership). In the case of a private foundation, the rules are even tighter, but it is still possible.

      As to advisable, it really depends on the situation. It’s probably safe to say that it isn’t a good long term practice, though it is often practical in early years.

    2. Is it OK for a nonprofit executive director to be paid for their work through their for-profit personal consultancy who the nonprofit outsources its management to? Or would it be a conflict of interest? Thank you!

      1. Sounds like a lot of conflict of interest. At a minimum, if the ED’s company has an outsourcing deal with the nonprofit, the ED should have recused themselves from the board decision to hire his or her company.

    1. You shouldn’t encounter any maximum board service limitations. You would just need to inform New York via your corporate annual report and state fundraising registration renewal of any changes to your list of directors or officers, should there by any changes.

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