What belongs in the bylaws

Einstein said: Make everything as simple as possible but not simpler.

Same goes for bylaws of your nonprofit organization.

You need enough structure in your bylaws to enable to organization to function well, but not so much as to hamstring its work.

If you leave something out of the bylaws:

  • It might be interpreted to mean that the thing is not necessary.
  • It might also mean that the board does not have the power to do that thing.
  • It might mean that there is no reason not to do the thing.
  • Or it might introduce ambiguities.

For example, what would happen if you  leave out any mention of hiring staff?

  • Does that imply that your organization doesn’t need it?
  • Or that the board may not hire staff?
  • If there’s nothing to say they can’t hire someone, then maybe the board will just decide to do it.
  • And then, perhaps, the hiring will be challenged as outside the scope of the board’s role.

For another example, what if we’re talking about dues or fees?  Or new committees?

You can’t plan for every single condition. So think about how you want the organization to run. Consider the plans from the positive.

Be clear about what your organization wants and needs.

How much detail is enough?

Some flexibility is essential.

In my opinion, if every step in a process is spelled out, it must either be central to your mission and, therefore, important to include or … probably not necessary.

Put necessary and detailed rules for the day-to-day running of the organization  in a policies and procedures manual.

Board members getting paid?

There was an interesting article in the Washington Post July 11, 2009 about condo officers deciding they deserve to be paid.

Condo Officers Can’t Pay Themselves Fees if Bylaws Forbid It by Benny L. Kass

In my opinion, to allow board members to be compensated for their service will open the door to owners who only want to serve for the money, and not for the best interests of the association.

Overall, membership on the board of a nonprofit organization is considered as a voluntary commitment. The federal Volunteer Protection Act of 1997 (42 USC §14505(6)) that defines “volunteer” as:

an individual performing services for a nonprofit organization or a governmental entity who does not receive—

  1. compensation (other than reasonable reimbursement or allowance for expenses actually incurred); or
  2. any other thing of value in lieu of compensation, in excess of $500 per year, and such term includes a volunteer serving as a director, officer, trustee, or direct service volunteer.

This means board members may not receive any special allowances where the general members would be expected to participate differently. This include: no free conference registration, free advertising or free membership when regular members of the organization have to pay.

And, perhaps most importantly, paid board membership is generally frowned upon by funders.

Board members are, however,  typically reimbursed for reasonable incurred expenses to attend required meetings.

There may be laws about this in your state. If you are considering paying board members for service. Check with the agency that regulates nonprofits in the home state of your corporation. That information is available on line at the IRS web site here.

Know the rules

Last weekend my family sat down to play a new game,  Cleopatra And The Society of Architects. In general, I hate games. (I have a terrible time waiting for my turn.)  But this one was pretty cool. It has some interesting strategy twists.

What’s that have to do with bylaws?

My daughter had played the game the day before with friends who were intent on figuring it out. She said they had to keep rereading the instructions to figure out how to play. And it took them about two hours.  No doubt there were probably side conversations about the merits of the game in addition to the rules that helped stretch it out. Nevertheless, it took a long time.

When she explained and reread the instructions for us, it went a little faster and she was a little more clear about what was supposed to happen.

We were playing that game for fun on a rainy Sunday afternoon. Imagine if you were trying to decide on the next program of your nonprofit organization.  That could be a problem.

If no one knows the rules, the board spends time every time deciding how to decide. What a waste of resources! On top of that, if one person thinks he/she knows the rules, then you can make bad decisions based on inaccurate information. This is also a recipe for problems.

Board members should read and understand the bylaws. And all members of the organization should have access to the currently approved set. But it’s human nature to avoid tasks that might be onerous or complicated. Bylaws would seem to be both. The best defense for this problem is to make the bylaws as easy to read as possible. Bylaws written in plain English as much as possible are more likely to be read, understood and used by the people in your organization who need to understand and use them.

Regarding consensus

Over the last hundred years or so, people have been trying to run their meetings using Robert’s Rules of Order. They are designed to efficiently run a meeting but not necessarily to facilitate the making of decisions. They can be cumbersome, so many groups often don’t adhere closely to them.

And, perhaps worse, sometimes people spend too much time trying to figure out the rules of running a meeting instead of doing the actual work of the organization.

You might want to consider a different structure.
Check out the book Breaking Robert’s Rules: The New Way to Run Your Meeting, Build Consensus, and Get Results by Susskind and Cruikshank (Oxford University Press, 2006) for an alternative method of running meetings. Their “Consensus Building Approach” works especially well for organizations that are less formally run and more committed to humanizing their work.

Consensus does not mean that everyone always has to agree, but rather that the group makes a decision that everyone can live with.

In addition, it allows the minority of members to have their voices heard during the process. This leads to unification better than having a vocal and dissatisfied minority.

How do I find out what my state requires to form a nonprofit?

I know bylaws. But I don’t know the rules in every state. I just found this great book that has—among other great things—an appendix that lists, state by state, what is required to form a nonprofit organization.

It’s possible that some stuff may be slightly out of date, but at least it tells you where to look in your state.

Check out this book by Mark Warda, titled, simply enough, How to Form a Nonprofit Corporation

More on electronic voting

Check out this article by Gene Takagi over at NonProfit Law Blog about board actions by email. While the article is focused on California law, I think the notion of what constitutes a legal digital signature is useful for all.

According to California law, a  digital signature must have all of the following in order to be legal:

  1. It is unique to the person using it.
  2. It is capable of verification.
  3. It is under the sole control of the person using it.
  4. It is linked to data in such a manner that if the data are changed, the digital signature is invalidated.

Number 3 speaks to a general peeve of mine about email accounts. I have a number of friends who share their email account with a spouse.  So I’m never quite sure who will read what I wrote or who has answered my note. And because I’m talking about actual friends here, it does make it difficult to decide just what kind of personal griping is reasonable.

It’s not like you need to invest big money for an email account. There are plenty of free options: yahoo.com and gmail come to mind instantly.

So if you must be the only one with access to the account in order for the digital headers to count as legal… well, that’s just one more reason to have your own account.

endofrant

But how does the data remain unchanged?

I’m not sure how to manage this requirement. Probably the safest way is to send email votes to an account set up specifically for  the organization. Then the original info can’t be changed (at least by normal people without special skills!) Use tags or folders to store the replies.

What about electronic voting?

There are laws in many states covering voting by electronic means, by email or other online process. Some states say electronic voting must be unanimous in order to carry. Others don’t have any rules about it.

Check with your state agency that regulates nonprofits.  You can find out who that is at the IRS web site here.

How to include that information in your bylaws

Include the ruling you found out for your state

If there is no law against it, decide how you will handle electronic voting.

If there a different requirement for the number of electronic votes required to make a decision, include that info in your bylaws.

Get help to write your bylaws

Building bylaws from scratch or revising an existing set is a tedious but critical task.

It’s easy to get tired of the job and just rush through some spots.

It’s all too tempting to imagine that whoever does the job the next time can address those details. However, there is no point in skipping over the easy parts (or the hard parts) and, what’s more, the more complicated parts will be the ones you’ll need in a crisis. Besides as you will learn, finding people to do the job isn’t easy.

What to do?
Here are a couple of tips for getting through your adventure

  1. One person should not do all the work of writing your bylaws. It’s a real burden. And worse, it could be a real problem for the organization when only one person has their hands in that pot. Oh, the mistakes she could make and the liberties she could take.
  2. Particularly because (this is what we call an “elephant in the corner,” the thing no one talks about) when only one person knows what’s in the bylaws, that person has tremendous power in the organization. It’s like playing Monopoly with a bunch of people but only one person knows the rules. And generally, that guy doesn’t share them well. (Four years after I did the work for that organization, and after I’d left the organization, I still get calls from people asking, “What do the bylaws say about…?” That, my friends, is very scary!)
  3. Depending on your organization, that power can be underutilized or wielded like a very big stick. If no one knows the rules, the board spends time every time deciding how to decide. What a waste of time! If one person THINKS he knows the rules, then sometimes you make bad decisions based on in accurate information. Also a recipe for problems.
  4. And finally, get help! Someone who sees the whole process, knows how far along your team really is, and how far there is to go, is key in keeping the project moving forward. Building bylaws from scratch or revising an existing set are tedious tasks – critical, but often tedious. It’s easy to get tired of the job and just rush through some spots. You think they’ll look at those spots the next time, but finding people to do the job is never easy and that project will keep getting put off.

If you commit to the task, then do it. Finish it.

Need help? Contact me.

I love this stuff!

kerchsig

Electronic voting and proxy votes

I love getting questions from readers.  Helps me to know what problems you’re facing. AND gives me something to poke around more about.  Here’s a question I got today:

I was looking for an example on how one includes in bylaws a ‘vote by proxy’ or ‘voting by email outside of meetings.’ Is it OK for boards to vote by e-mail on issues that can’t wait until the next meeting? How would that be included in bylaws?

Proxy and electronic voting are different things.

In voting by proxy one board member gives a written document awarding the first person’s vote to the second. The first person trusts that the second will vote as he wishes. The problem is that the director voting by proxy doesn’t get to hear or participate in the conversation around the idea being voted on. He may not even know the full wording of a motion. Directors have fiduciary responsibility for the organization. Proxy voting might just yield an unwanted outcome for the director personally.

There are laws in many states covering voting by electronic means, by email or other online process. Check with Attorney General’s office in the home state of your corporation. Some states say electronic voting must be unanimous in order to carry.

If it’s illegal in your state, you should mention that in the bylaws to keep other people from thinking they can do it when it’s not specifically disallowed.

It is likely that electronic voting requirements are different for board votes and membership votes. You should ask the AG about that. Or in any case, check with your group’s lawyer or accountant who manages these documents.

If it’s not illegal in your state then you should include in your bylaws under what circumstances electronic voting is allowed and what percentage is required to carry the motion. It might be a higher percentage that would normally carry.

Here’s a great resource from Pennsylvania Association of NonProfit Oranizations on proxy voting in  nonprofits.

Good luck to all!

Fix My Bylaws book update

I’m really excited to say that finally finally finally, the workbook that goes with my process for writing or rewriting the bylaws of your nonprofit organization is nearing completion.

I’ve had one round with the editor and preparing for the next one.
Layout is figured out but can’t be complete obviously until the writing is done.
And progress is being made!

Whoopee.. it’s like birthing a baby. So much preparation for such a big unknown.