Successfully running a nonprofit takes skill and creativity. It also takes discipline. Too often a nonprofit’s board of directors grows lax in its adherence to governing rules and procedures, which can cause failures of governance with potentially far-reaching consequences for the organization. Fortunately, good governance needn’t be complicated. Here are a few simple principles that every nonprofit’s board should follow.
Adopt procedures and follow them.
Having a clear set of rules for how decisions will be made, and who will be responsible for various tasks, can avoid tensions and lead to a better decision-making process. Some rules are spelled out in the nonprofit’s governing documents—its bylaws, board charter, and so forth. Among other things, this means that board members need to have a good understanding of how these documents govern their work. Other procedures may need to be crafted to suit a particular circumstance. For example, a board might form a special committee to examine an important transaction. For a committee to be effective, its role and responsibilities need to be agreed upon in advance.
Keep good records.
California law requires various kinds of legal entity to appoint a secretary who is responsible for keeping the governance records of the entity.Among other things, the secretary takes the required minutes at every board meeting. Meeting minutes need not record every tiny detail of what takes place at the meeting, but it’s important that minutes record what was discussed and what decisions were made. Minutes are essential for showing that the board is doing its job in a thorough and responsible way. They can also be important in transactions and litigation.
Recognize the board’s limits.
Some decisions involve complex or specialized information that board members may not know how to interpret. A board may best serve its constituents by seeking the help of outsiders. This can be true even if one board member has relevant expertise. For example, if the nonprofit is contemplating a complex financial transaction and happens to have a director with extensive accounting experience, that director’s opinion, though valuable, might not be enough to ensure that the board has done its job. Asking for outside advice is a good way to avoid this sort of problem.
The Church Law Center of California understands nonprofit governance
The Church Law Center of California assists religious and secular nonprofits with governance challenges. We can help your organization examine its board procedures and develop good practices. To find out how we can be of help to your organization, call us at (949) 689-0437 or reach out to us through our contact page.