The need for unanimity is one of the features that distinguishes nonprofit governance from for-profit boards. In a for-profit setting, directors of companies sometimes take contrary positions from those of the majority. Disagreement on a for-profit board can be viewed as a sign that a board has engaged in a healthy, rigorous debate about a complex subject. For a corporation’s shareholders, dissent can even be a sign that a director is protecting their interests.
A nonprofit’s board must take into consideration a very different constituency. That constituency includes donors, but also includes the nonprofit’s employees, volunteers, and beneficiaries. A nonprofit board is also beholden to the organization’s mission. In a for-profit setting a business entity may have no specifically defined purpose, leaving directors free to choose a course that best serves the interests of the people they represent—the shareholders. A nonprofit board can’t act so freely. Instead, it must weigh each decision in light of the organization’s mission statement, principles set out in the organization’s charter documents, and other sources of overarching direction.
A lack of unanimity on a nonprofit’s board can raise concerns that a critical underlying issue hasn’t been resolved. Constituents may wonder if the decision was made with significant financial questions still unanswered, or if it creates a risk that one or more directors felt was unacceptable. Directors who also interact with major donors may have to explain the reason for the disagreement instead of focusing on the organization’s work.
By prioritizing unanimity a nonprofit’s board ensures that every director’s concerns are addressed in each decision. Sometimes that means abandoning an initiative that a few directors are excited about, but that other directors feel isn’t a good idea. A nonprofit director’s role is partly to take on the sometimes difficult task of navigating the potential conflicts this arrangement can cause. If nothing else, the need for unanimity highlights the importance of choosing the right people to serve on a board.
The Church Law Center of California advises religious and secular nonprofits on matters affecting their organization and operation. We routinely assist nonprofit boards with their governance questions and would be happy to help your organization. Call us today at (949) 892-1221 or reach out to us through our contact page.