The Center for Ethics, Governance, & Accountability

I received an email from a visitor to our web site asking my thoughts on whether or not the founder of their nonprofit – who is also its executive director – could be a voting member of the board. (Note that the question was ‘could’ be…)

Well yes, the executive director ‘could’ be a voting member of the board, but the question allowed me an opportunity to reflect on the perceptions of nonprofits as a competitive advantage for fundraising, as espoused by my own organization The Center for Ethics, Governance, and Accountability. Those three words (ethics, governance, and accountability) have such a strong degree of symbolism and expectations that I must take care to provide my opinions only after pondering what ‘could’ be and what ‘should’ be. (What ‘shall not be’ is always the easiest opinion to offer.)

My response? While the IRS is the regulator of nonprofits, the corporations of the nonprofits are governed by state law. So, answer number one was to check the laws of the state in question.

Answer number two: why does the executive director need to be on the board? Or, does the executive director just want to be on the board? How many board members are currently on the board and would the executive director help or hinder the voting of the board? Presumably, the executive director is the key employee of the board and is tasked with running the organization and attending board meetings anyway. But, I never did determine the answer to the basic question of why?

In my years of experience as a board member, it has not been unusual for the executive director to also serve as the corporate secretary and either ex-officio board member, non-voting board member, or voting board member.

Ultimately, my answer to the above question was to make the executive director an ex-officio (non-voting) member of the board holding the office of corporate secretary. This approach, assuming there is no conflict with state law pertaining to corporate governance, seems reasonable because it is highly likely that the board has tasked its executive director with maintaining all corporate records (minutes, resolutions, policies, etc.) anyway.

In addition, the articles of incorporation and the bylaws may, or may not, speak to the specific issue of board governance. It the bylaws do not spell out, specifically, how the board is to be structured, then I would highly recommend that appropriate revisions take place at the very next board meeting.

Remembering that it is my strong belief that ethics, governance, and accountability are the key measures of any nonprofit, the perception about these issues is every bit as important as the reality; the decisions of donors/grantors and contributions to the organization rest upon the 'good name' of the organization, its staff, and its board . Accordingly, it continues to be my strong recommendation that nonprofits avoid any possible misperception so as to maintain that competitive edge within their peer group.

There are two related issues that deserve discussion in future articles. One is the challenges of the founder of the non-profit serving as executive director or board member; the other is the increased scrutiny by the IRS on board members of nonprofits. In short, as a board member, you will be held personally liable for the affairs of the corporation. This responsibility is entirely appropriate: nonprofit board membership is not a ‘resume builder’ but it is a serious responsibility that IRS regulators have rightly decided to address. Nonprofit boards should take notice.

Every effort should be made by every nonprofit board to task either its executive director or, perhaps, a special committee chair, with a thorough review of the policies of the organization. The new IRS Form 990 is an excellent place to start – especially if your nonprofit is a number of years old --  it would be good to see the issues with which you will be required to attest at your next annual filing.