In consultant Terrie Temkin’s experience (firstname.lastname@example.org), misuse of the nonprofit’s bylaws more frequently occurs inadvertently or out of expediency rather than due to someone working the bylaws to their advantage. But it does happen, she said.
When it does occur, it has great potential to create mischief.
“Someone may choose to use the bylaws to their advantage,” Temkin (CoreStrategies for Nonprofits Inc.) said. Those types of people tend to be bylaws “wonks” who know what is in the bylaws and then use them as a club to accomplish what they want, she said.
Misuse of bylaws is often made worse if the organization’s protocol for parliamentary procedure is Robert’s Rules of Order, Temkin said. “That’s because Robert’s is so complex, and requires so many steps, that if you really understand it you can use it to your advantage with the bylaws,” she said.
Temkin said in her work with nonprofits, bylaws problems most commonly occur when board members don’t know what is included in the bylaws, when they are used incorrectly or when they are used for self-serving purposes.
- Board members don’t know what’s in the bylaws.
“This is the most typical type of bylaws problem,” Temkin said.
A board member never sees the bylaws, the organization has an old copy or board members may be accustomed to serving on a board from prior board service, Temkin said. “Then, they just assume the rules and regulations are the same,” she said.
So if problems occur under these circumstances, they are not done maliciously. These kinds of bylaws issues, Temkin said, tend to be when meetings aren’t held when required, the board plays with the number of board members necessary to have a meeting quorum or the voting protocol the board uses is different from what is described in the bylaws.
“These kinds of issues can tip the balance in board decision-making, but it usually occurs for reasons of expediency,” she said.
- Bylaws are used incorrectly. Examples of areas where this commonly occurs:
Tweaking bylaws for self-serving reasons. A classic example: The organization’s founder writes into the bylaws that he will have a permanent seat on the board or have a place on the board for a family member in perpetuity. “This can be extremely detrimental to the organization but it is done all the time,” Temkin said.
- Board size. If the board size requirement in the bylaws gets dropped because the organization is looking for new board members, problems can follow. The organization is then put in a position of holding board meetings that are in noncompliance with the bylaws, she said.
“That’s misuse of the bylaws, but not mischief,” Temkin said.
- Financial protocols. “When people don’t follow or ignore financial protocols which set out specific instructions for items such as who signs checks, how many signatures are required and how money is deposited, they do so to the detriment of the organization,” Temkin said.
- Term limits. “This is a big area,” Temkin said. It may not be done maliciously, but it still creates problems for boards.
The issue of term limits and boards can be a real psychological challenge for a board, Temkin said. It’s hard to force people who “love” the organization off the board through term limits, Temkin said. This is doubly true when prospective board members are not lining up around the block to join. “This can create a future leadership vacuum for the board when the bylaws are very explicit about term limits and they are ignored,” she said.
And if members serve on the board too long, that can result in a lack of creativity in board thinking, Temkin said. Boards need a breath of fresh air, she said. “Also, cadres of board buddies could start making decisions in their group’s best interests,” she said.
When that occurs, that’s not a decision of the board, but a group.
“Boards need members that are less focused on their buddies,” Temkin said. “They see service as being good for them while they are on the board, and do not look at matters as disinterested parties. It doesn’t help the organization when members are more interested in retaining their relationships over the good of the nonprofit, she said.
A related problem with board terms and bylaws is the term of office for the board chair. If the chair enjoys being chair and doesn’t want to leave the position when the term is up, that can also be detrimental to the nonprofit, Temkin said.
- Organizations that have members. If the organization’s bylaws say members have a vote, then they should vote. The organization is obligated to see that this happens. “I see members, often because of lack of knowledge by the board, pushed out inadvertently, or for reasons of expediency, they do not vote on what they should be voting on,” Temkin said.
- CEO wants change in title and/or powers. This is typically done when an executive director wants to be president/CEO, Temkin said. The problem occurs when the board makes these changes without changing the bylaws, she said.
“It’s not a bad thing to make this switch, but you first need to look at what powers are granted in the bylaws, and make sure any changes reflect this,” she said.
Problems also occur if the CEO votes or signs checks without checks and balances in place. “The CEO will make a case to the board such as ‘I’m here daily. I care about this organization. I know what needs to be done, so let’s just write this into the bylaws.’” Temkin said. “The board must ensure the bylaws put healthy checks and balances in place.”
Conflicts of interest are another area where boards can create problems for themselves with how the bylaws are written, Temkin said. An example would be allowing directors with an “interest” in a financial transaction to remain in the room during board discussions on a purchase.
“Let’s say a board member is a roofer. He has a service to offer the organization,” said Temkin. “That’s perfectly fine, if the conflict-of-interest policies are written to say that a position on the board doesn’t preclude a board member from selling something to the organization.” In fact, this is typical language in some conflict-of-interest statements, Temkin said.
However, it becomes dicey if the bylaws statement allows the individual board member to be in on the purchase discussion as well as in the room when ballots are cast.
“To handle that most ethically, the board member should not be in on the board’s discussion and should not be there when the board votes unless all bidders are present,” she said. “The board member’s presence can be intimidating to other board members and it is an unfair advantage to the board member.”
Temkin has also seen bylaws written to do away with an organization’s members and leave all responsibilities to the board. It’s usually done from a desire to just expedite the work. “But you have to step back and look at why there is a role for members in your organization and determine if that reason is still valid today,” she said.
Executive committees, when used improperly, can create a “board within the board,” Temkin said. “They can use their power to make decisions without a lot of discussion that you get with a full board.”
This occurs because the discussions within the executive committee are not as rich and therefore not as valuable to the organization as they would be with the full board involved, she said.