A good board is a critical component of any nonprofit organization, and this is especially true of animal sanctuaries. A strong board helps provide a strong foundation for all of the vital work you are doing, bringing to bear additional skills, resources, and viewpoints in support of your efforts and helping you monitor and navigate governance and compliance issues that can otherwise easily fall through the cracks.
What Does A Board Do?
In the most simple terms, your board is responsible for ensuring that your organization is making decisions that further your mission and that these decisions are made in a way that respects your organization’s bylaws, other applicable laws, and general ethical standards. All board members should be personally committed to your organization’s mission and willing to volunteer sufficient time and resources to help you achieve it.
In most cases, key questions about your board and how it will function are outlined in your organization’s bylaws, a living document that you will probably often revise and rework to meet the changing needs of your organization over time.
You often hear about “fiduciary duties” in the context of board members. A fiduciary is someone acting on behalf of another based on an expectation of trust. It is commonly accepted that all nonprofit board members have three fiduciary responsibilities to the nonprofit organization they serve. These can be spelled out in a contract or memorandum of understanding with your board members but are generally mandated by state or common law even if not explicitly spelled out. Fiduciary duties dictate that nonprofit board members must act with:
- The Duty Of Care– This duty requires board members to exercise the appropriate level of care and competence when carrying out activities as board members. Many interpret this duty to mean that a board member must actively participate in board activities, including attending board meetings, reviewing agendas and supporting materials before board meetings, reviewing financial reports, providing strategic direction and management oversight for your organization, and generally staying up-to-date regarding your organization’s policies and programs and related developments in your industry or field.
- The Duty Of Loyalty– This duty means that board members must place your organization’s interests ahead of their interests and not use their position on the board to further a personal agenda or obtain a personal benefit.
- The Duty Of Obedience– This duty means that board members have the responsibility to ensure that your organization is abiding by applicable laws, that you are adhering to your bylaws, and that you are operating within the stated purpose/mission that you provided in your state-filed articles of incorporation (the purpose that qualified you to incorporate as a nonprofit).
Common Board Responsibilities
In addition to these fiduciary duties, some of the primary responsibilities that boards fulfill include:
- Determining and defining your organization’s mission and purpose in a way that will help your organization gain support from the community
- Determining which of your programs are consistent with this mission and monitoring the effectiveness of these programs
- Ensuring effective organizational planning in the near and long term; assisting with monitoring progress towards organizational goals
- Securing financial and other resources necessary for fulfilling your mission and ensuring prudent deployment of these resources via an annual budget, financial control measures, and in some cases, a process for financial audits
- Ensuring that your organization is adhering to applicable laws, regulations, and ethical standards, including following your bylaws and staying true to your stated mission; an effective board helps ensure that you are compliant with all relevant federal and state regulations and are never at risk of losing your 501(c)(3) status
- Establishing procedures for bringing on new board members, for on-boarding new members, and for regularly evaluating the performance of all board members
- Selecting your organization’s chief executive officer/executive director, setting their compensation, defining their principal responsibilities, providing support for their work, and regularly evaluating their performance
In addition to the above typical board responsibilities, board members can become essential resources for organizations in many other ways, including providing direct assistance with fundraising, strategic planning, accounting, human resources, legal expertise, and marketing, to name a few areas where board members often lend a hand.
How Many Board Members Do We Need?
There is no “right” one-size-fits-all number of members of a nonprofit board. As long as you are meeting minimum state law requirements, the size of your board is best determined by what works best for your organization.
As a threshold issue, corporate law for the state where you incorporated will often determine the minimum number of board members required for your organization. This number varies by state. For example, in Virginia, the minimum number is three, while in Delaware, the minimum number is one.
Nonprofit governance requirements by state (including minimum number of board members)
Most nonprofits will establish their required number of board members in their bylaws, and many nonprofits that have been around a few years will tell you that it can be advantageous to draft your bylaws to allow a number of board members within a specific range (between X and Y board members) rather than setting an exact number. This can help you avoid a situation where your board cannot act quickly on behalf of your organization because of the unforeseen departure of one or more board members.
If you are a nonprofit corporation that has received or is applying for 501(c)(3) tax exemption status from the IRS, although there is no legally mandated number of directors needed for a 501(c)(3) board, information currently available from a variety of IRS sources indicates that the IRS has a preference that a 501(c)(3) board consist of at least three directors, that three different individuals fill these positions, and that these individuals are not related personally or professionally. See “closely held” boards, below.
Many new, start-up nonprofit organizations start with that bare minimum of three board members since the question of who should be on your board is understandably often not an early area of focus. Board recruiting can also be a little more challenging when you are first starting, and for a lot of new organizations, three seems more manageable than higher numbers at the beginning. It’s not unusual at the beginning for a nonprofit board to consist of friends and colleagues of the founder, and often the founder themselves. Staying small in the beginning can help streamline decision-making, particularly while you are navigating early issues like incorporation and tax exemption.
As your organization matures and becomes more well-established, adding layers of leadership by growing the size and diversity of your board can be an essential part of sustaining that growth. In addition to fulfilling traditional board roles and responsibilities, many board members contribute other invaluable support to their organizations, including cash donations, in-kind services, and a broader network of contacts within your surrounding community. Having more than three board members helps ensure a greater diversity of viewpoints and perspectives during board discussions and deliberations, which is healthy for all organizations.
On the flip side, you don’t want to grow your board too big too fast – managing a board can become a burden in and of itself if you’re not careful. The correct number of board members will be a reflection of the needs of your specific organization. You can always revisit this number by amending your bylaws as your organization grows and develops.
A few guidelines to keep in mind when deciding on your number:
- Your board should have enough members that board responsibilities can be shared effectively. If your board is too small, there are likely one or more individuals carrying too much of the board workload. Many hands make light(er) work.
- Your board should be large and diverse enough that it is not possible for a single individual or subset of individuals to control board decision-making. As the IRS notes, boards that are too small “run the risk of not representing a sufficiently broad public interest” to qualify/continue to qualify for public charity status and tax exemption.
- Your board should reflect the community that your organization is intended to serve, and board discussions should include a healthy amount of external perspective to help ensure that you’re not becoming too insular in your decision-making.
- Ideally, you are selecting individuals passionate about your mission and bringing a diversity of skill sets that will help support your organization in many different areas (fundraising, advocacy, public relations, community partnerships, etc.).
- Your board should not be so large that discussions and decision-making become unwieldy because of the number of voices that need to be heard. It can also become very challenging to schedule meetings with large boards (too many conflicts).
- Your board should not be so large that it’s a struggle to engage meaningfully with each and all of your board members. Apathetic board members can be a big challenge. Taking the time to clearly explain from the outset what your expectations are for board service and to engage board members in a candid conversation about their specific interests can go a very long way towards connecting board members directly to your work and ensuring their regular engagement.
The bottom line, every board is different. As long as you are in line with your bylaws and following state law requirements, you can choose what works best for your organization and make adjustments over time.
Selecting Board Members: The Issue of “Closely Held” Boards
The question of “closely held” is connected very closely with the concept of public benefit. As a nonprofit organization, you were founded (and afforded special privileges) because your purpose supports a public benefit or public good. If the IRS believes that one person, one family, or one business controls your board – i.e., that your board is “closely held” – there is an implication that can be difficult to overcome that your nonprofit has been formed primarily to serve the interests of a small group of founders rather than the general public good. In these situations, the IRS may insist on board membership changes before granting exemption, or they may deny 501(c)(3) recognition on the grounds of a substantial risk of personal benefit or “private inurement.” In addition, it is widely believed that organizations viewed as “closely held” are often subject to increased risk of IRS audit. As explained in IRS-provided guidance:
Irrespective of size, a governing board should include independent members. It should not be dominated by employees or others who are not, by their very nature, independent individuals because of family or business relationships. The Internal Revenue Service reviews the board composition of charities to determine whether the board represents a broad public interest and to identify the potential for insider transactions that misuse charitable assets.
This guidance does not mean that family members, employees, and business partners cannot serve on your board, and many relatively young boards often have family members involved. But for purposes of your 501(c)(3) application/status and to avoid the risk of future audit, it is recommended that family members and/or business partners make up only a minority of your board. For example, if you have two family members on the board of your public charity, you should also have three non-family members on your board to balance them out (five directors total). If you have a minority of related members on your board, it is also essential to draft quorum and associated requirements in your bylaws to ensure that these are based on majority-unrelated numbers as well. For example, if a nonprofit has seven board members and two are married, you would not be considered closely held. But if only four of your directors attend board meetings regularly and two of them are married, you potentially have an issue. It is also worth checking state corporate law on this subject, as some jurisdictions do not allow any board members to be related.
How Long Should Board Members Serve?
The length of service for your board members is also a creature of state law and your organization’s individual preferences. In some states, corporate law dictates term limits (the maximum term of service) for nonprofit directors. In other states, corporate law specifies a default term length for board directors – the term length applies if you do not state any other term length in your bylaws. Unless your state does not allow a variance, your organization can decide the preferred term of service for your board members.
Nonprofit governance requirements by state (including term limits where applicable)
A term is somewhere between two and five years on most boards, with three years as the average. Many nonprofit boards start new members with an initial term of one year, and if that year goes well, the board may re-elect them for additional multi-year terms. This gives you more flexibility to deal quickly and less confrontationally with new board members that aren’t quite working out. Many organizations find that keeping the initial commitment short also helps recruit new board members that may be wary of long-term commitments with organizations they are just getting to know.
Most organizations will stagger board terms so that they are never in the position that the entire board is changing over at one time. Many nonprofit leaders will tell you that limiting turnover to no more than 1/3 of your board in any given year is important for board continuity.
As your organization becomes more established, term limits for board members are also worth considering (and are looked on favorably by the IRS). These are just what they sound like – a provision in your bylaws that dictates the maximum number of terms that a board member can serve. For example, if a board term is one year and your bylaws set a term limit of three terms, your board members will be able to serve for no more than three years.
Regular board rotation is good for all organizations. New board members can bring unique skill sets and perspectives to the table, helping ensure continuous growth for your organization by allowing for a regular influx of fresh ideas. Like terms themselves, term limits provide you with an efficient, less confrontational way to address issues with board members. They also provide a graceful exit path for board members that are no longer interested in serving.
How Often Should The Board Meet?
Most nonprofit bylaws require nonprofits to meet at least one time per year. This is also generally what the law requires in most states and what the IRS expects from 501(c)(3) organizations.
For many new nonprofits, the board is often a “working board” comprised of individuals who are also directly involved in managing the organization’s day-to-day activities. In many cases, finding time to convene the board even just once a year can often be challenging. As you become more established, you can hopefully bring on additional individuals to support your day-to-day operations, allowing the focus of your board to shift into more of an oversight role, focused on governance and “big picture” issues. These boards generally convene more than once a year – often quarterly – because that is what they find is needed to complete the work required from the board each year. As your organizational needs change and your relationship with your board changes, you may need to adjust the board meeting schedule each year.
The easiest way to determine the proper meeting schedule for your board is to set aside a time each year when you map out the items of business that need to be completed by the board in the coming year, along with a general time frame for when each item should be completed to help you begin to calendar your board meetings.
Things most boards need to complete each year:
- Electing or re-electing board members and officers; providing orientation and training for new board members and officers
- Reviewing and approving your organization’s annual budget
- Reviewing and approving your organization’s IRS Form 990 (and audit where applicable)
- Reviewing and approving your organization’s annual state corporate report & filing
- Conducting a performance review of your President/Executive Director and other officers
- Conducting an external or self-assessment of your board
- Reviewing and approving the annual work/programmatic plan for your organization
- Reviewing your bylaws, policies, and procedures for necessary updates
- Hosting your annual board meeting (minimum requirement)
Things many boards complete often but not every year:
- Strategic planning
- Fundraising, development, and capital campaigns
- Hiring a new president/executive director or filling another key officer position
Is An Officer The Same Thing As A Director?
Most new nonprofit corporations have three officers serving in the roles of president, secretary, and treasurer. The law of the state where you incorporated as a nonprofit dictates what officer positions are required to incorporate and whether the same person can hold more than one position. As long as you are meeting the requirements for your state, whether you create additional officer positions (e.g., vice president) or use different titles (e.g., executive director instead of president) is usually up to you.
Officers supervise and implement your organization’s day-to-day business and activities, and their specific roles and terms of service are usually defined in your organization bylaws. While you may have identified these individuals initially for purposes of incorporating, as you become more established, your officers may be appointed by your board (as spelled out in your bylaws).
A director, on the other hand, is simply a member of the board of directors. Directors are usually elected or appointed by other board members (as spelled out in your bylaws). They have the right to vote on matters before the board, receive certain reports and view specific documents – but generally no other authority over the organization’s daily activities and operations.
There are several differences between officers and directors. Officers manage the day-to-day organizational operations, and directors focus on governance and accountability. Officers are often compensated as employees or independent contractors. Directors usually serve in a volunteer capacity. Officers are not automatically members of your board of directors unless your bylaws specifically name them as board members.
For smaller start-up nonprofits, it can be pretty standard for the officers of the corporation and the directors of the board to be the same people – sometimes called your “founding board” or a “working board.” As the organization matures and you begin to bring on staff to support your daily operations, your board should shift to a greater focus on strategy and oversight as day-to-day responsibility is delegated to paid staff.
Sometimes your president or executive director will continue as a board member since their input can be critical for informed board decision-making. In larger, well-established nonprofits, you might see individuals filling roles along parallel tracks – a paid chief financial officer working closely with a volunteer board member serving as the board elected treasurer; a chairman of the board focused on big picture strategy working closely with an executive director or president who is managing the day-to-day. How you structure your board of directors is a combination of relevant state law requirements (including some state requirements about if and how many board members can be personally or professionally related and whether paid officers can serve on the board) and what works best for your organization.
As you mature, ideally, the day-to-day operations team (the officers and staff) is eventually different from the management team (the board). If there is overlap – that is, if there are officers or other paid staff also serving on the board – you should establish specific procedures in your bylaws for how your board will manage any decisions where there might be a conflict of interest – that is, where there is a decision being made by the board that could benefit these officers or employees (e.g., compensation, contracts). One easy way to avoid actual or perceived conflicts of interest due to a blurring of the line between oversight and execution is to establish officers only as non-voting advisory-only members of the board or remove them from the board altogether.
Are Board Committees Required?
Unless you have stated otherwise in your bylaws, you are not required to establish committees of the board. Many young nonprofits forego committees because their board is already small and, as a “working board,” may already fulfill many of the responsibilities that committees typically cover. As your organization grows, board committees can be helpful if there are specific areas of responsibility that require more time but may not merit the regular attention of the whole board. Accomplishing this work via committees that make recommendations to your full board can help streamline board meetings and decision-making and provide an avenue of engagement for board members with specific skill sets or interested in deepening their engagement with your organization.
As with everything else, committees work best if they have been provided with specific, preferably written directions about their goals and the guidelines they must work within. All committees should have a committee chair or chairs, usually elected or appointed by your board. In general, committee members may be board members or non-board members (staff, volunteers, outside advisors), depending on both your bylaws and applicable state law.
Some of the areas where nonprofit boards most commonly delegate to committees include:
- Financial reporting and oversight
- Board recruiting, training, assessment, and governance
- Staff recruiting, training, assessment, and compensation
- Executive Committee (board leadership)
Other popular committees include:
- Public Relations
In addition to these “standing” committees, sometimes it’s helpful to create an “ad hoc” committee within your board to take on specific projects (e.g., a committee focused on your annual gala or a committee focused on a capital campaign).