Nonprofit Board of Directors
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Many states require a nonprofit corporation to have an initial board of directors when you file your articles of incorporation and to maintain a minimum number of directors at all times (e.g. three).
The requirements and responsibilities of a nonprofit board of directors are defined in the statutory corporations code of the state where the nonprofit is incorporated. Further rules are defined in your corporate bylaws. The below introduction is general education. Review your state’s nonprofit code to understand the rules that apply to your directors.
The Role of a Director
Directors are your nonprofits strategic leaders. Their beacon is the organization’s mission statement and they will make decisions, establish goals, and define strategies to achieve it.
- A director directs; the executive director (sometimes called the CEO) carries out the strategy.
- Individual directors have limited power; as a board they make decisions. A quorum (minimum number) of directors must be present and vote.
- In the US, the vast majority of nonprofit directors are volunteers. They are not compensated.
- The directors elect officers of the board. These usually include a president or chairperson to preside over board meetings, a secretary who records meeting minutes, a treasurer who oversees finances, and one or many vice presidents (also called vice chairs).
- Directors of a properly formed and maintained nonprofit corporation have limited liability. Their personal assets have protection from debts and legal action against the nonprofit.
The election of directors is defined in the corporate bylaws. Directors can be elected by the board, by members, or may hold an office ex officio.
- Election by the Board
- The self-perpetuating boards of many public benefit corporations are made of directors who elect (or re-elect) the next directors.
- Election by Members
- Most mutual benefit corporations have a board of directors elected by members. Members cast votes to elect their directors. The directors serve as representatives of their constituents.
- Ex Officio
- An ex officio director is a director because he holds another position. For example, the bylaws may state that the executive director is an ex officio director without voting rights.
Directors are obliged to act in duties of care, loyalty, and obedience to the nonprofit.
- Duty of Care
- Directors demonstrate a duty of care through attendance, staying informed, and making independent decisions in a manner of care for the organization’s mission.
- Duty of Loyalty
- Loyal directors are prohibited from personal gain through their position, protect confidentiality, and disclose/avoid conflicts of interest.
- Duty of Obedience
- Directors carry out their duties in obedience to the nonprofit’s mission and corporate purpose. Their duty encompasses compliance with internal corporate and external government regulations.
When it comes to requirements for your board, information that is not state-specific can be incorrect
and is not as useful as cold hard facts from state law. It is the difference between saying
“typically a nonprofit should have a minimum of 3 directors” and saying “New Hampshire requires a
minimum of 5 voting directors. They need not be resident of New Hampshire nor members of the
nonprofit”. Take a look at the specific requirements for a board of directors in your state:
Nonprofit Governance Requirements by State
- Identifying your initial board of directors before you incorporate is required in many states. The articles of incorporation will ask for the names and addresses of initial directors.
- Quality directors will ask for the specifics of the opportunity, most of which will be defined in the bylaws, but which you should be prepared to answer (e.g. elections and terms, their responsibilities).
- Abide by requirements for the composition of your board as outlined in state law.