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Executive Committee Membership

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Can someone be on the executive committee who is not a member of the board of directors?

It’s an interesting question. The short answer is, “Perhaps, but probably not.” As can so often be the case, it depends on the situation. Here are things to consider.

Look at your bylaws

A great place to start is to read your bylaws. What do they say about committees? Do they specify that there is an executive committee? Do they say who should be on it? Do they say what the executive committee is supposed to do?

For example, I recently was helping an organization whose bylaws said nothing about an executive committee, but they did include a provision that the board could establish committees by resolution, and that “all committees have the full authority of the board” (italics mine).

Board committees

The next thing to consider is the type of committee. There are two types—board committees and non-board committees. With a few exceptions, the board may delegate authority to board committees. According to California law, all members of board committees must be directors.

On the other hand, membership on non-board committees is not restricted to directors. These committees, also called advisory committees, can serve a variety of purposes. As that name implies, they can provide counsel to the board. The board might also assign various tasks and responsibilities to them. For instance, a non-board committee might develop fundraising plans or be responsible for volunteer training. Because non-board committees have no legal authority to act in place of the full board, anyone may be a member. Non-board committees are often used as a way to engage additional people in the work of the organization.

Returning to the example above, since the organization’s bylaws clearly state, “all committees have the full authority of the board,” any committee established in the organization would be a board committee. Only board committees can make decisions on behalf of the organization, and all members of board committees must be directors.

So, what’s the answer?

If the board has delegated authority to the executive committee, then all members of the executive committee must be directors. Certainly, others might be invited to attend executive committee meetings and/or provide input, but such people are not members of the committee and do not have a vote on motions or decisions. Theoretically, a non-director could be a member of the Executive Committee, but only if the Executive Committee was given no authority to act. In such circumstances, that executive committee would, in fact, be an advisory committee. And what would be the sense in that?

And don’t forget…

State law trumps your bylaws. If your bylaws include any language that suggests non-directors can be members of your board committees, it’s time to revise your bylaws.

References

Managing Conflict

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Do you have advice about how to manage conflict on our board? We seem to be in two camps and can’t agree on what to do.

Conflict is bound to arise when a group of people is involved in a common endeavor. It’s not a bad thing. In fact, differing opinions can lead to creative solutions. On the other hand, serious and unresolved conflict can cripple an organization. Here are some suggestions for preventing, managing, and resolving conflict gleaned from some expert resources.

Pointers

In her article “Moving From Dissonance to Harmony: Managing Conflict on the Board,” Jill Sarah Moscowitz offers these basic pointers:

  • Start by reminding yourselves of your common interest in furthering the mission of organization
  • Identify the key issues. Even if they seem obvious, take the time to label them and write them down.
  • Begin with facts rather than assertions.
  • Avoid taking about “my position” versus “your position.” Instead, seek out your common interests. What do you all want to see accomplished.
  • Be truly curious. Focus more on listening than having the answer.

Face-to-Face Communication

Writing in “Managing Conflict: A Guide for Volunteer Boards,” E. Grant MacDonald emphasizes that “Confronting a conflict situation almost always can benefit from face-to-face communication.” He suggests holding a series of meetings and offers these recommendations:

  • Involve a trusted third party to facilitate the meetings.
  • Insist on confidentiality.
  • These are private meetings, not board meetings, but they are not secret meetings.
  • Make sure everyone knows that no decisions will be made in these meetings that bind the organization. The goal is for the parties to agree on recommendations that they will make to the board at large.

Avoiding Conflict

MacDonald also offers these ten practices to help avoid unnecessary conflicts in the first place. Many of them can be part of your board development activities.

  1. Practice good interpersonal communication.
  2. Operate with a strategic plan.
  3. Clarify roles and responsibilities.
  4. Help develop a skilled chairperson.
  5. Learn about conflict resolutions processes.
  6. Establish a code of conduct for directors.
  7. Encourage performance evaluation.
  8. Implement a grievance procedure.
  9. Celebrate agreements and new understandings.
  10. Look to gender and cultural differences as a way out of a mess.

References:

Moving From Dissonance to Harmony: Managing Conflict on the Board

Managing Conflict: A Guide for Volunteer Boards

Short Bylaws?

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Do you have a good example of short bylaws? Ours seem so lengthy.

That question came up in our Board Academy Governance session. The key to good bylaws is to cover all the bases carefully and stop there.

Your bylaws need to provide clear rules for how to operate your nonprofit. For example, your bylaws need to specify how many directors you have, how and when they are elected, and the length of their terms. Similarly, your bylaws need to specify what officers you have, their terms, how and when they are elected, and what they are required to do.

That said, your bylaws shouldn’t attempt to “micromanage” your organization. For example, your bylaws might state that your board president “will preside over meetings of the board and execute other duties as assigned by the board of directors.” If you want the president to do more than preside at meetings, write a job description for the president, formally adopt it, and record that in the minutes.

Another example relates to committees. If you have an executive committee, your bylaws should certainly say so and specify what that committee is authorized to do. As for other committees, include in the bylaws how they may be formed and constituted. Every committee needs a specific, written charge but it can be adopted by the board; it does not have to be in your bylaws.

Here are some resources to explore.

Resources for Effective Board Governance

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BoardSource is a great resource for all things related to nonprofit board leadership and governance. For example, Recommended Governance Practices is a six page document that gives high level advice in three areas:

  • Essential Practices: practices to function successfully.
  • Leading Practices: practices to move toward board excellence
  • Compliance Practices: practices that address legal requirements

Download a free copy here.

To Merge or Not to Merge?

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The Covid-19 pandemic is impacting nonprofits in one of two very different ways: some nonprofits are experiencing a dramatic increase in donor support and demand for services while the other half have watched their programs and funding come to a grinding halt because of issues related to social distancing. On each end of the spectrum, nonprofits are re-considering their plans for the future and what partners will be needed to realize them. Some organizations will consider mergers and, as they do, we hope this article will serve as a guide for their process.

Is a Merger Right for You?

David LaPiana, a nationally recognized nonprofit merger consultant and author of The Nonprofit Mergers Workbook, Part 1 & II, stresses that successful mergers will be driven by one or more of the following long-term strategic goals:

  • Better market positioning;
  • A larger market share;
  • A higher public profile;
  • Greater political influence;
  • More strategic fundraising;
  • A larger staff, allowing greater specialization of functions and the provision of more service;
  • The creation of a continuum of services under unified control; and/or
  • Better economies of scale.

If your nonprofit is considering a merger out of a desire to immediately start saving money, be forewarned: mergers are expensive. Mergers done well will require additional resources that will increase your current operating budget. Any overhead or payroll savings will most likely not be realized for a couple of years.

According to the Chicago Nonprofit Merger Research Project, a partnership between Northwestern University’s Kellogg School of Management, Mission + Strategy Consulting, and eight Chicago foundation funders, published in 2017, the most common denominators among successful nonprofit mergers include:

  • A prior relationship or collaboration existed between the organizations that merged.
  • Third-party consultants or facilitators were hired to navigate the often-lengthy merger process. (Median merger negotiation outcome took 15 months.)
  • The board chair or a board member from one of the organizations emerged as the chief merger advocate. (Meaning that the merger process was championed at the board level and was not staff-led.)
  • Motivations for the merger were spurred by a desire to enhance the competitive position of both organizations in response to external forces: competitors, shifts in government practices and policies, and the need for greater financial stability.

If you recognize your nonprofit’s merger intentions and capabilities among the benefits and critical requirements listed above, read on to understand how to proceed through the three primary phases of a nonprofit merger: Negotiation, Implementation, and Integration.

Negotiation Phase

Once two nonprofits commit to exploring a potential partnership, the Negotiation Phase officially begins. Key steps of this phase include:

  • Instating a “Negotiations Committee” or “Exploratory Committee” consisting of an equal number of board members from each of the potential merger partners. Nominations of non-board members who may have specific skills or experience beneficial to the discussion may be allowed as long as those nominations are unanimously supported. However, once the committee is inaugurated, no new members should be allowed to join.
  • All Negotiations Committee members must sign an agreed upon Confidentiality Agreement. This exploratory phase will require both organizations to be fully transparent and divulge all aspects of their operations – including those aspects that may be embarrassing. If, ultimately, the merger is not pursued, all committee members must be held accountable for not divulging any information shared in negotiations with outside parties.
  • Minutes must be carefully recorded at each Negotiation Committee meeting.
  • Due diligence is conducted as both organizations present and jointly review the following documents:
    • Organizational – Articles of Incorporation, Bylaws, Organizational Charts, etc.
    • Tax – IRS and State exemption letters, 990 filings, state tax filings, etc.
    • Insurance – General Liability policy, Directors & Officers policy, Workers Compensation policy, etc.
    • Personnel – all employee job descriptions and compensation, personnel policies, employment contracts, benefits programs, volunteer policies, etc.
    • Financial – audited financial statements, current income and balance statements, current budgets, copies of loans or other debt financing arrangements, etc.
    • Real Estate – deeds, leases, mortgages, etc.
    • Legal – statements describing any current or threatened litigations, copies of licenses and permits, list of commitments that would cancel as a result of a merger, etc.

At the end of the Negotiation Phase, if a merger is still desired, the Negotiations Committee will document a merger proposal to present to the respective boards of each of the merging organizations. The merger proposal will summarize the outcomes of the exploratory conversations and identify which specific merger structure will be pursued. (Parent-subsidiary, one organization acquiring/absorbing the other, or dissolution of both organizations and the incorporation of a third new entity are just a few of the potential options for consideration.) Each organization’s board must approve the merger proposal presented per their respective bylaws in order to move into the Implementation Phase.

Implementation Phase

The Implementation Phase is often the shortest of the merger phases, depending on how the new merger will be structured; which is a good thing as it is critical to hire an attorney experienced in nonprofit mergers to guide this phase. Essentially, the only goal of this phase is to legally merge and incorporate the two nonprofits to become one entity. Unlike mergers conducted in the for-profit world where attorneys are hired to represent each organization in this process, nonprofit mergers should involve only one lawyer who serves as a mediator to create mutual success for the merging organizations.

Integration Phase

Usually, as organizations reach this phase, there is a sense that the majority of the work has been done. But, that’s not true. In fact, the Integration phase is the hardest and longest phase of the merger process. There are always unanticipated “hiccups” that arise as new boards, staffing structures, donor systems, financial records and organizational cultures are blended together. This phase requires significant behavioral change throughout both organizations and can be quite emotionally challenging. Make sure all members of your leadership team understand the full scope of the merger process and are fully committed to the work and patience required to successfully complete the Integration Phase. Integration is not easy, but it is the most rewarding of all the merger phases, as the organization’s new identity – and each person’s role within it – is defined resulting in a shared sense of empowerment and long-awaited forward progress.

Collaboration is the heart of nonprofit work and mergers are the ultimate manifestation of collaboration. Many of our most valued local nonprofits grew out of two smaller programs or organizations uniting and leveraging their combined resources to create a greater good. We understand that the process is complex and want to remind you that Spokes is here to help. If you need a sample Confidentiality Agreement, sample merger worksheets, consultant referrals or an introduction to nonprofit leaders who have led successful mergers, contact us! In the meantime, here are a few other resources that may be helpful for you as you consider if a merger is right for your nonprofit.

From Stanford Social Innovation Review, “Nonprofit Mergers that Work”.

From the Council of Nonprofits, “Mergers, Collaborations and Strategic Alliances”.

From Nonprofit Quarterly, “Nonprofit Mergers: New Study Sees Strategy and Success”.

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