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The Basics of Board Committee Structure

Just as every board is unique, every board’s committee structure is unique too. Most boards continue the same committee structure from year to year with little thought given as to what the committees do or whether they are still relevant. As a result, the committees have vague objectives, committee meetings are often endless discussions with no results achieved, and the members of the committees become bored or frustrated.

At the other end of the spectrum is the zero-based committee structure where the board reviews its work plan each year and then establishes only those committees that it will need. Similar to a zero-based budget, this frees the board from doing things the same way each year. Of course, this only works if the association truly looks at what it needs in terms of board work for the year and only forms those committees that are necessary.

If the committee structure has not been revisited in a few years, the board should consider looking at the current committee structure and what the committees actually do. If there are overlapping responsibilities or no work being done, then it is time to realign the committee structure. Committees with no work can be abolished, and committees with overlapping work can be merged. Committees should not take on a life of their own, nor should they overshadow the board itself.

Standing and Ad Hoc Committees

There are generally two types of board committees:

  • Standing committees (also called operating committees) are those committees that a board uses on a continual basis. They can be set forth in the association’s bylaws or in its board operations and policy manual, or they may be established by custom.
  • Ad hoc committees are formed for a limited period of time to address a specific need. When the work of the ad hoc committee is completed, the committee is dissolved. An ad hoc committee may exist for less than a year or for a year or more depending on the extent of the work assigned to it.

The bulk of the board’s work should be done through its standing committees. Some boards have board development plans where members rotate through the different committees to gain a broad understanding of the association. Others allow members to stay with the same committee each year to develop a deeper knowledge of the subject area to provide greater service to the association. A balance of the two strategies allows board members to gain experience with different committees and to develop some expertise with the work of one or two committees.

Ad hoc committees are often formed to amend the bylaws, recruit a new CEO, develop a strategic plan, form a new subsidiary, launch a new division, consider whether to sell a building, or work with other associations or coalitions. An ad hoc committee could also be formed to study and find creative solutions to a particular challenge an association is facing, such as falling membership levels or a particular challenge its members are facing.

Other Options

A board does not always need to add new committees to get its work done, nor must committee members always be members of the board. Task forces and advisory councils can be useful tools. 

A task force can be formed if there is an objective that can be achieved in a relatively short period of time. Planning a special event or analyzing a merger proposal are examples of work that can be handled by a task force. 

Advisory councils assist boards in carrying out their work by providing expertise and advice in selected areas. Advisory councils do not have any governance responsibilities and are a good way to include former board members, potential board members, subject matter experts, and others in the work of the board without placing them on the board. 

Not every volunteer makes a good board member. Sometimes a task force or advisory council is a better use of the volunteer’s talent, experience, and time.

Committee Number and Size

The larger the board, the more committees it may want to have to ensure that all board members can serve on a committee in a meaningful way. Boards should avoid the temptation to form too many committees. To be effective (and to avoid burnout), board members should generally not serve on more than two committees. Limiting service to one committee can give board members the opportunity to focus on an area and develop expertise that can further the work of the association.

The size of the board will determine how many committees are sustainable. A committee’s size should be determined based on the number of members needed to accomplish the committee’s work. When committees have too many members, the result is usually that only a handful of people do the work of the committee and the rest of the committee’s members are not engaged. It might take a year or two of trial and error to determine the right size for each committee. 

Ad hoc committees and task forces are a good way to involve non-board members in the board’s work. This also gives the volunteer and staff leadership the opportunity to evaluate association members for their leadership potential and interest them in further volunteer opportunities. Keep in mind, however, that, in most states, the authorization to act on behalf of the board may only be delegated to committees composed solely of board members.

Committees should perform regular self-assessments to determine if they are working effectively, achieving their established goals, and providing value to the association. This can be done at the end of each committee meeting or on an annual or more frequent basis.

Role of Committee Leaders

Committee chairs and vice chairs should provide actual leadership to the committee. These are not empty titles but require real work in terms of translating the board’s goals for the committee into meeting agendas and work plans. Committee chairs and vice chairs should work with staff as appropriate to prepare background materials for committee meetings, schedule committee meetings, prepare minutes and reports, and otherwise keep the committee functioning. 

Committee chairs have the difficult task of following up with absent committee members or addressing behaviors that are disruptive to the committee’s work. Committee chairs also report on the work of their committee to the Executive Committee and the full board. For this reason, committee chairs are often board members. 

Sample Committee Structure

This sample committee structure is intended to be used by boards with more than seven members who find they need to work more effectively through committees. A board may not need all of these committees. An association may use different names for its committees, but board committees generally fall under these headings.

Standing Committees

Executive Committee
Depending on the size of the board, it may be advantageous to form a small (three- to seven-member) Executive Committee that is authorized to meet and take action between board meetings when it is impractical to get the full board together for a special board meeting. The Executive Committee can also serve as an advisor to the chief executive officer and a liaison between the CEO and the full board.

The Executive Committee is usually charged with oversight of the association’s chief executive officer. While there may be a separate CEO search committee or a compensation committee, the Executive Committee will often hire the CEO and work with the CEO in establishing goals for the year, evaluating performance, and setting compensation. The Executive Committee reports on these activities to the full board.

The members of the Executive Committee are often on that committee due to the position they hold within the association. The board chair and any vice chairs are normally on the Executive Committee. If there is a chair-elect or a past chair, that person may also be on the committee. Although in some associations the chair appoints the members of the Executive Committee, they can also be elected by the entire board. Another option is to have the chairs of each of the board committees and the chair of the board form the Executive Committee.

Audit Committee
Something of a rarity a decade ago, the Audit Committee is quickly becoming a standing committee at many associations. It is usually a small committee of three to five members. Its work is often seasonal, tied to the end of the association’s fiscal year. The Audit Committee selects the outside auditor, meets with the auditor to receive the audit report and management letter, and discusses the management letter with the full board and the senior staff.

The Audit Committee may also be charged with auditing the expenses of the board and the chief executive officer.

Members of the Audit Committee should be financially literate, and at least one (and preferably more) should be financial professionals. While there may be some overlap in membership with the finance committee, the chair of the finance committee and the treasurer should not be on the Audit Committee. Likewise, the chair of the board and the CEO should not be on the Audit Committee. These restrictions are intended to provide the committee with the independence it requires to operate effectively. 

Governance Committee
The Governance Committee is charged with the care and feeding of the board itself. The responsibilities assigned to this committee vary with each board. As a general rule, the Governance Committee would be responsible for board recruitment, orientation, board and director self-assessment, continuing education, and board management.

Recruitment involves identifying current and projected vacancies on the board, assessing the composition of the current board and identifying gaps in competencies or demographics, and finding and recruiting potential board members. The Governance Committee is charged with developing a position description for board membership to inform prospective candidates of qualifications in terms of their experience and background and what will be expected of them if they join the board. The Governance Committee can also serve as the Nominating Committee for new board members and officers.

Orienting its new board members is one of the most important tasks a board does. New board members not only need to know about the association and its programs, finances, and plans for the future. They also need to know how the board itself operates, how the staff and board interact, and what their role is in the association. Orientation sometimes includes training to provide new board members with the basic skills they need to be effective members of the board, such as how to read nonprofit financial statements or basic parliamentary procedure.

Every board should conduct regular self-assessments, preferably every year but at least every two to three years. The self-assessment should be of the board’s performance as a whole and of each individual member’s performance. Regular evaluation of how the board is functioning is a good way to realign the board’s focus and activities if it has strayed off target. Individual self-assessments are helpful for board members to gauge their own performance. It can aid them in identifying skills that may need additional development or to evaluate whether they have the time and commitment to give to the association at this point in their life.

Continuing education is useful for every board. Nonprofit laws and best practices for nonprofit boards have been changing at a fast pace in recent years, and even the most experienced board member can learn something new. Continuing education also allows the experienced board members to share what they have learned through practical experience with less experienced members.

A mentoring program can be part of a continuing education program. In a mentoring program, new board members are assigned a more experienced mentor on the board who is familiar with the association. The mentor helps the new board member to adjust to the association and the board. The Governance Committee can recruit mentors, provide mentor training, and oversee the mentoring program.

Management of the board includes the adoption and enforcement of a conflict-of-interest policy and a code of conduct among the board members.

Finance Committee
Sometimes called a Budget Committee or a Budget and Finance Committee, this committee oversees staff’s preparation of the annual budget and the performance of the association in meeting its budgeted revenues and expenses. The Finance Committee often receives regular reports on the association’s performance in meeting its budget and presents that information to the full board.

The Finance Committee is different from the Audit Committee. In effect, the Audit Committee is tasked with checking the work of the Finance Committee and the treasurer in overseeing the financial management of the association. While there may be some overlap in committee membership between the Audit Committee and the Finance Committee, the chair of the Audit Committee should not serve on the Finance Committee. Ideally, the association has enough financially literate board members that the membership of the two committees does not overlap.

The Finance Committee may be charged with a wide range of responsibilities, such as managing the association’s investments, setting compensation packages for staff, overseeing capital campaigns, and raising funds. It may handle these responsibilities as a committee or through the formation of subcommittees. A board may have a separate development committee to oversee fundraising, or it may assign that responsibility to the Finance Committee or one of its subcommittees.

Membership Committee
If an association has a Membership Committee, that committee may be tasked with developing criteria for membership, credentialing members, overseeing elections, or developing and delivering programs for members. There may be some overlap with the Program Committee and the Governance Committee.

Developing the criteria for membership and credentialing can be a huge task depending on the association’s structure. While the daily issues and activities involving memberships are usually handled by staff, questions as to the criteria for membership, granting membership, and the revocation of membership are usually reserved to the board. The board may also determine the benefits available to members and establish dues for each category of membership.

If the association’s members have the right to elect members of the board of directors or adopt policies for the association, the elections process may be the responsibility of the Membership Committee rather than the Governance Committee. This committee would then identify expected vacancies on the board, advertise the openings to the membership, and oversee the elections.

Membership Committees usually keep closely connected to the association’s membership and work with the staff to identify and develop programs that meet the changing needs of the membership. The evaluation of program delivery can also be assigned to the Membership Committee.

If the association has an annual meeting or conference for its members, this activity may be overseen by the Membership Committee or one of its subcommittees.

Program Committee
While staff often carries out the day-to-day activities that result in the development and implementation of the association’s programs, the Program Committee may be charged with long-range planning and general oversight of programs. Depending on the extent of the association’s programs and the size of the board, there could be several committees devoted to programs that may bear other titles (for example, government relations, technology, and education). Each of these committees or subcommittees would be assigned a specific element of programs to oversee.

A Program Committee is a good way to involve an association’s members in the association. Non-board members can serve on the Program Committee or on its subcommittees.

Ad Hoc Committees

By their nature, ad hoc committees are formed when they are needed and dissolved when their work is done. Below are some examples of ad hoc committees.

Bylaws Committee
The Bylaws Committee is charged with reviewing the association’s bylaws and current practices to ensure that they are synchronized. Over time, it is not uncommon for an association’s practices to evolve so that they no longer follow the bylaws. The Bylaws Committee assesses why this has happened and recommends changes to either the association’s practices or the bylaws. This group can also be used to review current best practices and governance trends and make recommendations on those the association should consider adopting. 

A Bylaws Committee may work with the Governance Committee or Membership Committee. Since a review of the association’s bylaws and practices is usually only done every few years, this does not need to be a standing committee.

A Bylaws Committee might also be tasked with periodically reviewing the association’s policies and procedures if these have been set forth in written form. It is not unusual for bylaws, policies and procedures to become unaligned over time and a periodic review can help to confirm that there are no inconsistencies among the various governance documents.

Capital Campaign Committee
A capital campaign is a coordinated effort to raise significant funds for an identified purpose, such as the construction of a building, the establishment of a scholarship program, or some other “big ticket” item outside of the association’s normal day-to-day fundraising activities.  A capital campaign will usually last for several years. An association may embark on a capital campaign only once a decade. Therefore, a capital campaign committee is an ideal ad hoc committee. 

Donors who are not on the board can serve on the Capital Campaign Committee. Their commitment is not open-ended, and they may be more willing to serve in this capacity. The Capital Campaign Committee may work with the Finance Committee, the Membership Committee, or the Program Committee.

Strategic Planning Committee
Since it should take less than a year to develop or update an existing strategic plan, this task can be assigned to an ad hoc committee or a task force. Many associations will choose to make it an ad hoc committee. Members of the Strategic Planning Committee are responsible for developing or updating an existing strategic plan for the full board’s approval. They may also monitor the implementation of the plan and report on its progress to the full board. This ad hoc committee may work closely with the Finance Committee, the Membership Committee, and the Program Committee.

Task Forces

Task forces by their nature are designed to bring people together to solve a problem. Task forces are short in duration and specific in focus. Below are some examples.

New Program Development Task Force
When it is time to brainstorm about ideas to keep an association relevant in the face of changing demographics or trends, a New Program Development Task Force might be the answer. It can bring board members, members, consultants, funders, and representatives of the community together to find a creative solution to the association’s challenges.

Joint Activities Task Force
An association that is considering joining forces with one or more other associations may want to study the issue through the use of a Joint Activities Task Force. Task forces are ideal for identifying issues, collecting information, reviewing and analyzing the information, considering alternative scenarios, and making recommendations to a committee or the full board.

Special-Events Fundraising Task Force
Organizations that use special-events fundraising such as concerts, golf tournaments, walk-a-thons, or auctions may use a Special-Events Fundraising Task Force to help plan and carry out an event. This task force may work with the Finance Committee or other committees involved in fundraising.

Environmental Scanning Task Force
It is advisable to conduct an environmental scan before making a decision that will impact the association. A task force might be charged with conducting an environmental scan for proposed actions such as going global, forming a subsidiary, or launching a certification program.

Advisory Councils

Not every association uses advisory councils. Unlike task forces, advisory councils may exist for many years. They have no governance responsibility, so they are not referred to as boards. Below are some examples of advisory councils.

President’s Council
This advisory group usually comprises former board chairs who advise the association’s president on issues facing the association. This is a way for former board chairs to stay engaged with the association and move off the board to make way for new board members. It also provides the link to the association’s institutional memory. 

The association should be careful to use an advisory council only so long as there is a benefit to the association. Keeping a President’s Council in place solely to provide a free trip to the annual meeting for former board chairs as a reward for past service does not meet that standard. Scheduling meetings with the CEO, the board leadership, and the President’s Council one or more times a year to take advantage of the expertise and experience of the council’s members can benefit the association, particularly if members of the council are from different industries or bring other diverse views to the association.

Major Donor Council
This advisory group often has a unique name to designate it as the pinnacle of volunteer involvement for donors. This group is given special access to the CEO and board, as well as advance briefings on issues. They receive special invitations to the association’s events. While they sometimes provide valuable advice to the association, Major Donor Councils often serve the primary purpose of recognizing major donors and cultivating additional gifts from them or their friends and family. While Major Donor Councils are often seen in 501(c)(3) organizations, an association might have a Major Donor Council for its PAC or foundation. 

Professional Expertise Councils
Sometimes an association wants to formalize the way it receives advice from volunteer experts. An association may form a council of scientists, physicians, educators, or other experts in a specific field to meet occasionally and provide advice as a group to the board or staff. Not only can the discussions by the experts advance the development of the association’s programs, but the qualifications of the experts on the council can also provide instant credibility to the association.

Ethics Councils
As more associations are adopting member codes of ethics or codes of conduct, they are also forming Ethics Councils to handle any complaints that the association receives that members have violated the code of ethics or code of conduct. The members of the Ethics Council are usually individuals who do not currently serve on the association’s board of directors. They are often selected for their reputation within the association or for superior credentials that they hold. 

Each board must determine which committee structure works best for it. The committee structure should be flexible and meet the changing needs of the association. There are a variety of options to choose from, and boards should be willing to experiment, keeping in mind that committees are simply tools that the boards use to get their work done. The right tool for today may not be the right tool for tomorrow. The challenge is in knowing which tool will get the job done.

Author’s Note: Nothing in this article should be construed as legal advice. If you need legal advice, consult your association’s attorney.

IRS Clarifies Excise Tax Rules on Nonprofit Executive Compensation Under IRC Section 4960

On January 19, 2021, the IRS released final regulations for IRC section 4960, which was added to the Code as part the 2017 Tax Cuts and Jobs Act (TJCA).

Section 4960 provides that, an “applicable tax-exempt organization” (ATEO) paying a “covered employee” compensation in excess of $1 million (or any excess parachute payment in an applicable year) is subject to a 21% excise tax. 

Further, these final regulations largely follow proposed regulations issued in June 2020 and apply to tax years beginning after December 31, 2021.

Take note of IRS clarifications and modifications between the proposed and final regulations. Understanding these rules can help you assess their impact on your organization and start proactive compensation and tax planning to help reduce tax exposure.

What is an ATEO?

An ATEO includes:

  • Organizations exempt under Section 501(a)
  • Farmers’ cooperatives under Section 521(b)(1)
  • Section 115 organizations
  • Political organizations described in Section 527(e)(1)

However, the final regulations do not address the application of Section 4960 to federal instrumentalities, such as federal credit unions, which are exempt from all current and future federal taxes under existing legislation. 

Until there is further guidance from the IRS, the preamble to the final regulations allow the federal instrumentality to treat itself as not subject to the Section 4960 excise tax either as an ATEO or related organization. However, if the federal instrumentality is a related organization of an ATEO, the compensation it pays must be taken into account by the applicable ATEO.

Applicable year defined

The final regulations define the applicable year of an ATEO as the calendar year ending with or within an ATEO’s taxable year in which compensation was paid. Further, the final regulations provide rules addressing applicable years as well as rules addressing related organizations with different taxable years.

Employee defined

The final regulations define an employee for purposes of Section 4960 to be consistent with the definition of employee for federal income tax withholding purposes, which includes common-law employees and officers as well as certain corporate officers. 

What is the definition of a covered employee?

The Section 4960 excise tax will only apply to amounts paid to a “covered employee” of an ATEO, related ATEO, and related non-ATEOs (including taxable entities, nonprofit entities that are not ATEOS, and governmental entities that are not ATEOs). 

Under Section 4960, a covered employee is any employee (or former employee) of an ATEO (or any predecessor) who is or was one of the five highest compensated employees for any preceding taxable year beginning after December 31, 2016. For purposes of determining the five highest-compensated employees, each ATEO must consider remuneration paid by related organizations.

A “related organization” of an ATEO is defined as a person or governmental entity that:

  • Controls, or is controlled by, the ATEO
  • Is controlled by one or more persons who control the ATEO
  • Is a supported organization or a Section 509(a)(3) supporting organization

While Section 4960 does not define control for purposes of identifying a related organization, the final regulations adopted the definition of “control” as set forth in Section 512(b)(13)(D), which is the “greater than 50% control” threshold used in Form 990 reporting. 

The final regulations clarify the determination of a covered employee. An ATEO may disregard individuals for purposes of determining an ATEO’s five highest employees under the following two exceptions.

Limited hours exception

Under this “safe harbor,” an employee — who is not paid by an ATEO and performs less than 100 hours of service as an employee of an ATEO — is treated as having worked less than 10% of the employee’s total hours for the ATEO and will not classify as a covered employee. 

This safe harbor applies to officers of an ATEO who devote minimal time in their roles but receive compensation greater than $1 million from a related for-profit organization.

Non-exempt funds exception

Under this exception, an employee who performs more significant services for an ATEO but is paid by a related for-profit entity will not be classified as a covered employee and will not be subject to the excise tax if the following conditions are met:

  • The employee must be compensated solely by the related for-profit entity in both the current taxable year and the preceding taxable year using assets that are not tax-exempt (the for-profit entity must not be controlled by the ATEO)
  • The employee’s time devoted to the related for-profit entity must exceed 50% of the total hours worked for the ATEO or a related ATEO over the two-year period
  • No related organization may have provided services for a fee to the ATEO
What is a parachute payment?

A parachute payment is any payment in nature of compensation that is contingent on a covered employee’s separation from employment. If the aggregate present value of the parachute payments exceeds three times the covered employee’s “base amount” (generally, average annual compensation over the five most recent taxable years) then there is a “excess parachute payment” subject to the excise tax. 

However, any payment made to an individual who is not a highly compensated employee, as defined in IRC Section 414(q), is not subject to the excise tax.

What is considered compensation?

The final regulations, like the proposed regulations, define compensation within the meaning of Section 3401(a), which equates to Form W-2 Box 1 wages with some modifications. 

In addition, the IRS has provided the following clarifications:

  • Compensation for Section 4960 purposes does not include amounts that are not includible in gross income under the Section 7872(c)(3) $10,000 de minimis exception related to foregone interest attributable to loans.
  • Compensation paid to licensed medical professionals (including veterinarians) for medical services — which includes administrative tasks such as medical recordkeeping — is not compensation for Section 4960 purposes. 
  • Compensation paid to licensed medical professionals for teaching and research will be considered compensation for Section 4960 unless it meets a regulatory exception.
  • ATEOs may use a good faith and reasonable allocation between compensation for providing medical services and non-medical services.
  • ATEOs may use a good faith and reasonable process in making allocations for purposes of any deferred compensation arrangements.
  • For compensation other than wages, the amount of compensation treated as paid by the employer is generally the recent value of such compensation that vested during an applicable year.
  • For compensation scheduled to be actually or constructively paid within 90 days of vesting, the employer may use the future amount to be paid, rather than computing the present value at vesting.
  • Taxable fringe benefits, such as employer-provided parking in excess of the value excluded under Section 132, are considered compensation for purposes of Section 4960.

For more information on federal tax regulations, contact Frank Giardini at frank.giardini@CLAconnect.com or 215-371-3271.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CLA) to the reader. For more information, visit CLAconnect.com.

Unplanned Exit: Death of the CSE

Loss of the Key Connector
The CSE plays a central, connecting role in key relationships within the association. These relationships cover every aspect of the association’s life, from sponsors to strategic allies, and vendors to legislative and regulatory officials. The death of this central connector will upset those who knew the CSE and disrupt the organization.

The staff will be immediately and perhaps profoundly impacted. The CSE often plays the role of mentor, advisor, and friend to members of staff. Some will be deeply troubled. The same will be true of board members and other volunteers, especially past board chairs, as well as members. How the association responds to the death of its CSE will be long remembered.

While many constituents will be affected, immediate attention should be focused on the CSE’s family and the association staff.

The Family

The family will be devastated, so the board chair should reach out as soon as appropriate to the CSE’s spouse or partner. Former board chairs and other association leaders may likewise want to make contact. However, it is important to keep in perspective that the family has lost a loved one, a spouse or partner, a parent. The CSE’s job was just part of the family’s relationship with their deceased loved one. Most family members, even immediate next of kin, will have only passing awareness of the association. 

The family’s wishes should be observed in all aspects. If possible, identify a family member to serve as liaison to coordinate with someone designated by the association. This will be important later as the association fulfills any obligations relating to the CSE’s compensation, insurance, retirement, etc. But association leaders must remember that the family’s primary concerns will not include the association.

The Staff

Caring for the staff is one of the principal concerns following the death of a CSE. Staff will likely learn about the death in different ways and at different times, depending on the circumstances. It will be hard regardless of when or how the news is learned. In any case, a thoughtfully and compassionately managed staff meeting should be held as soon as practical. The agenda might include the following:

  • Acknowledge the shock and trauma of the death and impact on the staff.
  • Provide the opportunity for a moment of silence, prayers, reflection, etc.
  • Share whatever is known for sure about the cause or circumstances, but do so in a thoughtful, dignified manner and respect confidentiality.
  • Provide the opportunity for employees to share their feelings and ensure that they feel supported as they discuss and process the news.
  • Describe any support systems or benefits that the association will provide to employees such as grief counseling (if any).  
  • Outline the association’s response and communication plan.
  • Summarize what is known about funeral and other plans and how staff can extend their sympathy to the CSE’s family.
  • Briefly describe how the staff will operate until an interim CSE is appointed or provide information on how and when they will hear more information.
  • Explain that they will be kept informed as more information about the funeral or memorial arrangements, etc., are finalized.
  • Assure them they will be kept informed throughout the search and transition process.
When the CSE Dies: A What-To-Do-Next Checklist 

Though a checklist may seem clinical and cold in this situation, this tool can be helpful during times of crisis. The contents should include the following: 

  • Offer to assist the CSE’s family in any way possible.
  • Meet with staff to discuss the death, help them cope, and describe next steps.
  • Implement a communication plan to ensure sensitive and timely notification to key association audiences, including
    • Former chairs and board members;
    • Former staff;
    • Chapter, section, and other component leaders;
    • Key strategic allies, sponsors, and other key constituencies;
    • Industry and related media;
    • Legislators and regulators;
    • Members.
  • Establish a firm but flexible plan for next steps to be taken by the board.
  • Identify a spokesperson to whom all public inquiries can be referred, especially media. CEO’s networks are very broad, and although the board and staff may try to notify everyone appropriately, they should be prepared to speak with off-the-radar contacts who may step forward when they hear the news. Part of that responsibility should include consulting with the family regarding preferred responses to questions about cause of death and requests for private information such as mailing addresses or family emails, funeral arrangements, and ways to pay tribute to the deceased leader.   
  • Send flowers to the funeral home or house of worship, unless otherwise requested by the next of kin. Consider sending two arrangements—one from staff, the other from the board. 
  • Consider
    • donating to the CSE’s favorite charity, house of worship, or academic institution
    • naming a conference room, program, or award in the CSE’s honor or creating a scholarship or other appropriate legacy within the association’s foundation or at an appropriate academic institution.
  • Include an obituary and tribute in the association’s publication and at the group’s annual convention.
  • Review the CSE’s contract to determine the timing and details regarding the association’s obligations concerning salary and other payments, insurance claims, resolution of deferred and other retirement compensation, etc.
  • Address administrative matters such as forwarding the CSE’s phone and/or changing the voicemail greeting. Include an auto-reply message in the CSE’s email as well.

The shock of a CSE’s death may result in odd or unexpected staff behavior. As Allison Foster, CAE, reported in an article concerning the death of her CSE, “Several staff members began performing poorly and lashed out at the association in public ways.” This reaction was surprising, given that the association had worked hard to support staff, even providing grief counseling. While understanding that this reaction was likely caused by grief, “the degree of hostility was unacceptable.” The association offered “a one-time buy-out to any staff member who felt the need to leave.”

This is an excerpt from The Association CEO Succession Toolkit: A Preparation Guide for Leadership Transitions by Gary LaBranch, CAE

The Right Work in the Right Way: 10 Tips for Individual Board Members

Your chief staff officer and chief elected officer bear primary responsibility—as your association’s “chief board development officers”—to help your board do the right work in the right way. But don’t underestimate how much you can enhance or impede your board’s effectiveness. Now that you have a better understanding of how even a good board can always be better, consider these 10 ways in which you can help make your board great.

  1. Use your association’s mission statement as a guidepost, and place the interests of the association first in any decisions your board makes. 
  2. Learn your association’s key financial drivers and ask the right questions. For example, instead of focusing on a small line item in the budget submitted to the board for approval, ask how your association’s financial plan is aligned with its strategic plan or whether key sources of revenue or expenses are rising or falling. 
  3. Let your chief elected officer and chief staff officer know what you most need to learn about your association, trends in the profession and industry you serve, or your fiduciary obligations and best practices to fulfill your governance responsibilities. 
  4. Contribute to your board’s culture of candor and inquiry by “athletically listening” (rather than listening to react) to the diverse views of your colleagues; challenging assumptions you might question in a civil, respectful way; and resolving differences inside rather than outside the boardroom. 
  5. Help your board devote as much time as possible to the issues with the greatest impact on your association’s success and vitality. To address those issues, request board meeting materials that will help the board provide insight and foresight, as well as oversight and hindsight. 
  6. Respect your association’s reporting lines and communication channels. Don’t supervise, micromanage, or befriend individual staff members, all of whom report either directly or indirectly to the chief staff officer. 
  7. Focus your time on the responsibilities assigned to the collective board and its individual members, rather than getting enmeshed in the tactics and implementation assigned to staff members or other groups. 
  8. Participate in the self-improvement process your board uses to assess its performance each year. Periodically ask yourself how well you think you contribute to the board’s work and what you can do or might need to be as effective as possible.
  9. Help with board succession planning by identifying association members who are good candidates for the pipeline of potential volunteer leaders. 
  10. Encourage your fellow board members to help the board make data-driven decisions based on information rather than opinions.

This is an excerpt from The Governing Board: Key Responsibilities for Association Boards and Board Members by Nancy R. Axelrod.

Nine Myths About Board Meeting Procedure Worth Debunking

Board of directors

As an attorney and professional parliamentarian, I’m sometimes asked, “Who was Robert, and why do his rules rule?” Henry Martyn Robert was the original author of Robert’s Rules of Order.

Most organizations with a parliamentary authority use Robert’s. To the public, Robert’s Rules and parliamentary procedure are one and the same. However, a lot of what is “known” about procedure—especially board meetings—is wrong. Mark Twain warned, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

Below are nine myths about board meeting procedure that associations should put to rest.

Myth 1: Parliamentary Procedure Doesn’t Matter

Many associations dictate in their bylaws or other governing documents that a parliamentary book will be followed when transacting business. Some states even have statutes that require certain organizations (e.g., HOAs, condos, nonprofits) to follow rules or Robert’s. Ignoring or incorrectly applying such procedures can lead to embarrassment and even lawsuits.

Myth 2: Any Robert’s Will Do

While there are many books with Robert’s Rules in the title, most are earlier editions or knockoffs. There is one official Robert’s that is the successor to earlier works. Each new edition brings changes to procedure. The current edition is Robert’s Rules of Order Newly Revised, 12th Edition. If your organization’s rules specify the “latest edition,” this is the book you need to use.

Myth 3: Boards Follow the Same Rules as Other Meetings

Rules aren’t one-size-fits-all. Problems are common when large meetings behave too informally, or small meetings behave too formally. Rules should be like clothes—they should fit the organization they are meant to serve.

Most parliamentary manuals provide that board and membership meetings are conducted differently. Large meetings must be fairly formal. However, formality can hinder business in smaller bodies. Robert’srecommends less formal rules for boards where there are not more than about a dozen members present, including:

  • Members may raise a hand instead of standing to obtain the floor.
  • Members may remain seated while speaking or making motions.
  • Motions need no second.
  • Discussion of a subject is permitted while no motion is pending.
  • When a proposal is clear, a vote can be taken without a formal motion.
  • There is no limit to the number of times a member may speak to a subject or motion.
  • Occasions where debate must be limited or stopped should be rarer than in larger meetings.
  • The chair is typically a full participant and can debate and vote on all questions.
  • Votes are often taken by a show of hands.

Smaller boards that dislike informality may follow more formal procedures. Informal boards may also choose to be more formal on important or controversial matters.

Myth 4: Seconds Always Matter

In a larger or more formal body, a second to a motion implies that at least two members want to discuss it. If there is no second, there should be no further action on the proposal. However, after any debate, the lack of a second is irrelevant. For less formal smaller bodies, seconds aren’t required.

Myth 5: Debate and a Formal Vote Are Required

Many noncontroversial matters can be resolved without debate through “general” or “unanimous” consent. Using this method, the presiding officer asks, “Is there any objection to …?” For example, “Is there any objection to ending debate?” If no one objects, debate is closed. If a member objects, the matter is resolved with a motion and vote. Unanimous consent allows an assembly to move quickly through non-contested issues.

Myth 6: The Maker of a Motion Gets to Speak First and Last

The maker of a motion has the right to speak first to a proposal. After speaking, the maker has no more rights to speak than other members.

Myth 7: “Old business”

“Old business” is not a parliamentary term and suggests a revisiting of any old thing ever discussed. The correct term, “unfinished business” makes clear the term refers to specific items carried over from the previous meeting. A presiding officer never needs to ask, “Is there any unfinished business?” Rather, the officer should simply state the question on the first item.

Myth 8: Yelling “Question!” Stops Debate

The previous question (or motion to close debate) is often handled wrong. Shouting “Question!” is not only bad form, but it’s also ineffective. A member wanting to close debate must be recognized by the chair. The previous question requires a second and a two-thirds vote. Only the assembly decides when to end debate.

Myth 9: The Chair Rules the Meeting

The chair is the servant of the assembly, not its master. If the assembly rules are being violated, any member can raise a “point of order.” Once the chair rules on the point of order, a member can appeal from the decision of the chair. If seconded, the appeal takes the parliamentary question away from the chair and gives it to the assembly. The assembly is the ultimate decider of all procedural issues.

The benefits of a well-run board meeting go beyond legal concerns. Proper procedure can turn long, confrontational meetings into short, painless ones. Eliminating these myths will bring your meetings more in line with proper procedure and result in shorter, more effective meetings. 

20 Questions Board Members Should Ask to Assess Financial Health

Financial Planning

1. Is our financial plan consistent with our strategic plan?

Sufficient Available Cash

2. Is our cash flow projected to be adequate?
3. Are our cash-flow projections reasonable, objective, and not overly optimistic?

Satisfactory Reserves

4. Do we have sufficient reserves?
5. Has the board adopted a formal policy for the establishment of reserves?

Meeting the Budget

6. Are we regularly comparing our financial activity with what we have budgeted?
7. What procedures do we use to make sure that the differences between what was budgeted and what actually happened are being appropriately addressed?

Propriety of Expenditures

8. Does the board provide oversight of contractual agreements to ensure that the organization’s exempt status will not be questioned or impaired?

9. Does the board provide for internal controls over expenditures?
10. Does the organization maintain adequate business insurance?

Internal Controls

11. Do we have the appropriate checks and balances necessary to prevent errors, fraud, and abuse?
12. Are we alert to the possibility of fraud within our organization and are we taking safeguards to try to prevent fraudulent activities?

External Audits

13. Do we have an external audit?
14. Does our annual audit have an unqualified (“clean”) opinion?

Financial Documents

15. Is our financial staff providing us with accurate and timely financial statements that allow us to understand the financial state of the organization?
16. Do we regularly review IRS Form 990? Does it accurately represent our organization?

Signs of Financial Distress

17. Are our key sources of revenue rising or falling? If they are falling, what are we doing about it?
18. Are our key expenses, especially salaries and benefits, under control?

Making Investments

19. When was the last time our investment policy was reviewed?
20. Are we satisfied with the performance of our investments, given the level of risk appropriate for these funds?

Give Your Governing Documents a Checkup

Your association’s articles of incorporation and bylaws are the most important documents prescribing how the organization is to be organized and operated. The articles document is essentially a contract with the state where your organization is incorporated (which may differ from where your offices are located) and takes precedence over every other governing document. The bylaws expand upon and must be consistent with the articles and often serve as an agreement between your association and its members.

Your governing documents must accurately reflect not only the law, but also the association’s actual operations, to avoid misunderstandings and to ensure that the organization is not bound to an unintended requirement. 

It’s wise to periodically conduct a quick check-up of your governing documents. Focus on these areas:

  1. Organizational purposes. Are purposes specified in the bylaws, and if so, are they consistent with the articles? An association may change its purposes and reflect the change in the bylaws, but forget to amend its articles with the state. If you specify in the bylaws that the organization’s “purposes are as stated in the articles of incorporation,” then amendments can be made just in the document that controls. 
  2. Membership voting rights. Do your articles and bylaws, in conjunction with state law, provide that your association has members with voting rights? If so, are the specific rights spelled out? For example, do members vote only to nominate or elect directors, or to approve major corporate transactions, or to amend the bylaws? And do these statements match the association’s intent? 
  3. Board action procedures. Most states require that a board take action only at a meeting where a quorum is present or by unanimous written consent. Most do not permit proxy voting but do allow directors to participate in meetings via teleconference. Ensure that your bylaws reflect the requirements of your state’s nonprofit corporation law (as opposed to the for-profit or general corporations code) and are followed.
  4. Committee designations. Most state laws require that board committees—those groups that may exercise board authority—be composed exclusively of board members and be appointed by the board. Other committees and working groups may be formed through other channels and may include non-board members, but they may only make recommendations to the board for action. Check that your committee designations comply with state law and that your bylaws and committee documents are clear about what committees may exercise board authority and under what circumstances.

Governance Terms

A

Advisory Board: Unlike traditional boards of directors, advisory boards do not have formal governance responsibilities or legal duties. Instead, they provide advice and expertise to the executive team.

Affiliate:  an organization that is related to another organization, typically through ownership, control, or shared interests. 

Annual Meeting: A mandatory yearly gathering of a company’s interested shareholders, during which the directors present an annual report.

Articles of Incorporation: a formal document filed with the state government to legally document the creation and recognition of a corporation by the state;  also known as  “Charter”, or “Certificate of incorporation”

Audit Committee: A committee of the board of directors responsible for overseeing financial reporting, the audit process, and internal controls.

Authority Matrix:  A tool used within organizations to define and document the levels of authority and decision-making powers assigned to various positions or roles; also known as a “Delegation of Authority Matrix” or “Responsibility Assignment Matrix”.

Authorized Shares: The number and types (classes) of shares the corporation is authorized to issue

B

Ballot Vote: A method of voting used in corporate board meetings where members write their vote on a slip of paper.

Board of Directors: A group of individuals elected to represent shareholders and oversee the management and operation of a company.

Board Resolutions: Formal decisions made by the board of directors to approve significant actions and policies, such as budget approvals, major contracts, and policy changes. They must be consistent with the bylaws and articles of incorporation.

Board Self-Assessment: A systematic process by which an organization’s board of directors evaluates its own performance, effectiveness, and governance practices.

Bylaws: The rules and regulations enacted by an organization to provide a framework for its operations and management.

C

Certificate of Formation: a formal document filed with a government body (a state in the US) to legally document the creation and recognition of a limited liability company by that government body.

Chairman: The head of the board of directors, responsible for leading board meetings and ensuring effective governance.

Chief Staff Executive: The highest-ranking executive in a company, responsible for overall management and performance. The CEO reports to the board of directors and often serves as a link between the board and the company’s operations.

Clayton Act: A United States federal law that addresses specific practices such as mergers and acquisitions that could reduce competition.

Code of Conduct: A formal document that outlines the ethical standards, values, and principles expected of employees, directors, and officers within an organization.

Committees: Formal groups established by the board or management to focus on specific areas of the organization’s operations, governance, or strategic initiatives. Committees can be standing (permanent) or ad hoc (temporary).

Community Impact: Contributing positively to the communities in which the company operates, through initiatives like philanthropy, volunteering, and community development projects.

Competency-Based Board: A board of directors, whose members are selected and evaluated based on their individual competencies, skills, and experiences relevant to the organization’s needs and strategic objectives. This approach emphasizes the importance of having a diverse group of directors with a broad range of expertise to effectively oversee and guide the organization.

Compliance: Adherence to laws, regulations, guidelines, and specifications relevant to its business.

Conflict of Interest: A situation in which a person or organization could potentially benefit personally from their actions or decisions made in their official capacity.

Consent Agenda:  A procedural tool used by boards of directors, committees, or other governing bodies to streamline meeting processes and efficiently manage routine or non-controversial items of business

Contested Election: A situation in which there are multiple candidates competing for a single position or seat, within a governing body such as a board of directors, a legislative body, or a membership organization.  ALSO CALLED COMPETITIVE ELECTION

Corporate Secretary: An officer responsible for ensuring the integrity of the governance framework, being the company’s compliance officer, and managing the corporate record.

Corporate Social Responsibility (CSR): A company’s commitment to manage its social, environmental, and economic effects responsibly.

Cumulative Voting: A method of voting where have a certain number of votes that they can allocate to one or more candidates, providing a way to support preferred candidates more strongly.

D

Director at Large:  A member of an organization’s board of directors who does not have specific oversight of a particular department or functional area but instead provides broad oversight and general governance to the organization

Due Diligence: The investigation or exercise of care that a reasonable business or person is normally expected to take before entering into an agreement or contract. 

Duty of Care: A fundamental principle in corporate governance and fiduciary duty that requires officers and directors to exercise ordinary and reasonable care in the performance of their duties, exhibiting honesty and good faith

Duty of Loyalty: A fundamental principle in corporate governance and fiduciary duty that requires officers and directors to prioritize the interests of the organization and its stakeholders above their own personal interests.

Duty of Obedience: A fundamental principle in corporate governance and fiduciary duty that requires officers and directors to ensure compliance with the laws, regulations, and governing documents that apply to the organization. 

E

Executive Committee: A small, permanent group of senior executives and board members who are delegated the authority to make significant decisions on behalf of the full board of directors or the organization.

Executive Leadership: Senior management responsible for executing the board’s strategic vision and managing day-to-day operations.

Executive Sessions: A private meeting within a board meeting, attended only by board members and other invited individuals, such as legal counsel or auditors.

F

Fiduciary Duty: The legal obligation of a board member to act in the best interest of the company and its shareholders.

Foreign Corporation: A business entity that is incorporated or registered in a jurisdiction (such as a state or country) outside of where it conducts its primary business operations.

G

Geographically Comprised Board: A board of directors, that are formed or organized based on geographical areas.

Governance: The system or framework of rules, relationships, practices, and processes by which a company is directed and controlled.

H

Hybrid Board:  A specific type of board structure that combines elements of both unitary and staggered boards, where some directors might be elected annually, while others have staggered terms.  

I

Independent Director: A board member who does not have a material or pecuniary relationship with the company or its related entities.

Industry Standards:  Established norms or requirements within a specific industry that are created 

K

Key Performance Indicators (KPIs): Measurable values that demonstrate how effectively an organization is achieving its key business objectives.

L

LLC (limited liability company): a type of business structure that combines the pass-through taxation of a partnership or sole proprietorship with the limited liability of a corporation.

Lobbying Disclosure Act (LDA):  a United States federal law enacted in 1995 to regulate lobbying activities and promote transparency in government relations with disclosure requirements, reporting their lobbying activities and expenditures.

M

Manual of Policies and Procedures: A document that expands on of the terms of formation and operation of the organization in accordance with the articles of incorporation and the bylaws. Nonprofit organizations and associations  a comprehensive document that outlines the policies, protocols, and standard operating procedures (SOPs) governing the operations and conduct within an organization. It is an expansion on articles of incorporation and the bylaws;  also known as the “P&P manual” or “P&P guide”

Mission: A concise description of the company’s core purpose and primary objectives. This explains why the company exists and what it aims to achieve in the long term.

Minutes: Official records of the decisions and discussions that take place during meetings of the Board or shareholders. Minutes document the actions and serve as a legal record of decisions made. They must accurately reflect the resolutions passed and discussions held, and they are often referenced for compliance and accountability.

Motion: A formal statement or proposal presented by a member of the board or a shareholder that asks the meeting to take a specific action or adopt a certain position; see “Parliamentary Procedure”.

N

Nominations Committee: A board committee that oversees the appointment of directors and succession planning for senior executives.

Non-Executive Director: A member of the board of directors who is not part of the company’s executive management team.

O

Operating Agreement: A key document used by limited liability companies (LLCs) to outline the business’s financial and functional decisions, including rules, regulations, and provisions. This agreement governs the internal operations of the business in a way that suits the specific needs of the owners (referred to as members). It is similar to a partnership agreement or corporate bylaws, but specifically for LLCs.

P

Parliamentary Procedure: A set of rules, ethics, and guidelines used to conduct meetings and make decisions in a systematic, fair, and orderly manner. 

Principal Office Address: The main office where the corporation’s headquarters is located and records are kept.

Plurality Voting:  A method for voting where the highest number of votes win, often used when multiple positions are open.

Procedures: Step-by-step instructions on how policies are implemented and followed. 

Proxy Voting: A mechanism allowing shareholders to vote on corporate matters without being physically present at the meeting.

Q

Quorum: The minimum number of members or directors who must be present at a meeting to legally conduct business and make decisions. Without a quorum, any decisions or votes made may be considered invalid.

R

Registered Agent and Office: The name and address of the corporation’s registered agent, who is authorized to receive legal documents on behalf of the corporation, and the location of the registered office.

Remuneration Committee: A board committee responsible for determining executive compensation and overseeing remuneration policies.

Representative board: A board of directors, whose members are selected of individuals who represent various stakeholders or interest groups associated with the organization.

Rising Vote: A method of voting used in corporate board meetings where members stand to indicate their vote, and the chair counts the votes;  used when a voice vote is unclear or when a count is needed.

Risk Management: The identification, assessment, and prioritization of risks followed by coordinated efforts to ensure the organization’s sustainability and resilience.

Roberts Rules of Order: A specific and widely recognized manual of parliamentary procedure, originally written by Henry Martyn Robert in 1876.

Role Call Vote: A method of voting used in corporate board meetings Each member’s name is called, and they state their vote aloud. This method provides a clear record of how each member voted and is used for important or controversial issues.

S

Sarbanes-Oxley Act (SOX):  A United States federal law passed in 2002 that aims to improve corporate governance, financial transparency, and accountability

Shareholders: The owners of shares in a company, normally having voting rights and a claim to a part of the company’s profits; also known as stockholders.

Sherman Act: A United States federal law that prohibits activities that restrain trade or competition in interstate commerce.

Slated Ballot: A voting method often used in elections  where a predefined list or “slate” of candidates is presented to voters for approval or rejection as a whole, rather than voting on each candidate individually.  A useful tool for a nominating committee to use to ensure that the board has the necessary mix of skills, experience, and diversity.

Staggered Board: A specific type of board structure where directors serve overlapping terms, with only a portion of the board being elected or re-elected in a given year; also known as a classified board. 

Stakeholders: All parties with an interest in a company, including employees, customers, suppliers, and the community, in addition to shareholders.

Stakeholder Engagement: The process of involving individuals, groups, or organizations that may be affected by or can affect a company’s decisions.

Statement of Purpose: a formal declaration that outlines the fundamental objectives, values, and principles guiding a corporation’s operations and decisions.

Strategic Objectives: High-level goals that the company aims to accomplish to fulfill its mission and vision. These objectives provide a roadmap for strategic planning and performance measurement

Strategic Planning: The process of defining the organization’s direction and allocating resources to pursue this strategy.

Subsidiary: An organization that is controlled by another an organization, referred to as the parent organization. 

Succession Planning: The process of identifying and developing new leaders who can replace old leaders when they leave or retire.

Sustainability:  The integration of environmental, social, and economic considerations into the decision-making processes and strategies of a company to ensure that the company operates in a manner that is responsible, ethical, and capable of sustaining long-term success while minimizing negative impacts on the environment and society.

Sustainability Committee: A dedicated committee at the board level to oversee sustainability initiatives and ensure they are integrated into the corporate strategy.

T

Task Force: A temporary group created to address specific issues, challenges, or projects within a limited timeframe. They are focused on achieving a particular objective and disband once the goal is met 

Transparency: Openness in the company’s operations and decisions, ensuring that stakeholders have access to accurate and timely information.

Treasurer: Corporate officer responsible for the operational aspects of financial management, such as cash flow, liquidity management, and financing activities.

U

Unitary board: A specific type of board structure where directors are elected at the same time, typically at the annual shareholders’ meeting.

V

Voice Vote: A method of voting used in corporate board meetings where members verbally express their votes. The chair then announces the result based on what they heard.  This is the simplest and most common method of voting in meetings

W

Whistleblower Policy: Procedures and protections for individuals who report unethical or illegal activities within an organization.

Y

Year-End Financial Reporting: A process of preparing and disclosing financial statements at the end of a company’s fiscal year.

Z

Zero-Based Budgeting (ZBB): A budgeting process in which all expenses must be justified for each new budgeting period, regardless of whether they were included in previous budgets.

When the CSE Dies: A What-To-Do-Next Checklist

  • Offer to assist the CSE’s family in any way possible.
  • Meet with staff to discuss the death, help them cope, and describe next steps.
  • Implement a communication plan to ensure sensitive and timely notification to key association audiences, including
    • Former chairs and board members;
    • Former staff;
    • Chapter, section, and other component leaders;
    • Key strategic allies, sponsors, and other key constituencies;
    • Industry and related media;
    • Legislators and regulators;
    • Members.
  • Identify a spokesperson to whom all public inquiries can be referred, especially media. A CSE’s networks are very broad, and although the board and staff may try to notify everyone appropriately, they should be prepared to speak with off-the-radar contacts who may step forward when they hear the news. Part of that responsibility should include consulting with the family regarding preferred responses to questions about cause of death and requests for private information such as mailing addresses or family emails, funeral arrangements, and ways to pay tribute to the deceased leader.
  • Send flowers to the funeral home or house of worship, unless otherwise requested by the next of kin. Consider sending two arrangements—one from staff, the other from the board.
  • Consider – donating to the CSE’s favorite charity, house of worship, or academic institution – naming a conference room, program, or award in the CSE’s honor or creating a scholarship or other appropriate legacy within the association’s foundation or at an appropriate academic institution.
  • Include an obituary and tribute in the association’s publication and at the group’s annual convention. 
  • Review the CSE’s contract to determine the timing and details regarding the association’s obligations concerning salary and other payments, insurance claims, resolution of deferred and other retirement compensation, etc.
  • Address administrative matters such as forwarding the CSE’s phone and/or changing the voicemail greeting. Include an auto-reply message in the CSE’s email as well. 

Moving Ahead

Following the initial shock, the association’s leaders must press ahead with the appointment of an interim CSE and a search for a new CSE.