Dear Nonprofiteer, Is the nonprofit Board perpetual or merely self-perpetuating?

Today’s query: is the nonprofit Board perpetual or merely self-perpetuating?

Dear Nonprofiteer,

I’m on the board of a small, but national, non-profit.  We have been incorporated as a non-member, board-operated nonprofit and designated a 501 (c)(4).

We originally created a mechanism by which our affiliated state organizations could participate in the election of board members.  However, this system has not worked well at all, owing mostly to a lack of interest on the part of the affiliates.  It soon became difficult for us to maintain the By-laws’ required minimum of 9 members.

Our steering committee decided to draft a new section of the By-laws that would eliminate the election process and replace it with a perpetual board until such time as our board decides to make a change (and perhaps allow “member/donors” to participate in the process).

A couple of our existing board members are dead-set against this, viewing the perpetual board language with suspicion and wondering if we aren’t making a huge mistake.

As one of the primary proponents of this change, I have argued that most non-profit boards are self-perpetuating.  I have been asked to show some evidence of this.  The only evidence I have been able to find is an occasional reference to the phenomenon, but no hard evidence (as in a named non-profit).

Can you provide any examples of non-profit boards that are, in fact, self-perpetuating?

Signed, Of Time and Eternity

Dear Time:

It may be that you and your colleagues are talking past each other, and disagreeing about nomenclature rather than substance.  If the Nonprofiteer served on a Board where someone proposed to make it “a perpetual board until such time as our board decides to make a change,” she’d be alarmed too, because it sounds like you mean to keep the same people on the Board indefinitely, with no mechanism for replacement short of a bylaws amendment.  (Likewise she’d be dismayed by the phrase “eliminate the election process.”)  On the other hand, if she heard that the proposal was to create a “self-perpetuating board,” she would relax, because that’s exactly what most non-profits use: groups of people elected for specific terms who are authorized, among other things, to recruit and elect new Board members (also called “directors”).  This is as true for 501(c)(4)s as for the more common charitable 501(c)(3)s.

Except in membership organizations, no external group has the power to elect a nonprofit Board of Directors.  As Lesley Rosenthal, general counsel of Lincoln Center, explains in her book Good Counsel, “[A] governance or nominating committee [of the Board]. . . . may be responsible for reviewing the performance of existing directors and the board as a whole, as well as considering new candidates for directors.”  Thus, self-perpetuation—identifying and bringing on new Board members—is a routine Board function and not a plot to create a permanent leadership cabal.

That’s why a set of model nonprofit bylaws contains the following provision:

10. Vacancy. Any vacancy occurring in the Board of Directors shall be filled by majority vote of the remaining Directors, though less than a quorum. Each person so elected shall serve until the duration of the unexpired term, or until the next annual meeting.

Self-perpetuating Boards include virtually every one of the Nonprofiteer’s clients over the past 30 years, including those of the Donors Forum of Chicago, DePaul University, Greenpeace U.S.A., the Hope Institute for Children and Families, the YMCA of Metropolitan Chicago, and on and on.  The only exceptions are organizations whose governance documents specifically call for election of the Board by members, such as the League of Women Voters.

But by your own description you are a “non-member, board-operated nonprofit.”  There is therefore no obstacle to your revising your bylaws to create a self-perpetuating Board, nor is there any governance danger in doing so.  The governance problems would arise if the new bylaws created an actual perpetual Board, one without terms or term limits or requirements that people step off the Board after a specified period of service.  Keeping the same people in place indefinitely is a disaster for any living organization.

If the Nonprofiteer has misunderstood the question, please let her know and she’ll try again.  Based on her current understanding, though, you’re recommending a change which will bring your organization closer to, rather than further from, best nonprofit practice.

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    Nonprofiteer

    The Nonprofiteer is Kelly Kleiman, principal of NFP Consulting, which provides Board development, strategic planning and fund-raising services to charities and philanthropies. Through her consulting practice and in her guise as The Nonprofiteer, Kelly has spent the past 25-plus years helping small and mid-sized nonprofits organize themselves better and raise more money. These days she focuses especially on helping them use high-skill volunteers. Kelly is also a lawyer and freelance journalist whose reportage and essays have appeared in the New York Times, Wall Street Journal, Washington Post, Christian Science Monitor and other dailies; in magazines including In These Times and Chicago Philanthropy; in the alternative press; on websites including the Huffington Post; and on the radio, including the BBC and WBEZ Chicago Public Radio. She and her fellow "Dueling Critic" Jonathan Abarbanel present a weekly podcast of their reviews of Chicago theater at DuelingCritics.net. Earlier in her career she was dean of admissions of IIT Chicago-Kent College of Law and Executive Director of the Chicago Children’s Choir, and practiced real estate and zoning law with the firm of Rudnick & Wolfe. Kelly holds undergraduate and law degrees from the University of Chicago. She was a founding Board member of the Association of Consultants to Nonprofits and also served for 5 years on the Board of the Association for Women Journalists–Chicago. She can be reached ("Dear Nonprofiteer . . .") at KellyNFP@yahoo.com.

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