Nonprofits typically have one of two basic structures. The most common is to simply have a board of directors to control governance matters as well as officers to manage the nonprofit’s day-to-day operations. The second structure is the same except that there are also voting members who elect the board. While voting members add an additional layer of protection, many organizations find that members are not necessary for achieving the nonprofit’s goals and end up being more of a hindrance than a benefit.
The board’s main duties involve corporate governance, finance, and policymaking. In this structure, the initial board members are elected at the first corporate meeting, with additional and replacement members being elected by the other directors on the board.
Specifically, the directors are responsible for hiring and replacing talented executives, setting executive compensation, setting goals and monitoring performance, auditing financials, and dissolving the nonprofit should the time come.
Board members will ideally have years of relevant experience and expertise that helps them forecast and assess the major risks threatening the nonprofit’s mission and long-term viability. It is also important to have a mix of internal directors (those who work as employees or officers for the corporation) and external directors (those who can offer more independent perspectives). Doing so will also help the board not be overly biased toward the management’s views.
When nonprofits take the form of democratic, member-driven organizations or associations, they often choose to use voting members to elect their board. In this way, the members have the ultimate say over who is setting the major corporate goals and policies. Common examples of organizations that frequently use voting members include social clubs, unions and trade associations, chambers of commerce, professional associations, and churches.
Members have specific rights under state law and the corporation’s governing documents, namely the articles of incorporation and corporate bylaws. However, keep in mind that there are additional corporate formalities that voting membership nonprofits must follow. All meetings of voting members must be properly noticed and documented in the same manner as board meetings.
State law dictates which corporate officers are required. At a minimum, these will include the CEO (or president), a secretary, and a treasurer. You may also choose to have many other types of officers, including a chief financial officer (CFO), a chief operating officer (COO), a chief information officer (CIO), a chief sales officer (CSO), and senior vice presidents. Officers have a legal duty to act in the best interests of the corporation at all times. Large corporations often have hundreds of officers in order to disperse responsibilities.
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