By: Eugene Fram Free Digital image
BoardSource, a professional governance organization, reports that this question is one of the most asked. Google reports about eight million citations, in a brief .52 second search, related to the issue or related issues. The question continues to be debated, and the need for comment and opinion seems insatiable.
But here are the issues as I see them:
State Legislation: Most nonprofit charters are issued by states, and it appears that the vast majority of American nonprofits are governed by these regulations. California permits the CEO to be a voting member under Code 5227 that allows compensation for some potion of board members. Until a recent change, New York did allow the CEO to become a board member. The motivations behind the legislation center on preventing a CEO developing conflicts-of interest, especially as they relate to salary decisions. Also, there is a feeling among some nonprofit board members that the board must be the “boss.” This attitude can even go as far as one nonprofit board member’s comment: “We have a real board, we tell the CEO exactly what to do.”
It appears that the restriction is considered a “best practice.” Some nonprofits move around it by naming the CEO an ex-official member of the board, a member without a vote. However, there is a “better practice,” available where permitted by legislation.
Developing An Even Better Practice in a Nonprofit
Start At The Top: Allow the CEO to hold the title of President/CEO and allow the senior volunteer to become Board Chair. This signals to staff and public that the board has full faith in the CEO as a professional manager. In addition, the change absolves the senior volunteer of potential financial liability, not unlike the volunteer who unwittingly received a $200,000 bill from the IRS because it appeared he had strong control of a bankrupt nonprofit’s finances and operations.
Ask The CEO: Make certain the CEO is willing and able to accept full responsibility for operations. Not all CEOs, designated as Executive Directors, want the increased responsibilities attached to such a title and to become a board member. These managers frequently feel comfortable with having the board micromanage operations and often openly discuss their reservations.
The CEO Becomes A Communications Nexus: Under the CEO’s guidance, board-staff contact takes place on task forces, strategic planning projects, at board orientations and at organization celebrations. It openly discourages the staff making “end runs” to board members, not a small problem in community-focused nonprofits
Brand Image: As a board member, the CEO can be more proactive in fund development. The board position and the title can easily help the CEO to build the organization’s public brand image through the clear public perceptions of the board’s choice to lead the organization. This provides leverage to make greater use of the board-CEO relationship required to develop funds. It can allow the CEO to be the spokesperson for the organization’s mission and to quickly become the center for public statements when a crisis develops.
Peer Not Powerhouse: Probably descending from early religious nonprofits, its personnel may be seen by part of the public as not being “worldly.” They must be over-viewed by a group of laypersons that encounters the real world daily. The CEO, as a voting member of a nonprofit board and a board team peer, takes on increasing importance to reducing these attitudes. As long as the CEO works successfully as a peer not a powerhouse, there should be substantial benefits to the nonprofit organization.
I know people always think “ex officio” means “non-voting” but, ex officio means “by reason of position” so if someone holds a certain title, say, President of a related organization, they are automatically a member of the board of organization 1. non-voting means non-voting, sometimes an ex officio position happens to be non-voting. but if you have “ex officio” in your bylaws and you really mean “non-voting” you should check your state laws…
Jevan: Good point. State laws vary so widely in terms of language and regulations that it is wise to review them when making changes. I encountered one nonprofit where the president, a volunteer, was also listed as the CEO. This could lead to any number of CEO liabilities, that other board members might not have.
It wasn’t discovered until an attorney on the board reviewed the by laws.