If you’re getting started launching a new non-profit or organization, or perhaps you’re new to serving on a Board of Directors, there are a lot of things to keep in mind. We’ll assume you have an working group of at least 2-3 people (to start your initial Board of Directors if it doesn’t already exist). Our goal here is to address the wide-range of topics you’ll be exposed to on a Board of Directors and provide an overview of specific topics. Send us an email or post a comment below if you have any questions or specific areas you’d like us to write about.
Articles of Incorporation & Bylaws
The two most important documents for an organization are:
- Articles of Incorporation: You must prepare and file Articles of Incorporation (or Organization) in order to charter or incorporate in any state. These articles typically include the following types of information that are then signed by the incorporator(s) of the organization:
- Organization Name
- Initial Office Location
- Stock Classes and Rights (unless a non-stock organization like a non-profit)
- Initial Board of Directors
- Bylaws: Think of these as the rules that govern how the organization is run. Bylaws cover of a wide range of topics including, but not limited to:
- Name of the Organization
- Purpose / Mission / Vision
- Membership (if a non-profit or association)
- Duties (for members or Board members)
- Meetings (schedule, requirements for quorum, etc)
- Committees (how many, what their roles and responsibilities are, and their meeting schedules and authorities)
- Amendments (rules on how to amend the bylaws including any amendments made since the initial bylaws were ratified)
These documents can both be changed down the road as needed. The articles of incorporation, which are filed with the state you are incorporated in, can be changed by filing amendments to the articles of incorporation with the state. These become public record and can be viewed by anyone.
Your bylaws can be updated or amended by a vote by your board or membership. The rules specific to how you would implement your bylaw changes will be governed in your original bylaws. Common requirements for bylaw changes include a quorum at the meeting to discuss/approve the changes and either a simple or “super” majority vote of your directors or members.
Boards of Directors are very elastic. Small organizations can start out with a couple of people on their Board and expand as large as they’d like. We’ve seen boards with over a hundred members before. At the same time, Apple has only seven members on their Board of Directors, so bigger isn’t necessarily better. It’s preferable to have an odd number of voting members so you won’t end up with a tie vote.
- Chairman/Chairwoman: The Chair is responsible for running board meetings and is typically the public face of the organization (unless a President/CEO or Executive Director has been hired). In a volunteer-led organization they are going to be doing most of the day-to-day meetings, fundraising, and networking. Oftentimes, until a full-time hire is made, this individual will also serve as the President/CEO or Executive Director.
- Vice Chair: This position stands in for the Chair whenever they are unavailable or unable to serve. It’s a good practice to try and have someone lined up to fill in for, or succeed, the Chair at the end of their term.
- Secretary: Typically this person will be tasked with taking the minutes at meetings, preparing and sending the agenda before meetings, and otherwise keeping the records of the organization. We’ll dive into some of those specifics later.
- Treasurer: This position is responsible for the financial aspects of the organization. If you’re just getting started, the treasurer typically opens the organization’s first bank account and often includes the Chair as a signatory on the account(s) (or whomever is going to serve as the initial President or Executive Director). The treasurer also prepares financial statements to be presented at Board meetings and sets up and manages the “books” (financial records) for the organization.
- Director: Everyone else remaining on your board is simply known as a director. A director may be elected to another role on the board, serve on committees, and vote on any matter before the board.
- Ex-Officio: Typically seen on non-profit or association boards, ex-officio members are typically elected officials or other individuals from offices or positions important to your organization (for example, a Chamber of Commerce may have the local mayor or a county supervisor serve on their board). These members may or may not have voting rights which you can specify in your bylaws.
- Non-Voting: Sometimes you may have staff or other individuals that aren’t otherwise a regular director or ex-officio member that you still want present at your board meetings.
Meeting Format & Schedule
Most Boards and committees tend to adopt and follow Robert’s Rules of Order. You can find a full copy of the original Robert’s Rules of Order (1996 revision) here [PDF]. If you would like to formally adopt Robert’s Rules, they have provided an easy step-by-step guide here including how to properly reference the rules in your bylaws.
Generally you should meet at least annually, but you should consult with state law wherever you are incorporated. For new Boards you may want to meet more frequently until things are up and running and then switch to a more periodic schedule such as quarterly or bi-monthly (every other month). Many organizations that have a local director base (e.g., Chambers of Commerce and smaller non-profits) may choose to meet on a monthly basis to give the Board more frequent insight into day-to-day operations. More frequent meetings requires more administrative upkeep but also gives your directors the opportunity to participate in important decisions without having to wait months for the next meeting.
Sample Meeting Agenda
Your meetings will generally follow a consistent format to provide for an orderly flow to keep the meeting on point. You can feel free to add or subtract items from your meeting agenda, but here’s a good outline to start with.
- Call to Order
- Welcome and Introduction(s)
- Outside Presentation(s)
- Old Business
- Review/Approve Minutes from Previous Meeting
- Financial Report
- Committee Report(s)
- President or Executive Director Report
- Old Business
- Next Meeting Date/Time and Location
Minutes & Resolutions
Do you have someone on your board who takes notes at each meeting? Did you know that most states in the United States require boards, including non-profits, to have written minutes from formal meetings? It’s the law in every state except for Delaware, Kansas, Nevada, North Dakota, and Oklahoma.
Keeping the minutes is pretty straightforward. You don’t need to necessarily record the audio at meetings, or take word-for-word notes. Instead, minutes can simply be a summary of key topics (that align with your agenda) and the discussions and outcomes of each. Your board secretary typically will handle the minutes at your meeting. You can also designate a staff member or other participant in your meetings to take the minutes. Either way, it’s important to plan ahead to have someone take the minutes at your meetings. It’s even better if that person stays the same from meeting to meeting so your minutes are consistent.
As your board grows it makes sense to delegate certain discussions and decisions to smaller working groups known as committees. Your meetings could become quite lengthy if your full board had to take up every decision and matter at regular meetings. Therefore, most boards will setup committees that can be permanent or temporary. Some common examples include:
- Finance Committee: As you grow, your asset base will hopefully grow as well. Your finance committee will help guide decisions on where the organization’s assets should reside. That is generally between bank accounts and investments. This committee will also ensure periodic financial reports are prepared for the full board. Your treasurer is typically part of this committee and reports on their behalf to the board.
- Audit Committee: Your regular finance committee may be able to initially handle any audit requirements. You may be required at some point to have a different set of members on your audit committee.
- Events Committee: If you have an annual event, or a series of events, you may delegate the oversight of these events to a sub-committee. This committee may establish goals and priorities for events, review and establish event budgets, and otherwise report these findings to the full board.
- Nominating Committee: When it comes time to recruit new board members, which may become an annual tradition, you may want to delegate these tasks to a sub-committee to handle the recruitment, interviews, and recommendations for new directors to the full board for their consideration.
- Executive Search Committee: Your search committee will typically take the lead and handle the hiring process as you grow and need to hire a President/CEO or Executive Director. The committee can handle the details while reporting its findings to the full board for their final approval.
You will want to be familiar with basic financial statements if you’re either starting or joining a board for the first time. The most common financial statements are:
- Balance Sheet: This statement will show you a breakdown of the organization’s assets, liabilities and equity. It will always balance, as long as the accounts are all correct, such that Assets will equal Liabilities + Equity. Typically your balance sheet will list Assets,then Liabilities and finally Equity.
- Income Statement / Profit & Loss (P&L) Statement: You may see these terms used interchangeably but they equate to the same thing. Your income, or P&L, statement is simply a listing of your revenue or sales, cost of goods sold (if applicable) and expenses. A simple formula is Revenue minus Cost of Goods Sold = Gross Income; Gross Income Minus Expenses = Net Income. Your Net Income is typically referred to as your “bottom line” since it will be the last line on the income statement.
- Cash Flow Statement: The cash flow statement is simply a listing of cash in and cash out so you can see where cash is moving through the organization.
- Budget: A budget is simply your estimated income vs expenses over a certain time period — typically a year. Organizations use budgets to try and stay on track with revenue goals and keep expenses in check. You will typically see budget vs actual reports that show your current progress. You can also compare your current budget to prior budgets to help with future planning.
- Tax Returns: If you’re a non-profit you will become very familiar with the IRS Form 990. This is a non-profit’s annual tax filing. It’s required to be made public. For other organizations this may be some version of the Form 1120 or the form specific to your organization type. You will also have state and possibly local tax returns to consider as well.
These statements all become part of the official record for your organization. Some may be filed with local, state, or federal tax agencies, and some may be required to be made public (if you’re a non-profit, for example).
It’s important to keep and maintain your organizational records so they are readily accessible. Some records will be kept indefinitely like bylaws and your articles of incorporation. Some records like financial statements and employment records may only need to be kept for a certain number of years. It make sense to always err on the side of caution and keep records longer than you might need.
Records you will want to keep on file and readily accessible to your board include:
- Bylaws & Articles of Incorporation
- Meeting Agendas
- Meeting Minutes
- Voting Records
- Financial Statements / Audits
- List of Members / Shareholders
- Tax Filings and Records
- Employment Records
There are a lot of guidelines for record retention you can look to follow. Look to your federal, state and/or local law for specific record-keeping rules that may apply to you. Most importantly, you want to ensure your records are readily available to your board and any other parties that need access. For example, your board should be able to quickly review past meeting minutes to recount previous discussions. If you’re a non-profit or association, you may be required to have many of these records available for inspection at any time.
Boards generally start off with no term limits and just keep their directors on until they either leave voluntarily or term limits are put in place. You will probably update your bylaws to provide for some kind of term limits once you become more established. You may want to stagger term limits when you first implement them so the member turnover isn’t all at once. For example, you might start by implementing term limits over a couple of years with a combination of two and three-year terms. This allows you to retain members critical to the beginning of the organization and pass along their knowledge and experience to newer members over the next few years.
You have the flexibility to setup term limits however you’d like in your bylaws. You may choose to allow members to stay on for multiple terms, or you may limit them to one or two terms. Your board can find the common ground that makes the most sense for the size of your board and how often — or not — they’d like to handle the turnover process.
Handling Turnover & New Board Members
Eventually you will have a Board member resign or “term out” (the natural expiration of their term on the board). It’s important to plan ahead so you can move forward with minimal impact to your board and organization. If you already have term limits in place you can plan for their succession. If you know a member is going to be leaving in a year, you may have conversations with them months in advance about who should take their place on the board. Or, you may want to introduce completely new and independent directors. The choice is up you and your board of directors.
The biggest risk with board member turnover is losing what’s often referred to as “institutional knowledge.” When you’ve had a member on for a while they are typically privy to a lot of the discussions and policies made at the board level. Those members also probably helped craft the mission and vision for the entire organization. Creating opportunities for new members to connect with and overlap existing board members can help capture that knowledge and experience.
Whether you’re starting a board of directors or joining one for the first time, we hope this guide will help you hit the ground running. As you have seen, there are a lot of things to keep in mind when working with a board of directors. Thankfully, there are a lot of great guides and tools available to help you along the way. If there’s anything we can do to help you along your journey please reach out below in the comments or email us. Thanks for taking the time to read and we look forward to your feedback.