Monday, November 21, 2011

The Importance of By-Laws to Resolve Governance Battles

Non-profit organizations need to have a clear governance structure. One reason is that it is not uncommon for the members, officers and/or directors of non-profit organizations to engage in power struggles, particularly if the organization has grown from a small, cohesive group to a larger, loosely organized membership. In some cases, a single member or a small group of members who disagree with the organization’s current management or general objectives can create a significant rift in the organization by publicly denouncing the current administration (or worse, purporting to assert control over the organization). As in any organization, a certain amount of turnover and change can be very positive, but a power struggle may destroy the organization itself. In order to minimize governance battles, the organization’s governing documents need to be strong enough to prevent dissention amongst the members, officers or directors from crippling the organization’s stated purpose (and perhaps, its existence).

The best way to proactively eliminate the risk of organizational anarchy is for the organization to adopt clear, coherent and thorough by-laws. In our experience, many non-profit organizations fail to adopt by-laws with mechanisms designed to provide clear power demarcations and methods for resolution of control issues. In addition, many organizations are using outdated by-laws which were not written for the organization as it is currently structured and operated, or for the technological age, when e-mails and social media can improve communication but can also facilitate membership dissention on a very public platform.

At a minimum, the by-laws of every non-profit organization should clearly set out the following:

1. The different classes of membership;
2. The rights and limitations which attach to each class of membership;
3. The individuals eligible to be members of each class of membership;
4. The procedure for applying for membership;
5. The procedure for admitting members;
6. The date, time and place of meetings of the membership;
7. The procedure for submitting issues to a vote of the membership;
8. The minimum votes required for the organization to take action;
9. The number of directors and officers;
10. The individuals eligible to be elected as officers and directors;
11. The procedure for nominating individuals for office or directorship;
12. The procedure for electing officers and directors (time, place, manner of voting, proxies, quorum requirements, etc.);
13. The terms of office for officers/directors and eligibility for re-election;
14. The procedure for expelling and replacing officers and directors; and
15. The procedures for amending the by-laws.

The by-laws need to be more comprehensive than our brief outline above. However, if the above-stated items are clearly set out in the by-laws, such that there can be no disagreement about how natural shifts in power must occur, then the organization should be able to control the damage that can result from membership discord. Also, the bylaws should not be a static document, and should be subject to adaptation as the organization evolves.

The attorneys at Gross & Romanick have substantial experience drafting by-laws for non-profit organizations. Whether the organization has recently formed or has been in existence for many years, we can carefully construct by-laws to suit the goals of its members, taking into account the unique aspects of the organization. Call us today to schedule a consultation: 703-273-1400.