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For board resources check out our Board Toolkit.
- What does a Board do?
- Why do I need a Board?
- What are the responsibilities of a Board?
- Can staff serve on the Board?
- What are, and how do I deal with, conflicts of interest?
- Can we hold Board meetings (and vote) via phone or e-mail?
- Can children serve on our Board?
- Does the Open Meeting Law apply to Board meetings?
- What do I need to know about Board meetings?
The Board of Directors is the group charged with governing your nonprofit corporation. Those who serve on the Board are called directors or board members. Among other things, the Board:
- Meets regularly and follows an agenda at the meetings
- Authorizes all bank accounts, all borrowing of money, and all major contracts
- Has the bylaws available, abides by them, and reviews them annually
- Approves an annual budget and makes specific plans to generate sufficient income to meet or exceed expenses
- Has established a fiscal year and is certain that the necessary tax returns for the organization are filed on time
- Sets policy for the organization and ensures compliance with laws
- Ensures board policies are fair to all board members
- Has established its standing committees and has a clear understanding of committee responsibilities and authority
- Holds effective meetings so that members can use their time well
All corporations are governed by a Board of Directors. ORS 65 requires that public benefit nonprofit corporations in Oregon have a Board of at least three members.
The Oregon Department of Justice (DOJ) outlines the duties and responsibilities of the Board in its pamphlet: A Guide to Nonprofit Board Service in Oregon.
Although staff members sometimes serve on the Board, it is most common for them to attend board meetings when their input is needed on an issue, but to not be actual voting members of the Board. If you do choose to have staff on the Board there are two areas of concern:
- Conflict of interest. Whenever the Board is considering an issue from which the staff board member stands to benefit, the staff board member must declare a conflict of interest and not participate in the decision.
- Funders may find it disturbing if the Board is composed primarily of staff members
You may want to read this interesting article: Should CEOs be on the Board?
For most nonprofits, public perception of conflict of interest is a greater threat than actually running afoul with the law. Compensation to board members for services or goods they provide to the nonprofits they govern may comply with the legal conflict of interest rules but may still fail the “sniff test” of public perception. Oregon law requires board members to declare any potential or real conflict of interest they may have. The law focuses on transactions where a board member could personally gain financially. Once a conflict is declared, the law permits them to participate in the discussion and even vote on the transaction. However, many nonprofits bylaws go beyond this approach and require board members to excuse themselves from both discussing and voting on the matter of conflict. Examples of conflicts of interest are:
- A founding board member of a nonprofit leases the use of his facilities to the nonprofit
- A board member of nonprofit A, who is also program manager for nonprofit B, participates in a Board discussion of A’s strategy for responding to a County Request for Proposals. Nonprofit B submits a competing application.
- A board member resigns in order to apply for a new staff position after substantial Board discussion about the new position’s qualifications
- A board member resigns to apply for the ED position after the Board decided to fire the ED
In the first example above, the board member wishing to lease his facility has a clear conflict of interest: he stands to gain income. Even if the board member/facility owner declares his conflict of interest and removes himself from the discussion and vote, fellow board members should be cautious when considering the lease proposal. They are treading close to the IRS issue of private inurement—the possibility that a charitable organization might use its resources to benefit a private individual. Board members should make certain that the proposed lease terms are in the best interest of the nonprofit and do not offer undue benefit to the landlord. They may want to obtain a professional evaluation to be certain that the lease and amount are typical and fair to the nonprofit. While most conflicts of interest that come up do not involve direct personal financial gain, Oregon law also requires that board members observe the duty of loyalty—putting the interest of the nonprofit they serve above all other interests. In the second example above, any disclosure of information that might help Nonprofit B compete for funds could well compromise the board member’s duty of loyalty as a board member of Nonprofit A. The board member resigning to apply for a staff position poses primarily a “sniff test” issue—will the public or other staff believe that a fair judgment can be made when a candidate may well return to the Board if she or he is not hired? Issues of the candidate’s friendships with board members and access to information could also be potential “hot” items. So how will your Board steer clear of the conflict of interest realities or perceptions? One important step would be a board agreement to “when in doubt, call it out," inviting every board member to discuss their concerns about conflicts with the Board Chair or the full Board. A second important step would be adoption of and adherence to a conflict of interest policy. Here's an article about conflict of interest policies and a sample policy from Compass Point’s Board Cafe.
Although current law in Oregon allows you to hold a board meeting using “virtual” means such as teleconference, videoconference, or Internet chat rooms, whether these methods are good in practice remains questionable. For a quick information pamphlet about virtual meetings in Oregon, click here. BoardSource has published many interesting articles about the benefit and challenges of virtual attendance to board meetings (video or teleconference) and about the perils of “cyber-governance.” (Access to articles may require subscription.)
Many organizations, especially those which serve youth, are often interested in including young people in the decision-making process. If you do decide to have youth on your Board, you might consider the following suggestions:
- Be sure to provide an adequate orientation to new youth members
- Pair youth members with adult mentors who can help them understand how to be productive participants and who can be resources when they have questions they’re embarrassed to ask at a meeting
- Remember that minors cannot sign legal documents or be solely responsible for financial/legal matters
A good resource on this topic is Youth on Board.
Open Meeting Laws normally do not apply to nonprofit organizations. According to the Oregon Nonprofit Corporation Handbook, “the Open Meeting Law requires that all meetings of governing bodies of a public body shall be open to the public with certain exceptions” (p.731). The DOJ interprets the definition of a public body to require that "the body be created by or pursuant to the state constitution, a statute, administrative rule, order, intergovernmental agreement, bylaw or other official act." Most nonprofit organizations are not considered public bodies and therefore, are not subject to the law. According to the DOJ, a nonprofit organization is not subject to the Open Meeting Law even if it receives public funds, contracts with governmental bodies or performs public services. If the law does not apply to your nonprofit organization, your bylaws will determine whether the public or staff members can attend your meetings and under what circumstances. On the other hand, if your nonprofit exercises sufficient governmental functions, the Open Meeting Law may apply to you. The DOJ describes when a nonprofit organization might be considered a public body here. If you believe your organization may be a public body, you should consult an attorney for a professional opinion. Here is a simplified Guide to Bodies Subject to Public Meeting Law. Every two years, the DOJ also publishes a manual explaining the Open Meeting and Open Records laws. The full manual can be found here.
How often do we need to meet? According to the Oregon Nonprofit Corporation Handbook, “your Board is required to meet as often as necessary in order to run your corporation” (p. 285). Generally, a nonprofit corporation should meet at least once annually. Some of the factors that may influence the frequency of board meetings are:
- The amount of activity in the organization
- The age of the organization
- The location of board members
Regardless of how frequently your Board meets, it is very important to keep board members well informed and to provide them with adequate opportunities to learn about current issues, ask questions and make good decisions. Download the DOJ's Guide to Nonprofit Board Service in Oregon here.
Do we need to keep meeting minutes?
According to Oregon Law, “A corporation shall keep as permanent records minutes of all meetings of its members and Board of Directors, a record of all corporate action taken by the members or directors without a meeting, and a record of all actions taken by committees of the Board of Directors in place of the Board of Directors on behalf of the corporation.” ORS 65.771. At a minimum, your minutes must should reflect the date, time and place of the meeting the notice given, if any; what directors (and others) were present and whether this made a quorum; what items were submitted for a vote; and who voted for, against, or abstained. Minutes should also include references to any item that the Board should be doing to fulfill its legal obligation to oversee the corporation.
What records do we keep?
In addition to meeting minutes, ORS 65.771 requires the organization to keep other records. Please refer to the statute for more information.
What are quorum requirements?
A quorum is the minimum number of board members required at a meeting for the meeting to be validly held. Although you may set your own quorum requirements in your Bylaws, Oregon law does require that the quorum be at least one-third of the number of board members. Contrary to myth, the only action a board can make without a quorum is to adjourn the meeting for another time.
What are voting requirements?
When voting, the law requires that a majority of present members’ votes be obtained in order to pass a motion or resolution. So for example, if enough board members are present to have a quorum, the majority of those members present (not all members) must vote affirmatively on an issue for the issue to be adopted. Your Bylaws may require a greater number of votes, but not fewer. Voting by ballot is not allowed outside of a meeting. Neither is telephone polling where a director calls other directors individually to obtain their votes. Voting via conference call—where all members are present and in communication at the same time—is allowed.
What is voting by proxy?
Proxy voting occurs when someone with the right to vote cannot attend a meeting and wants to give someone else the authority to vote in their place. Although members of a nonprofit can vote by proxy, Oregon law has no provisions that would allow directors to do so.
When should we hold an executive session?
Executive sessions can be held at the beginning or end of a regular board meeting and can be held whenever the board feels it is necessary. Boards commonly call executive sessions to indicate that they will close an otherwise open meeting to discuss confidential matters. BoardSource’s publication, Executive Sessions: How to Use Them Regularly and Wisely, provides helpful information about how to conduct executive sessions. If the Open Meetings Law applies to your organization, you must abide by the state laws that govern executive sessions. You can find the DOJ's discussion re Executive Sessions here.
For more information on Open Meeting Laws, please refer to Question 8 above.