A few years back I made a post addressing the assumption that ex officio positions on a board of directors were automatically non-voting. Spoilers: That is not the case.
Apropos to that, I recently became aware of a 2009 law in California that prohibits non-profit organizations from having non-voting directors. I wasn’t aware that such restrictions existed anywhere so check the laws in your state.
Thus, a nonprofit corporation may not have non-voting members on its board of directors. One of the rationales for this change was to clarify the use of ambiguous titles that include the word “director.” The word “director” has a specific legal definition with associated rights and obligations. Knowing which persons are directors and the total number of directors is also relevant in dealing with a number of critical issues ranging from quorum requirements for a board meeting to the limit on interested persons who may serve on the board. A corporation that wishes to involve non-directors in its board meetings may treat these individuals as guests or appoint them to a separate advisory committee.
On first blush, this may seem like a superficial change. If you can’t call them director, you call them something else, right? As I read both the advisory and text of the law, if someone has the rights and responsibilities of a director, even if they are not called that, but no vote, (i.e. director emeritus, ex officio appointment, honorary director), they either need to be given the right to vote or be stripped of the rights, responsibilities, and title of director.
This rule not only applies to board meetings, but also committee meeting as well. No committee exercising board authority can be comprised of non-voting members either.
This law also impacts who has the right to be present and attend meetings. Many non-profit organizations have their by-laws written so that the executive officer of the organization (i.e. CEO, President, Executive Director) is part of the board and executive committee, but is not allowed a vote. It often isn’t deemed appropriate for the executive to have a vote in board actions related to evaluations, salaries and disciplinary action related to the executive.
The advisory from the Public Counsel Law Center to which I link, has the following advice about how to include the executive in a manner that has a little more status than simply “guest.” Though in the meeting minutes, they would still have to be listed separately from the directors in attendance, whether as a “guest” or “also in attendance.”
For example, a corporation may include in its bylaws a provision that the chief executive is required and has the right to attend every board meeting, unless specifically excused by the board. Such a person would be able to express opinions about matters up for discussion, present reports and be involved in the logistics of organizing board meetings, such as notification and setting the agenda.
Right from the outset, the Public Counsel Law Center advisory makes it clear they are not providing legal advice. Obviously, I am not qualified to provide legal advice either.
It strikes me that some tense situations might arise from if “right to attend, unless excused” language in by-laws was exercised to exclude executive officers or non-voting representatives of the city which owns the building.
The rationale laid out for the requirement that all those classified as director have voting rights makes sense in terms of clarifying who does and does not have decision making authority and concomitant responsibilities for the organization. However, it does require explicitly identifying in the bylaws which other people are required and/or have the right to participate in meetings which other people might be excluded by custom or decision. It is worthwhile to check if the non-profit laws in your state make a distinction similar to the one in California.