Spokes | Resources for Nonprofits

Find Us On Social Media:

Do we have to follow Robert’s Rules?

by

If your organization’s bylaws say your meetings will follow Robert’s Rules of Order, then yes, you do have to follow them—but do you follow them? Robert’s Rules are complex! It is very difficult to follow them to the letter unless you have a dedicated parliamentarian available. I’ve been on quite a few boards and none of them truly followed Robert’s Rules.

Robert’s Rules provide a method for making group decisions, but there are alternatives that may better serve your board of directors. Here are some examples.

Consensus Decision-Making: This approach involves discussion until all participants can agree on a single course of action. It emphasizes cooperation and collaboration, seeking to address concerns and find solutions that everyone can support.

Consent Decision-Making: This approach involves seeking consent from all members for a proposed course of action. Instead of requiring full agreement, consent decision-making aims to ensure that no member has strong objections to the proposed action.

Democratic Voting: Similar to Robert’s Rules, democratic voting involves members casting votes for different options, and the option with the majority of votes wins. However, the rules and procedures may be simplified compared to Robert’s Rules.

Each of these methods has advantages and disadvantages. I encourage you to check out thedecider.app. It’s a cool tool to help you choose a decision-making model that suits the decision your group needs to make.

And don’t forget! If you decide to adopt a different method, don’t forget to revise your bylaws accordingly.

Annual Meetings

by

As a self-perpetuating board with no voting members, must we hold an annual meeting?

To answer that question, first be sure to see what your bylaws say. Bylaws typically have provisions about meetings. If your bylaws call for an annual meeting, you have your answer.

The exact phrase “annual meeting” does not appear in the California Corporation Code for public benefit corporations. However, there is a specific, relevant requirement in Section 5510: “A regular meeting of members shall be held on a date, time, and with the frequency stated in or fixed in accordance with the bylaws, but in any event in each year in which directors are to be elected at that meeting for the purpose of conducting such election, and to transact any other proper business which may be brought before the meeting.” CA Corp Code 5510

If a board meets regularly, you could simply designate one of those meetings as your annual meeting. Unless your bylaws say otherwise, It does not need to be a separate meeting in addition to your regular meeting schedule.

That said, why not have an annual meeting? It can serve a number of useful purposes! Check out:

Requirements for Nonprofit Annual Meetings | Nolo

How to Plan an Effective Annual Meeting for Your Non-Profit

Investing your reserve funds

by

Our board is looking to know legalities a nonprofit board should be aware of in deciding how to handle or invest a financial reserve.

When one of our nonprofits approached Spokes for help with that topic, our first reply was, “We are not attorneys, tax experts, or financial advisors.” That said, we can offer practical suggestions based on our experience with the many nonprofits we serve.

The most important thing to keep in mind is the board’s fiduciary responsibility to the organization. As part of that responsibility it must act with prudence and with the organization’s best interests in mind.

California has adopted the Uniform Prudent Management of Institutional Funds Act (UPMIFA), which provides guidelines for the investment and management of nonprofit institutional funds. It includes eight factors to consider:

  • General economic conditions.
  • The possible effect of inflation or deflation.
  • The expected tax consequences, if any, of investment decisions or strategies.
  • The role that each investment or course of action plays within the overall investment portfolio of the fund.
  • The expected total return from income and the appreciation of investments.
  • Other resources of the institution.
  • The needs of the institution and the fund to make distributions and to preserve capital.
  • An asset’s special relationship or special value, if any, to the charitable purposes of the institution.

In San Luis Obispo County, some of our smaller nonprofits with surplus funds have placed them in FDIC-insured certificates of deposit with varying terms to ensure that funds are available when needed. Nonprofits with greater reserves will want to adopt a sound investment policy in line with UPMIFA.

Learn more about UPMIFA.

Can the Executive Committee determine the ED’s pay?

by

Our bylaws state that the Executive Committee has full authority/responsibility to review the CEO’s performance and to set compensation, and that the Board “shall be informed” of the Committee’s decision. Is this OK?

Technically, the answer is yes—assuming that all members of the Executive Committee are, in fact, directors. Even so, the board as a whole still has responsibility for the process and outcome.

That said, it’s generally recommended to have a transparent and fair process for determining the executive director’s salary. While the executive committee certainly may play a role in salary discussions, it’s often advisable to establish a compensation committee or involve the full board in the decision-making process.

Having a broader group involved can bring diverse perspectives and ensure a more objective approach to determining the executive director’s salary. This approach is in line with principles of good governance, accountability, and transparency, which are important for the credibility and effectiveness of nonprofit organizations.

Two things to keep in mind:

  • Although the IRS does not provide specific dollar amounts or an acceptable range of compensation levels, they stipulate that compensation must be reasonable and not excessive.“Reasonable” is defined as the value that would ordinarily be paid for like services by like enterprises under like circumstances.
  • Nonprofits filing IRS Form 990 must describe the process they use to approve executive compensation as part of the nonprofit’s responses on the annual return, IRS Form 990, Part VI, Section B, line 15.

Worker Self-Directed Nonprofits

by

Someone recently contacted Spokes to say, “I’m thinking of starting a worker self-directed nonprofit. Can Spokes help me?”

A worker self-directed nonprofit? I’d never heard the term. I know about public benefit nonprofits, mutual benefit nonprofits, and benefit corporations, but this inquiry required some research!

The Sustainable Economies Law Center describes a self-directed nonprofit as a sort of cross between a worker cooperative and a 501(c)3 nonprofit. Specifically, it defines a worker self-directed nonprofit as,

a nonprofit organization in which all workers have the power to influence the programs in which they work, the conditions of their workplace, their own career paths, and the direction of the organization as a whole.

In general, a worker cooperative is “democratically managed business that is owned and controlled by the workers.” California corporation code has specific provisions for the formation of a for-profit worker cooperative. California code also has specific, separate provisions for incorporating as a nonprofit. As far as I have learned, California code does not include explicit provisions for something called a worker self-directed nonprofit.

I have lots more to learn on this subject, but it’s intriguing to think about how one might structure a nonprofit within California’s current code that might mimic or embody key features of a worker cooperative such as election of the board of directors. More to come on this topic, but in the meantime, check out these resources:

Guiding nonprofits to achieve their goals through support and expert resources.

How Can We Make A Difference Together?

Spokes welcomes local professionals who would like to share their expertise in support of the nonprofit sector.

Get Started Contributing

Recent Articles