What guidance do you have on the appropriate boundary between bylaws and board-adopted policies? Are there policies that should never be referenced or embedded in bylaws? —From our Webinar.
Bylaws are the “Constitution” and rules of governance for a nonprofit corporation. They cover issues like the rights of membership (if there are members), the role, number, method of selection and removal of the directors, the selection and duties of officers and committees, rights of indemnification, and procedures for amendment. They make choices in the rules of governance set out in the state nonprofit corporation law and establish, in about 10 pages (more or less), the power relationships and the way the organization will be governed.
Policies are the rules the organization adopts for its every-day operations. The Standards for Excellence program promulgated by Maryland Nonprofits and replicated by several state organizations, including the Pennsylvania Association of Nonprofit Organizations (“PANO”) with which we just completed a Webinar on the Top Ten Critical Polices, sets forth 55 specific standards for ethical and accountable operations. They cover issues of mission, governance, conflict of interest, human resources, financial management, and public awareness. The Standards provide template policies to implement those Standards. The policies can all be tailored separately to reflect the needs and desires of each adopting organization. On paper, they comprise a substantial book.
We don’t include any of these policies in our form of bylaws. (See Ready Reference Page: “Bylaws Function As ‘Constitution’ of Nonprofit Corporations”). Like a Constitution, bylaws should be relatively more difficult to amend than operational policies that can change quickly as facts change on the ground. It would be very tedious to have to amend bylaws to keep up with every change, addition or deletion among operational policies. And most of them are irrelevant to the mode of governance spelled out in the bylaws.
We include a provision in our bylaw template that a nonprofit corporation must adopt policies on conflict of interest, whistleblower protection, and document retention and destruction because those are the three policies the Internal Revenue Service specifically asks about on the full Form 990 tax information return. Although not generally required by law, the IRS and the public recognize that they are important for good governance. While we wouldn’t need to include reference to them in the bylaws, we do so to remind the organization that others are watching.
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