I sit on the board of an organization that is greatly intertwined with a major funder. The board members of the major funder are also the only members of my organization. Their part-time executive director also serves as our part-time executive director, funded by them. They have now told us to make specific changes to our bylaws. Do they have that right? How should we decide what to do?

There are probably many important details I do not know in this tangled situation, but I will try to help you sort it out.

First, legally and morally, your board of directors must make its decisions in the best interests of its community and organization. Try to figure out those best interests before looking ahead to whether your decision will be supported. I’ll come back to this.

You may need legal advice to clarify the situation, and you certainly need to read your bylaws very carefully. Are you saying you, as a director, are not a member of your own organization? It is legally possible but not common. This matters, as any bylaw change must come to the members for approval and you need to be sure who can vote.

Some organizations are set up to serve one other. Often a foundation does this, as a fundraising arm for a hospital, for example. They have no other purpose, so the parent organization is their community. That operational parent agency serves the broader community. Often, such parent organizations want to maintain control to make sure the foundation raises monies based on the strategic priorities of the parent organization. However, the foundation board still has the legal authority, and the legal duty of care, to decide how to carry out its mandate. A wise parent organization might give bylaw advice rather than an order, especially when it knows it has the approval authority at the members’ meeting anyway.

If your major funder did not establish your organization and set your mandate, then this membership arrangement seems very odd. Funders do not normally need or seek that level of control. Many now will not even take one board seat, and many organizations will not make a board seat available to a funder, no matter how major. A board’s role is governance. It is problematic to have someone on the board who mistakenly thinks they represent another organization, and is there to protect an investment rather than to govern.

Regardless of why or how the organization got to this stage, we can only look ahead. What is the best future structure to achieve what the community needs? If you already have a current strategic plan, that will provide a good starting point. If your vision of the future community, and your role in achieving it (mission) are missing, outdated or unclear, start there. Involve the full board at minimum, and use an external governance consultant as a facilitator if possible. Do not use anyone with divided loyalties to facilitate.

Once that is in hand, continue the discussion but focus now on what structure would best achieve that Vision and Mission. Consider doing a full governance review, again preferably with a third party reviewer, to help you identify and consider your options. At least set up a Governance Task Force, or assign the review or oversight of the review to your existing Governance Committee. Include the changes proposed by the other organization in the options being considered. Make the best choices you can and determine what that would mean in terms of bylaw changes, then compare them overall to what the other organization directed.

Are they similar and easily reconciled for bylaw purposes? Similar with a few significant differences? Far apart?

From there, craft your message back to the other organization explaining why you think your group has determined the right structure for the future, and why their suggestions were less suitable if that is the case. Seek to have an open dialogue and try to reach agreement. Again, an external facilitator might be valuable if the differences are large.

You have some power here — bylaw changes do not normally go to a members’ meeting for approval until they are recommended by the board. However, check your bylaws and governing statute. Your members probably have the right to call a special meeting for this purpose. Again, you may need to clarify this with your lawyer.

You posed a supplementary question of whether the mutual executive director should be part of bylaw discussions at either or both organizations. I do not know the personalities involved, but generally I would say yes. A major part of an executive director’s role is to give strategic advice to their board, or boards in this case. This is certainly a strategic issue and the views of a senior nonprofit professional with day to day knowledge of the organization would be well worth including. Naturally, you would listen with the understanding that he or she must take extra care to give neutral advice, and may have some self-interest in the outcome.

However, giving advice is different from decision-making power. I suggest having the ED present but without a vote. Then you not only hear the ED’s advice, but also have the ED able to communicate back to each organization about the process. Having each side know that the other is operating fairly and transparently, and making a sincere effort to do what is right for the community, makes it easier to consider different solutions and come up with the best overall approach.

If part of what they propose or you develop would significantly change the authority, responsibilities or compensation of the Executive Director, a discussion of that item should happen In Camera, with no staff present and separate minutes taken.

I hope the situation is resolved amicably and in a way that is positive for your community as well as your organization.

Since 1992, Jane Garthson has dedicated her consulting and training business to creating better futures for our communities and organizations through values-based leadership. She is a respected international voice on governance, strategic thinking and ethics. Jane can be reached at jane@garthsonleadership.ca.

To submit a dilemma for a future column, or to comment on a previous one, please contact editor@charityvillage.com. For paid professional advice about an urgent or complex situation, contact Jane directly.

Disclaimer: This article is for information purposes only. It is not intended to be legal advice. You should not act or abstain from acting based upon such information without first consulting a legal professional.

Please note: While we ensure that all links and e-mail addresses are accurate at their publishing date, the quick-changing nature of the web means that some links to other web sites and e-mail addresses may no longer be accurate.