Who’s in Charge Here?
Most Non-profit corporations, including homeowner associations, have a volunteer, part-time executive board, with a full-time professional manager, management company, or executive director. The relationship between these two parties can get tumultuous. After a large turnover in board membership, the new board members may see the professional manager as a holdover and supporter of the old regime. Conversely, a long time manager may become so invested in an organization, they dismiss new board members as temporary and amateur dabblers in the business of the organization. For a smooth running non-profit organization, it is important that the professional manager and the volunteer board understand their respective duties and responsibilities.
The board of directors of a non-profit corporation has a duty to discharge its duties in good faith, with the care of a reasonably prudent person, and in a manner he reasonably believes is in the best interest of the corporation. A board for a non-profit organization owes its duties to the corporation’s mission goals. A board for a homeowner’s association owes duties to the planned community and the owners. The purpose and goals of the corporation are usually contained in its bylaws or articles of incorporation.
A board of a non-profit is not expected to operate the non-profit’s day-to-day operations. Those tasks are delegated to the executive director, staff, and/or management companies. The board is responsible for overseeing those persons and their activities.
The following major duties are suggested for a non-profit board.
1. Provide continuity for the organization by setting up a corporation or legal existence; to represent and advocate to the public and its members the organization's goals and point of view through its products and services.
2. Select and appoint a chief executive to whom responsibility for the administration of the organization is delegated. This chief executive could be the president or another officer on the board, but usually would be the professional executive director or managers. In determining and appointing and managing such an individual, the board should do the following:
Specify a job description for that chief executive which could include his executive relations with the board, leadership in the organization, in product/service/program planning and implementation, and in management of the organization and its personnel.
Review and evaluate the chief executive’s performance regularly on the basis of that specific job description.
Offer administrative guidance and determine whether to retain or dismiss the executive.
3. Govern the organization by broad policies and objectives, formulated with the assistance and agreement of the chief executive and employees, including assigning priorities and ensure the organization's capacity to carry out products/services/programs by continually reviewing its work.
4. Acquire sufficient resources for the organization's operations and to finance the products/services/programs adequately.
5. Account to the public and/or its members for the products and services of the organization and expenditures of its funds, including:
Providing for fiscal accountability, approving the budget, and formulating policies related to contracts from public or private resources.
Accepting responsibility for all conditions and policies attached to new, innovative, or experimental products/services/programs.
The president of the board of a non-profit has the same duties of good faith and reasonableness as a board member. The statutes do not set forth specific duties of the chairman or officers but allow the corporation to set the duties of the chairman and other officers in its bylaws. Typically the president has the duties of a chairperson as set forth in a standard manual of parliamentary procedure (such as Robert’s Rules of Order) and presides over the annual, executive, and special meetings of the organization. The president and other officers will represent the organization to the public. In many cases, the president has additional administrative functions, which are set forth in the corporation’s bylaws. In the rare cases where there is no professional executive director or management company, the president may take on a larger number of management functions.
Even where the bylaws of the organization do not refer to an executive director or other staff position, the board generally has the power to hire and contract with employees and independent contractors and to define their duties. The board of directors and officers are also allowed to reasonably rely on the expertise and competency of those individuals.
Robert’s Rules of Order describes an executive director as a salaried individual who devotes full time to the position of administrative officer and general manager of the organization, usually under a contract of employment. He is responsible for seeing the board’s instructions are carried out; recommend plans of work; conduct the day-to-day business of the organization; and hires, fines and determines salary of other staff members. Robert’s notes that in many organizations, the professional executive director provides all the management functions that would otherwise be exercised by the president, leaving the president with the duties to preside over meetings and act as a spokesperson for the organization. The executive director takes orders and direction from the board, and not from the president or another officer independently. As typically the professional executive director is operating under a contract, specific tasks and duties that he is to perform are contained in that contract. Generally those tasks and duties are in line with the executive director providing day to day management of the organization and carrying out the goals and policies as set by the board.
In general, the standard business practice of a non-profit corporation, including homeowner associations, provides for an executive board that formulates policy and direction and oversees the professional executive director or manager as he conducts the day-to-day affairs of the corporation and carries out the policies established by the board.
–Bradley A. Coxe is a practicing attorney in Wilmington, NC with Hodges & Coxe PC who specializes in Personal Injury, Medical Malpractice, Homeowner's Associations, Contract and Real Estate disputes and all forms of Civil Litigation. Please contact him at (910) 772-1678.