Board bylaws and board policies are both essential elements of governing nonprofit organizations, but they serve different purposes and have distinct characteristics. Understanding the difference between these two governance tools is crucial for nonprofit boards to effectively operate and make informed decisions.
Bylaws are legally binding rules that outline how a nonprofit board will operate. They provide a framework for the board’s actions and decisions, aiming to prevent conflicts and disagreements while ensuring that the organization operates within established boundaries. Bylaws typically have a consistent structure across nonprofit organizations, although they are tailored to the specific needs and circumstances of each organization. The creation of bylaws occurs when the organization is established, and they are reviewed periodically to ensure relevance and compliance with legal requirements.
Why Your Board Needs Both Bylaws and Board Policies
The primary function of bylaws is to establish the fundamental governance structure of the organization. They cover important aspects such as the organization’s name and location, statement of purpose, election and roles of board members and officers, membership issues, meeting guidelines, board structure, compensation and indemnification of board members, the role of the chief executive, amendment procedures, and dissolution of the organization.
On the other hand, board policies are documents that provide specific guidelines and procedures for the day-to-day workings of the board. Unlike bylaws, which have a more permanent nature and are less frequently amended, board policies can be adjusted and updated more readily to adapt to changing circumstances. Policies address various areas of organizational oversight, such as financial, human resources, risk management, fundraising, program implementation, and ethical conduct. They provide detailed instructions on how the organization should conduct its activities and ensure consistency in board governance.
Board policies are typically developed and approved by the board of directors or designated committees. They are intended to support the implementation of the organization’s mission and strategic goals, while also ensuring compliance with legal and regulatory requirements. Board policies provide clear guidance to staff, volunteers, and stakeholders, helping them understand the organization’s expectations. They also contribute to risk mitigation and organizational transparency by establishing protocols for handling sensitive issues and decision-making processes.
Bylaws and board policies can be similar and still both necessary. Here are some examples:
Bylaw Example: Conflict of Interest Bylaw: The organization shall adopt a Conflict of Interest policy to ensure that board members, officers, and employees act in the best interests of the organization and avoid conflicts that could compromise their judgment or objectivity. The Conflict of Interest policy shall outline the disclosure procedures, restrictions, and steps to be taken in the event of a conflict of interest.
Policy Example: Conflict of Interest Policy: The Conflict of Interest policy establishes guidelines for identifying, disclosing, and managing conflicts of interest within the organization. All board members, officers, and employees are required to complete an annual Conflict of Interest disclosure form, disclosing any actual or potential conflicts of interest they may have with the organization. The policy outlines the procedures for reviewing and addressing conflicts, including recusal from decision-making processes, establishment of independent committees, and documentation of actions taken to mitigate conflicts.
Bylaw Example: Financial Management Bylaw: The organization shall maintain a Financial Oversight policy to ensure responsible fiscal management, transparency, and accountability. The Financial Management policy shall include guidelines for budgeting, financial reporting, internal controls, cash management, and financial oversight by the board of directors.
Policy Example: Financial Reserves Policy: The Financial Reserves policy establishes guidelines for the organization’s reserve funds. It outlines the target level of reserves to be maintained, the purpose of the reserves, and the conditions under which reserves may be used. The policy also defines the process for monitoring and reporting on reserve levels, as well as the authority and responsibilities of the board and management in managing the reserves.
Bylaw Example: Board Member Attendance Bylaw: The organization shall have a Board Member Attendance policy to ensure active participation and commitment from board members. The policy shall specify the minimum attendance requirements for board meetings, procedures for notifying absences, and the process for addressing repeated or excessive absences.
Policy Example: Meeting Conduct Policy: The Meeting Conduct policy establishes guidelines for board meetings to ensure productive and efficient deliberations. It outlines expectations for punctuality, preparedness, respectful communication, and adherence to the agenda. The policy also covers procedures for requesting agenda items, distributing meeting materials in advance, and documenting meeting minutes.
While bylaws are binding and must be followed, policies are more flexible and subject to regular review and update. Boards may have numerous policies covering various aspects of their operations, reflecting the complexity and diversity of their activities. Policies can be amended as needed to adapt to new laws, regulations, or internal changes within the organization. They are practical tools that facilitate effective management and ensure consistency in decision-making across different areas of the organization’s work.