The New Year is a time for resolutions. Sometimes it helps us to get on with life if we "clean up" a task that we have been putting off. Cleaning up bylaws is one of those tasks about which many boards are prone to procrastination. Yet, it is often unwieldy bylaws that give rise to board practices that are incompatible with effective governance.
When a board implements Policy Governance®, Bylaw revisions are generally needed, in order to create consistency between the Bylaws and the principles of Policy Governance, or at very least, to optimize the flexibility allowed to the board in designing its own process.
Bylaws set out the way in which the real people that constitute the "artificial person" or "corporation" can "speak." They set out the conditions under which the board can be considered to have spoken. They must be consistent with the requirements of Articles of Incorporation, Letters Patent, or other legislation that provides authority for the organization's existence.
Since bylaws are more difficult to amend than policies, they are best kept brief and to the point, so that they act as an "enabling" document for the board. In organizations made up of members, Bylaws also provide a means for the members to limit the authority of the board. However, too many limits can hamstring the board, preventing it from governing effectively, just as too many limits from the board can negatively affect the CEO's ability to achieve Ends.
Typically, bylaws in most organizations contain more detail than is necessary. While there is no one "right way" to create bylaws, here are some general tips.
If in doubt, leave it out …
In general, bylaws should be kept lean. Given a choice, put details in policies rather than bylaws.
If you aren't sure about whether something should be in bylaw or policy, bylaws would normally include content about:
Organization's name and general mandate
Board composition, selection and size
Length of board member term and tenure
Conditions for removing someone from the board
Quorum for the board
Selection of officers
Ability of the board to delegate authority
Fiscal year
Requirement for an external audit
Conditions and process for dissolution of the organization
Conditions for amending bylaws
For organizations with a membership, bylaws would also include:
Categories of membership
Voting privileges
Committees created by a membership, such as nominating committee
Frequency and notice regarding annual meetings
Outline of conditions for creation of subdivisions of the membership such as branches or chapters.
Issues relating to committees created by the board (rather than by membership), and issues relating to staff, are better handled in policy.
Some organizations are granted authority to regulate the behaviour of others, such as professional regulatory bodies (who regulate the members of their profession), voluntary membership organizations (who choose to expect certain behaviour of members in order to qualify for membership), or municipal councils (who regulate certain behaviours of citizens by virtue of civic bylaws). These organizations may be required to create additional bylaws setting out in detail, for example, the disciplinary process for a profession, or the conditions under which membership will be accepted or rejected. In some cases, the requirement for these bylaws to exist is set out in legislation. When that is the case, the objective should be to make them as enabling as possible, and consistent with Policy Governance® principles, while still remaining within legislated requirements.
Purpose, mission, objects, ends …
Incorporation documents or legislation generally require bylaws to include the "objects" or "purpose" of an organization. In order to avoid having to amend the bylaws every time that the board amends the Ends, it is wise to keep this statement as broad as possible. That way, it can enable the board to finetune the Ends as required, without necessitating bylaw amendments. Rather than the usual list of activities, (e.g., "to maintain," "to improve," "to advise on," "to foster") create a broad statement of the result of the organization's existence.
Committees
Bylaws in traditionally governed organizations typically include detailed lists of standing committees and provisions related to them. When revising your bylaws related to committees, there is really only one enabling statement necessary: "The board may create whatever committees it considers necessary to assist it in fulfilling its governance accountability." This permits the board to create committees if needed, but does not set up a series of committees that must exist, regardless of whether they cease to serve any useful purpose. The exceptions, as noted above, are committees created directly by a membership, or committees that legislation requires to be committees of the board. Unfortunately, the drafters of legislation do not always consider good governance principles, and sometimes require committees that can confuse the clarity of delegation from board to CEO. Read such legislation carefully.
Usually the legislation may require only that a given committee must exist in the organization. This does not mean it must be a committee of the board, only that the board is accountable to ensure that it exists. That accountability can be handled by the board's creation of an Executive Limitation that prohibits the CEO from operating without the use of whatever committees are legally required to exist, consistent with the legislated requirements. Along similar lines, some legislation may require an organizational committee to exist, with members appointed by the board. Again, simply because members must be appointed by the board does not automatically mean that the committee must be a committee of the board. Ideally, the CEO should be able to appoint the members of operational committees. However, in this particular instance, the legislated requirement for the board to make the appointments can be handled as a Consent Agenda item.
The Executive Committee – "To be or not to be"
When revising bylaws, if it is at all possible, omit the Executive Committee. If you are a membership organization, and the members are simply not ready to accept this step, then strictly limit the authority of the committee, to prevent it from becoming the "real" board. While traditional organizations had a valid reason for an Executive Committee – to "approve" decisions regarding management issues for the CEO in between board meetings – in Policy Governance there are Ends in place, and limitations within which the CEO may operate. Thus, the need for "in between" decisions is very rare. Only if you have a board that is very large (in which case, the ultimate solution is to examine the size of the board), or that meets very infrequently, might an Executive Committee be necessary. Even then, limit its authority to making decisions on behalf of the board only in situations where it is impossible to convene a quorum of the board. With the ability to hold teleconference meetings, this eventuality will be very rare.
Board Size and Tenure
Updating bylaws is a perfect opportunity to consider whether your board is the optimal size. A smaller group of people who are committed to effective linkage with the whole ownership and concentration on the long term results to be produced by the organization is more effective than a large group who are theoretically "representative" of separate interest groups. Ask whether your board could be smaller (it's rare to find a board that needs to be larger). Length of the board's term and the number of terms to be served should also be reconsidered. Terms that are too short do not allow board members time to become skilled at governing. In general, a term of three years is suggested. This allows a year to become familiar with the organization's issues and approach to governance, and two years to be fully active, productive contributors to the board. Shorter terms generally result in board members saying that just when they were starting to feel they could make a real contribution, their time was up. Eligibility for a second three-year term should also be considered. At the other extreme, do build in opportunity for healthy turnover, so that a board does not become "stale" or dominated by one or two "life members."
Staff
Since bylaws are about the relationship of the board to its owners, not about the board to its staff, most organizations do not need to even mention staff in bylaws. For some organizations regulated by legislation, it may be necessary to include an enabling statement that indicates the board is empowered to delegate authority to the CEO. If uncertain whether this is required, check with your legal advisor.
Who Should Amend Bylaws?
The accountability for ensuring that bylaws are current rests with the board. In membership organizations, the final approval of bylaws generally rests with the members, but the board should take the initiative in suggesting necessary amendments. Carver1 suggests a few simple steps, summarized here:
The board identifies bylaw sections to be revised.
The whole board (or for large boards, a committee) discusses and decides the general sense or direction (not the exact words) for a new section, or generates two or more alternative directions. (In membership organizations, input from a sampling of members may be helpful both to enrich the dialogue, and to make the final product more salable.)
Staff assigned by the CEO crafts language consistent with the direction, or several alternates consistent with the alternative directions. Where appropriate, a legal comment is included. Board members receive these in advance of the meeting.
The whole board explores and debates the options, then votes. If necessary, steps 2 and 3 are repeated. In membership organizations, the board determines a marketing strategy to assist in acceptance of the changes at the annual meeting.
1Carver, John. "A Board Enshrines Policy Governance in Its Bylaws." Board Leadership, Jossey-Bass Publishers. Sept.-Oct. 1997.
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