Nonprofit Governance

Nonprofit governance simply means how your nonprofit is administered. The key players in a nonprofit organization are the directors, officers, committees, members, executive director, staff and volunteers, and any existing advisory boards or friends groups. Each plays an important role in carrying out a nonprofit corporation’s mission.

In the eyes of the law, a corporation is a legal entity. It is separate and distinct from the people who run it. The corporation can enter into contracts, be sued, and perform other powers permitted by state law. These activities are carried out exclusively through the actions of the corporation’s board of directors or designee. For more information about the specifics of your state, please visit our Nonprofit Governance by State chart.

• Board of Directors/Trustees are a nonprofit’s strategic leaders and their beacon is the organization’s mission statement. They make decisions and establish goals. Individual directors have limited power; decisions are made as a board. A quorum, or minimum number of directors, must vote to take action. When a board makes a decision, that decision is documented in resolutions, which are thereby the actions of the corporation. We’ll discuss the board of directors in greater depth.
• Officers of the Board are elected by the directors. These typically include a President/Chair to preside over board meetings, a Secretary who records meeting minutes, a Treasurer who oversees finances, and one or more Vice Presidents/Vice Chairs.
• Committees may be established by a nonprofit organization’s board of directors. A board of directors in a more established organization may contain 15, 20, or more directors. At this size, it is prudent to delegate certain research, oversight, and authority to committees. For example, a Governance Committee, containing a subset of directors and staffed by the Executive Director/CEO may be responsible for the health and functioning of the board of directors. It recruits new board members, conducts orientation, and evaluates the performance of the board and individual directors. Committees typically include both directors and non-directors.
• Members are not a requirement in a nonprofit’s governance structure. Public charities typically do not have members. In structures that do, like mutual benefit corporations, members have rights such as voting to elect directors. There may be multiple classes of membership, qualifications for membership, and membership dues. Membership comes with additional administrative oversight and can be important in organizations that wish to engage and represent the interests of particular individuals and communities.
• Executive Director and CEO are titles typically designated for the one employee of the board of directors. This person has primary responsibility for carrying out the direction set by the board of directors. All other staff and volunteers report to the Executive Director/CEO. This crucial position is the conduit for communication between the board of directors and the team that carries it out. The performance and compensation of the Executive Director/CEO is overseen by the board of directors.
• Staff and Volunteers are the front lines of the nonprofit, whether they are W-2 employees, independent contractors, or unpaid. These individuals receive direction from and report concerns to the Executive Director/CEO or their designee.
• Advisory Board/Friends Groups may often be referred to as “members” but they do not have voting rights or other legal provisions that align with true membership. These groups are better termed as advisory or friends groups so as to be clear about this distinction. They are important in giving informal opinion and perspective, yet fall outside the formal workings of a nonprofit.

Key Takeaways:

1. The nonprofit corporation is run through a board of directors with legal authority and ultimate accountability for the actions of the corporation.
2. The board of directors acts as a group, not as individual directors.
3. The Executive Director/CEO is the chief employee of the nonprofit, responsible for the performance of the staff and volunteers and execution of the direction set by the board of directors.