Has your board tried to make an important governance decision—perhaps increasing or decreasing its size—only to find out your bylaws do not permit it? Have you changed the name of your school, but your bylaws still reflect the previous name? Is your chief financial officer (CFO) and treasurer the same person?Most independent school boards only consult their bylaws in an emergency, when they would like to make a change to the governance structure, or when they are unsure of how to proceed with an action. When they do check in, boards often find that their bylaws, which were created and approved by the founding board of trustees, are woefully outdated and that the process of amending a bylaw is so cumbersome that it will take more time than they have to address the issue at hand.
So how can a board avoid this eventuality? The answer should be obvious—review bylaws regularly and make sure they reflect the current state of your board’s structure and practice. But on most boards, no one wants to be in charge of reading the bylaws (too boring!), much less making the necessary changes to reflect the current governance practices of the board and the state’s current nonprofit laws. While bylaws are not top of mind for most boards, they are the backbone of the work of all nonprofit boards.
What Are Bylaws?
Most independent schools are nonprofit corporations, and as such, have articles of incorporation. These serve to register the entity with the state and provide the name, main location, and purpose for your school, among other things. Schools, and more specifically the school’s board of trustees, have bylaws to guide the way the school’s governing board operates, usually created by the founding board of trustees. Without bylaws, there would be nothing governing the board and its trustees, which would not be conducive to best practices or long-term school viability.A school’s bylaws should be the foundation of good governance practices and provide accountability for those practices. According to BoardSource, bylaws essentially cover three things:
- how an organization is structured—who are the trustees, how are trustees selected and for how long, what are the officer positions and duties, what are the standing board committees and their functions;
- the rights of the trustees—the right to notice of a meeting, voting rights, rights in the face of removal from office and indemnification; and
- the procedures by which trustees function, including such things as how notice of meetings is given, whether participation by phone is permitted, whether electronic voting is allowed, and so on.
When Schools Have an Issue
Schools create their board bylaws at the founding of the school and then put them on a figurative high shelf—all but forgetting about them until a governance issue arises. Boards operate with the best of intentions but often get into habits of governance that may not reflect either best practices or what is written in their bylaws. Many schools will go 20 years or more without updating their bylaws only to find themselves in the middle of a crisis and with bylaws that offer little or no helpful guidance.As part of my work, I witnessed one school onboard a new board member to fill the role of treasurer and discover that the treasurer was also the CFO according to the bylaws. The treasurer-elect was informed of this discrepancy and declined to take on the role until the bylaws were changed. The board had to scramble to correct the language.
In another instance I’m familiar with, a school with no term limits for board members found itself with several trustees who were not in alignment with the decisions that were helping to move the school forward. They were representing the past and making the school’s future difficult. Instituting term limits enabled the governance committee to deftly move those trustees off the board while inviting new members who would bring fresh perspective and embrace the vision for the future of the school.
When, How, and Why to Update
The key question for school leaders is when should a school update its bylaws? A thorough review is necessary every three to four years at a minimum. There are several reasons to review, including making sure the bylaws conform to the state’s latest nonprofit law, matching practice to reality, and addressing a new situation that may not have existed previously (such as video conferencing, votes by email, etc.).First and foremost, schools will want to check with their attorney, who should be well-versed in the state’s nonprofit corporation law and can counsel the board about any laws that may affect the current bylaws. Perhaps the state has changed the rules around conflict of interest, which a school has not yet reflected in its bylaws. Keeping abreast of these legal changes will prevent schools from operating outside of accepted legal practice.
A regular audit of bylaws every three to four years, in conjunction with a governance audit, is ideal. A governance audit should include a review and examination of the frequency of board meetings, the number and nature of the standing and ad hoc committees, and the number of board members and the skill sets they bring. After completing the governance audit, take a look at your bylaws to make sure they conform to your vision of governance; if not, a bylaw change is in order. It makes far more sense to review your bylaws in this light, rather than making adjustments on a bylaw-by-bylaw basis. Reviewing your governance as a whole and then conforming your bylaws to your practice is a much more orderly process.
Finally, stay aware of changes in how the board operates and how those changes may affect board governance. Most boards have incorporated the ability to participate in a meeting by telephone or video conference into their governance structure and bylaws, but as technology changes, we need to stay on top of other opportunities to participate that would require a bylaw change. For instance, do your bylaws allow for voting via email, and if so, under what circumstances?
The other question that often comes up is who should review the bylaws. Because bylaws are so often neglected until there is a crisis, it is best to make regular bylaw review a key component of the governance committee’s duties. That way, a group is stewarding the review, and your board is less likely to fall into noncompliance.
Ensure Regular Review
It’s important to remember that undertaking a review does not necessarily mean your bylaws will have to be amended. Well-written bylaws that are appropriately specific should last for more than a year or two. Also: Make sure the process for amending bylaws is not so cumbersome (while still conforming to state law) that no one ever wants to do it. Many schools require a reading once or even twice, at separate board meetings, before voting on the bylaw change. In addition, boards often require approval by two-thirds or three-quarters of the board to change a bylaw. This can drag out what should be a simple procedure of updating a bylaw. Unless your state law says otherwise, a simple majority vote by your board to amend your bylaws is perfectly reasonable. Making bylaw amendment straightforward will make it less likely that it will be shelved for a later date.
The bottom line is that bylaws don’t make good governance—your board’s culture and practices do that. But your bylaws provide the framework for you to carry out that good governance, so a regular review of your bylaws ensures that you are following the best and most legal path to good governance.