BETTER BYLAWS

Bill Taylor UW Extension Area Community Development Educator

REFERENCES
Better Bylaws by D. Benson Tesdahl, published by BoardSource, 2010 The Handbook of Nonprofit Governance by BoardSource, 2010 Free Management Library at http://managementhelp.org/

REFERENCES (cont.)
Wyoming state statutes at http://legisweb.state.wy.us/LSOWEB/wyStatutes. aspx
Title 6, Chapter 5, Article 1 Offenses by Public Officials Title 9, Chapter 13, Article 1 Public Officials, Members and Employees Ethics Title 16, Chapter 3 Administrative Procedure Title 16, Chapter 4, Article 4 Wyoming Public Meetings Act Title 17, Chapter 19 Wyoming Nonprofit Corporation Act Title 18, Chapter 7, Article 1 - Libraries

DISCLAIMER
No training guides or lesson plans for public boards All training materials written for nonprofit boards and organizations
Must be converted to apply to public boards

Wyoming statutes do not require bylaws of a public board, just rules of operation
Bylaws are easiest & most concise place for those general rules

DISCLAIMER (cont.)
Remember:
Bylaws are for internal operating rules for the board
No public hearing required

Rule-making for public policy requires the public hearing process

 Proper governance, best practices, call for bylaws Bylaws are guide for how you are organized and operate
Without them, there is no standard by which to hold the board, members, or officers accountable

WYOMING LAW
W.S. 16-3-101(b)(ix) Rule means each agency statement of general applicability that implements, interprets and prescribes law, policy or ordinances of cities and towns, or describes the organization, procedures, or practice requirements of any agency.

WYOMING LAW (cont.)

W.S. 16-4-404(a) In the absence of a statutory requirement, the governing body of an agency shall provide by ordinance, resolution, bylaws or rule for holding regular meetings WY Nonprofit Corporation Act good guide for those things applicable to public boards Each establishing statute may be slightly different.
County Library Board example W.S. 18-7-103(b); 18-7-105(a)

CONSEQUENTLY
This presentation will be mix of nonprofit and public board practices
Some are interchangeable I will attempt to delineate where there are differences

PURPOSE
Reflect how to fulfill mission & carry out business in orderly, legal manner Define duties, authority limits, principle operating procedures

PRECIDENCE OF AUTHORITY
Nonprofit
Wyoming Nonprofit Corporation Act Articles of Incorporation

Public
Wyoming statute, county resolution or city ordinance which established board Wyoming statutes, county resolutions or city ordinances, or policies which dictate authority, governance, relation w/ other entities, etc.

PRECIDENCE OF AUTHORITY(cont.)
Nonprofits & public
Bylaws always subordinate to statutes, county resolutions or city ordinance, articles of incorporation Organizational Resolutions (properly passed motions) subordinate to bylaws Organizational recommendations, guidelines often nonbinding Organizational procedures processes to implement policies

CREATION
At the organizational start-up Need to be in place so the organization knows how to conduct business Nonprofit file copy with IRS Form 990 There is no state agency which reviews content or accuracy
Inconsistencies or improprieties usually addressed when someone (member, public) complains or files adverse action

 Content varies, depending on organization Revising requires specific, often timeconsuming process, so detailed & specific policies often left to policy documents

CONTENTS (cont.)
Suggested for nonprofit organization (P = Public in parentheses): General
Official name (P) Location of principal office (P) Limitations required for tax exemption Procedure for amending bylaws (P) Procedure for dissolving organization Disposition of assets on dissolution

Members (if a member organization)

Qualifications for membership Admission procedures Dues obligations Classes of membership, their rights & privileges Notice required for membership meetings (P) Quorum requirements Frequency of meetings and meeting procedures Voting procedures (P)

CONTENTS (cont.)
Board of Directors
Size of board (P) Qualifications for membership Terms of office & term limits (P) Selection process (P) Process for filling vacancies (P) Frequency of meetings (P) Quorum and voting requirements (P) Meeting procedures (P) Powers of the executive committee Other standing committees or statement that allows their formation (P) Compensation of board members Circumstances under which board members may be removed (P) Conflict-of-interest procedures (P)

CONTENTS (cont.)
Officers
Qualifications for holding office (P) Duties of officers or reference to job description (P) Process for selecting or appointing officers (P) Terms & term limits (P) Provision for chief executive on the board (P) Circumstance under which officers may be removed (P)

Fiscal Matters
Audit committee & audits (P) Fiscal year of the corporation Indemnification and insurance for officers & directors

MISSION
Broad statement of purpose in Articles of Incorporation for nonprofit organization (NP) Further refined and clarified mission in bylaws

MEMBERSHIP
NP w/o membership controlled and administered by board of directors
Makes bylaws and procedures simpler, more efficient Places control in hands of a few

The more types and levels of membership, the more complicated bylaws and procedures become
Members accorded rights by state law

BOARD OF DIRECTORS
NP board of directors/public board similar in many ways Size - best to provide range rather than specific number
Providing range does not require bylaw amendment to adjust
i.e. County library board statute 3 to 5

BOARD OF DIRECTORS (cont.)

NP
Can easily become too big to be efficient
Establish advisory body, honorary council for those prominent individuals who will not be able to be a working member of board

State whether or not compensated

Compensation (excluding reimbursement of expenses) is rare and legally risky Excessive compensation may trigger IRS sanctions

BOARD OF DIRECTORS (cont.)

Selection
Nonprofit
Normally elected by members, if member organization WY law allows other methods of designation or appointment if specified in bylaws May be elected by board in non-member organization, or as specified in bylaws

Public
Selection process dictated by statute, resolution, ordinance

BOARD OF DIRECTORS (cont.)

Terms
Term limits
Advantages
Ensure variety of perspectives Expand base of contacts Prevent concentration of power Easy way to eliminate undesirable members

Disadvantages
Loss of expertise & institutional memory Cost of more orientation & training

BOARD OF DIRECTORS (cont.)

Terms (cont.)
Term limits (cont.)
Advantages & disadvantages balanced by allowing return after break in service of 1-2 years or terms

Length
Commonly 1-5 years

NP average 3-year terms w/ 2 term limit Usually staggered, especially w/ larger board

QUORUM
Minimum number present to conduct business WY law according to bylaws
Cannot be lower than greater of 1/3 of board members or 2 directors 10% of membership, unless stated differently in bylaws of membership organization

Should you allow board to act w/o majority of board present?

QUORUM (cont.)
May require higher number for certain actions i.e. amending bylaws, dismissing a director, etc. Typically majority of board members 1 over 50%

MAKING DECISIONS
Determine methods of acceptable decision making
Typical to state all business must be conducted by Roberts Rules of Order
Too restrictive what about consensus, other parliamentary law systems, etc.? Suggest or other methods as agreed upon by the (members)(directors)(board).
As long as recorded in minutes as decision of group, a vote is not required unless stated for certain decisions in the bylaws, statute, resolution, or ordinance

MAKING DECISIONS (cont.)

Voting
Majority one over 50% of those voting
Most common requirement

Super-majority higher level for certain decisions

Amending bylaws often requires 2/3 or

Unanimous may be required for most critical decisions

MAKING DECISIONS (cont.)

Voting (cont.)
Proxy appointing someone else to vote for you
Allowed via signing proxy form in general membership voting (WY Nonprofit Corporation Act) Not listed as proper form of director voting in nonprofit act No provision for proxy voting on public boards

MEETINGS
Membership organizations required to hold annual meeting of membership
Board may meet as outlined in bylaws

Public boards see establishing statute, resolution, ordinance

Some monthly, some quarterly, some as needed Should publish time & place for regular meeting schedule (see WY Open Meetings Act)

MEETINGS (cont.)
Public boards (cont.)
3 possible types of meetings (Open Meetings Act)
Regular, Special, Emergency Outline process for calling, advertising, holding, recording of each in bylaws

Executive sessions
Outline process for calling, holding, recording Public only in accordance w/ Open Meetings Act

MEETINGS (cont.)
Virtual meetings
Public Meetings Act
Meeting means an assembly of at least a quorum Assembly means communicating in person, by means of telephone or electronic communication, or in any other manner such that all participating members are able to communicate with each other contemporaneously.
Must provide method for public to hear DOES NOT include email decisions or discussion

MEETINGS (cont.)
Virtual meetings (cont.)
Establish acceptable methods in bylaws Nonprofit Act does not mention any electronic means for meetings

OFFICERS
NP President, Secretary, Treasurer required unless otherwise stated in bylaws
One person may serve multiple offices

P see establishing statute, resolution, ordinance

i.e. County library board chair is required

OFFICERS (cont.)
Provide general outline of duties minimum expectations
Can refer to detailed job description as additional document Broad & flexible enough so bylaws do not require amending with every adjustment of duties

OFFICERS (cont.)
NP carefully consider whether officers:
Chosen from among directors Directors by virtue of being officers Chosen from general public or membership, but not part of board of directors
Non-directors have no voting power on board

Most common elect officers from among directors

COMMITTEES
Appointed to focus on specific issues, programs, activities, etc.
Specify who may appoint (commonly board or chair or both) Usually a subset of board, could include others as needed for expertise
WY NP law committee of board can only consist of board members

Duties and authority should be defined

COMMITTEES (cont.)
Keep bylaws broad enough so amendment not needed for every committee appointment or change
May list names of standing committees, w/ authority to appoint ad hoc committees May provide general statement of authority to appoint committees & refer to policy documents for composition, duty description, make-up, length of existence, etc.

COMMITTEES (cont.)
Suggested clause: The board shall have the right to appoint and determine the composition and authority of such standing committees and other committees and task forces as it deems necessary from time to time. Such committees and task forces may be described in separate administrative regulations or in resolutions of the board. Better Bylaws by D. Benson Tesdahl

COMMITTEES (cont.)
Task force, work group temporary, less formal group assembled to deal w/ specific task Some organizations write a charter for each committee or task force, outlining composition, organization, duties, authority, duration, etc.

COMMITTEES (cont.)
Common NP standing committees
Executive Finance Audit Governance

 A situation in which a director or officer has divided loyalty. Better Bylaws by D. Benson
Tesdahl

Duty to act in best interests of board or organization

Becomes of special concern when you, your family, your business, or another organization you represent will benefit from a board decision

Not illegal, sometimes unavoidable

(cont.)

IRS: purpose of a conflict-of-interest policy is to protect the nonprofit organizations interest when it is contemplating entering into a transaction or arrangement that might benefit the private interest of one or more of its officers or directors. - Better Bylaws by D. Benson
Tesdahl

(cont.)

Policy set forth in bylaws defining conflict of interest and outlining process when it occurs
Or reference conflict of interest policy document
For easier & more efficient changes and adjustments

(cont.)

Minimum policy should:

Define in general terms what a conflict is Require disclosure to full board of actual or potential conflict Have board decide (w/ counsel, if needed) if conflict exists Preclude director from participating in discussion or voting on any conflicting transaction

(cont.)

Wyoming Law
Director not to engage in any discussion concerning the matter, influence any of the parties, or vote on the matter (W.S. 6-5-106(b)) Best not to even be present during that agenda item leave the room

CODE OF ETHICS
Expectations for ethical conduct of officers & directors Bylaws may include a statement or reference a separate document
May include disciplinary code of action May include nondiscrimination statement

Federal & state laws prohibit certain unethical or discriminatory actions whether included in bylaws or not

INDEMNIFICATION
NP required to indemnify (pay) officers and directors for expenses incurred in defending any proper action of board P indemnification covered by governmental entity Even though required, many organizations place indemnification statement in bylaws for clarity

INSURANCE
NP should strongly consider directors and officers (D&O) insurance
Covers liability unless convicted of criminal action
Review carefully usually contains several exemptions

Also covered by WY NP volunteer immunity statute (W.S. 1-1-125) Policy statement in bylaws

INSURANCE (cont.)
P covered by governmental liability umbrella
As long as performing assigned duties in good faith

OTHER PROVISIONS
NP IRS Form 990
Asks if following governance policies in place?
Conflict-of-interest Whistleblower Document retention & destruction Executive compensation Joint venture

OTHER PROVISIONS (cont.)

Vacancies on board
NP outline procedure for filling vacancies occurring before end of term P outlined in statutes, resolutions, ordinances, procedures

Removal of board members & officers

NP outline conditions necessary for removal & procedure P outlined in statutes, resolutions, ordinances, procedures

OTHER PROVISIONS (cont.)

W.S.9-2-410. All public records are the property of the state. They shall be delivered by outgoing officials and employees to their successors and shall be preserved, stored, transferred, destroyed or disposed of, and otherwise managed, only in accordance with W.S. 9-2-405 through 9-2-413. Provide bylaw statement of how records are to be handled
Reference WY Dept of State Parks & Cultural Resources, or County or City Clerk for details

AMENDMENTS
Bylaws must change as operations change
Operations in violation of bylaws are illegal Cannot ignore bylaws because they are inconvenient, incomplete, outdated Actions of boards & organizations have been voided by courts because they did not follow their own bylaws

AMENDMENTS (cont.)
Review regularly
Recommended every other year Whenever governance problems or changes arise Committee, legal counsel, committee-of-thewhole

AMENDMENTS (cont.)
Include clause in bylaws detailing exactly how they may be changed
Whether amendments can be made by board or members (NP) How changes are developed & reviewed Is advance notice required before vote for approval? How long? Whether changes can be approved at meeting or with mail ballot (NP) Vote required for approval
Majority? Supermajority? All business must be at public meeting if public board

AMENDMENTS (cont.)
Each revision dated upon approval of organization
Date of amendment recorded in minutes

NP file amended copy w/ IRS Form 990