Q&A #9 – Is the Executive Committee allowed to cut programs and terminate staff without consulting the full Board?

Question:  I am on the Board of Directors of a nonprofit organization, and the Executive Committee has been meeting frequently and making major decisions without consulting the full Board. For example, the Executive Committee has decided to cut some of the organization’s programs and terminate some staff members. Is this legal? Should the full Board be consulted for these decisions?

Answer: It is common for Executive Committees to have fairly wide latitude to make operational decisions without consulting the full Board, usually in collaboration with the Executive Director. This can include operational decisions like cutting programs and terminating staff.

Whether or not this is legal in your case will depend on your organization’s Bylaws (or perhaps the Executive Committee charter or authorizing resolution). These governing documents should have detailed provisions outlining what types of decisions the Executive Committee is empowered to make, the process for notifying the full Board, and when full Board approval and/or ratification is required.

The applicable state nonprofit corporation law should also be consulted, although these laws will probably not answer your question. State nonprofit corporation laws generally set forth some basic restrictions on the power of a Board committee, such as restricting committees from filling vacancies on the Board, amending governing documents, dissolving the organization, and in some cases approving major disbursements of funds (the specifics vary depending on the state). Outside of these basic restrictions, it is generally up to the organization to define the authority of the Executive Committee and other committees through the governing documents.

Unfortunately, many organizations have not set forth these parameters in much detail. This means there may be some gray area that doesn’t provide a clear answer to your question. In these cases, it is often difficult to know exactly which decisions should be brought to the full Board. If the governing documents and state nonprofit corporation law do not provide a clear answer, I generally advise organizations to adhere as closely as possible to the Board’s culture and past practices, and stay in communication with the full Board.

Planning Tip – This question highlights the importance of having an organizational culture of transparency with clear and effective governance and management communications. When reviewing your organization’s governing documents, you should consider whether the current process (and any proposed changes) will help to instill a culture of transparency and communication.

Lastly, it is important to keep in mind that nonprofits are currently facing urgent and unusual circumstances, requiring many organizations to take very quick and decisive action to stay afloat. I would be mindful of this situation as you seek to get more clarity about the role of the Executive Committee going forward.

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