Q&A #14 – Can a nonprofit organization have non-Directors on its standing committees?

Question: I serve on the Board of Directors of a nonprofit organization, and our Bylaws provide that most of our standing committees (including the nominating committee, finance committee, investment committee, and audit committee) must include a certain number of non-Directors. One Board member has recently questioned whether this is appropriate. Are we allowed to have non-Directors on our standing committees?

Answer: It is quite common for nonprofit organizations to have non-Directors on their standing committees, but whether this is permitted is a surprisingly complicated question. The answer depends on the applicable state nonprofit corporation statute, and these laws are often more restrictive on this subject than you might think.

In many jurisdictions, the nonprofit corporation statute provides that “committees of the Board” (in other words, committees with Board-delegated powers) must consist of “one or more Directors.” Language like this suggests that non-Directors cannot serve on committees with Board-delegated powers, regardless of what the Bylaws say.

On the other hand, state nonprofit corporation laws typically do not restrict non-Directors from serving on advisory committees (this is sometimes stated explicitly in the statute and is sometimes implicit). The powers of an advisory committee are, naturally, limited to giving advice and making recommendations. The Board cannot delegate its decision-making authority to an advisory committee.

Whether a committee is a “standing committee” is not the key issue under the law. The key issue is whether these committees are empowered to take action on decisions that otherwise would or should be decided by the Board (such as the hiring of a CPA firm to audit the organization’s financial statements, in the case of the audit committee). If so, there is a good chance that the applicable state nonprofit corporation law only allows Board members to have a voting role on these committees.

On the other hand, if these committees are empowered only to give advice or make recommendations (which the Board is not obligated to follow), then you should be able to include non-Directors.

Planning Tip – One possible way to include non-Directors on committees that exercise Board-delegated powers could be to make clear in your Bylaws that such non-Directors serve only in a non-voting capacity. While this approach may not be explicitly recognized under state nonprofit corporation law, it would generally be consistent with the spirit and purpose of the law – i.e., to make sure that Directors are not trying to avoid their fiduciary duties. This may require an amendment to your Bylaws, but this is well worth exploring, as non-Directors can bring valuable expertise, perspective, and added capacity to an organization, and involving non-Directors in this way can serve to create a farm team of future potential Board members. We’ve discussed other approaches and roles for non-Directors (such as serving on task forces and working groups) here and here.

As with all nonprofit corporate governance questions, you will need to take a close look at the applicable state nonprofit corporation law and scrutinize your Bylaws to find the answer, particularly the provisions in your Bylaws setting forth the role and powers of your standing committees.

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