Board Of Directors Titles Non Profit - Nonprofit titles can be a misleading center of confusion due to a nonprofit executive posing as president/CEO
A typical nonprofit organization has an executive director who reports to a board of directors as specified in the IRS charitable filing. Too many executives now carry the completely inaccurate (at best) and highly misleading (at worst) President/CEO titles.
Board Of Directors Titles Non Profit
I was recently in a meeting with the CEO of a local non-profit organization—actually there were several CEOs of several local nonprofits—and that night I saw a TV commercial, one of those CEOs was there. His title is President/CEO. This is not the correct way to refer to the manager; The purpose of this article is to explain why.
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In addition to complying with the rules and regulations governing a nonprofit's charitable status as determined by the IRS, the nonprofit must comply with the rules and regulations of the state in which it is incorporated. For example, in my state, the organization needs two officers: a president and a secretary. A non-profit is a standard, non-stock, c-corp corporation. Nonprofits may unwittingly use headlines to mislead the public. When an executive takes the title of president and/or CEO, that person effectively becomes the head of the company. I am sure that was not the intention of the board and it is not in accordance with the requirements of the Internal Revenue Service, but the truth of the matter is that confusion has crept into the day-to-day operations.
Most nonprofit boards have something they call the chairperson, and many use the executive director as an ex officio secretary. As a former board member, I have previously written articles and answered questions about the managing director and explained in what circumstances I consider appropriate (usually when the managing director acts as company secretary). In boards that use the title of president for a lead volunteer who chairs the board, that person is considered the president of the nonprofit organization and usually signs off as such when the company submits its annual report to the government. organization to which it is associated and remains responsible. So technically the President is actually the President/President. The title director (CEO) doesn't even appear in most of the state laws I'm familiar with; again the chief executive uses the title president.
I am recently aware of a non-profit corporation that had to sign a document intended to form a corporation for a particular state, and the signatures of the President/CEO and President/COO (Chief Operating Officer) were actually denied by the government. The requirement was that the president and the secretary (must be two different people) sign the document to be registered. The rules were confused by the officials of this company, but in fact it was the correct interpretation by the government agency.
However, turning to an NGO and using the President/CEO as an executive can be very misleading and should be avoided. The remainder of this article describes the situation and proposes an action plan to remedy the situation.
Articles Of Amendment To Articles Of Incorporation (non Profit)
The meeting I attended required a decision by several executives. The issue was indeed both important and complex and would bind the organization into a permanent partnership. Accordingly, it was prudent for executives to accept that they would need to inform their respective boards and obtain approval before proceeding to sign letters of intent. Technically, if the board follows strict governance, either the chairman signs the memorandum or the board specifically agrees to authorize the chief executive officer to sign the memorandum on behalf of the board. Such decisions are common in well-run organizations and clarify the board's purpose.
After the meeting I was asked to summarize my thoughts. I explained that I expected more leadership and less hiding behind the board for a nonprofit president/CEO. Based on the title he used, I think I was right to expect a higher turnout from the other executives in the room. See how headlines (taken literally) can get confusing?
The confusion revolves around an executive who introduces himself as president/CEO but then uses the board to hide behind him. Members of a group should be able to rely on the title of the representative of the organization as an indication of that person's authority within the organizational structure. Technically, the executive director of this non-profit organization has taken on the role of president/CEO as would be applied to a for-profit organization. In a typical for-profit situation, the president has significantly more authority (and potentially more responsibility under Sarbanes-Oxley and other federal and state regulations) and can therefore act on behalf of the company and approve such documents. as a declaration of intent. For profit, the chairman may notify the board, even after the event, depending on whether the rating is important or outside the company's normal day-to-day operations. that the president has both authority and responsibility to carry out these actions.
At what point did the title of executive cease to satisfy the holder of that position, causing the title of president to come into play?
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I noticed that the title change was happening more and more often. At another recent meeting, this topic was brought up and one of the attendees noted a very noticeable "title change" in today's organizations, especially at the vice president level. Is the board aware that it has delegated authority outside the bounds of appropriate governance to the executive director? Somehow I doubt the administration understands; However, there undoubtedly came a certain time when the title issue should be brought before the board for consideration, depending on how the managing director and chairman of the board chose to handle the change of managing director to president at that point. time I would argue that any deliberate decision by the Executive Director and/or Chairman not to notify the Board is fraud. I would also argue that tacitly and kindly releasing the current directors of this information would be negligent if they were aware of a change and chose not to comment. Issues of this importance deserve board discussion and informed action.
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The session I attended was innocuous enough, but it really highlighted the importance of defining roles and associated titles in a nonprofit. A board that takes the opportunity to review existing governance practices and correct them if necessary can avoid misleading headlines and potentially unwanted and unintended issues. It has long been my contention that Sarbanes-Oxley (or something very similar) would eventually become law and apply to nonprofits. Continued mistakes, like the real and hypothetical ones described in this article, will only fuel the need for more federal regulations to prevent nonprofits from overstepping their lines. If nonprofits are going to claim that they can manage themselves through community-based governance, it's time to demonstrate that ability.
Rob Glenn is the founder of the Center for Ethics, Governance and Accountability (CEGA), a consulting firm exclusively serving the nonprofit sector. You can be contacted by email.
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