Board Quorums, Non-Profit Strategy, and Technological Innovation
As with most matters in non-profit governance structure, the rules relating to board quorums for a particular organization will inevitably have a strategic effect on an organization. Procedural matters can have a strong impact on organizational culture and effectiveness. The bylaws of a non-profit should clearly delineate voting procedure and quorum requirements for the governing board of directors/trustees.
Before drafting”or amending”such quorum requirements, a non-profit should consider three matters:
1) What the law of the state of incorporation allows for quorum requirements?;
2) What are the non-profit board quorum best practices?;
3) What specific elements of a quorum requirement would best meet the strategic goals and the organization’s specific vision?
A quorum requirement specifically delineates the number/percentage of board members that must be present in a meeting to validly vote for a resolution. State non-profit laws outline the parameters for quorum requirements. Under Arizona law, for example, the default quorum requirement if nothing is specified in an organization’s bylaws is 51% (majority) of sitting directors, but non-profits are permitted to set the quorum requirement for board meetings as low as 33% (one-third). Voting member meetings typically have greater flexibility to set quorum. In Arizona, voting members can set a quorum as low as 10%. This flexibility acknowledges the reality that many voting membership corporations struggle to attract significant participation in their meetings.
Many non-profit’s use the 51% benchmark for a quorum as a concession that directors will not be able to attend all meetings, but having a majority of board members in attendance for official business ensures a representative cross-section of participation which will not simply reflect the will of a very small clique of directors. However, organizations that value strong hands-on participation by board members may set a higher quorum requirement to encourage meeting attendance and broader participation. In the alternative, non-profits that are developing board membership from influential leaders for fundraising purposes may set the quorum requirement lower than 51%, with the understanding that those in positions of power may have less availability for meetings while providing important leadership meeting board goals outside of meetings. If the latter strategy is followed with a low quorum bar, it is important that the board and staff find ways to actively engage board members not attending meetings outside of the meeting structure to facilitate buy-in to goals, strategy, and mission (and to seek input). If a high quorum requirement is set, the board should be careful to avoid member burnout (such as by doing board heavy lifting through committee work) and make sure they can attract the category of board members they need with an onerous attendance requirement.
Moreover, it has become increasingly important that non-profits clearly delineate whether, in what manner, and to what extent, remote meeting participants will be counted for quorum voting purposes, as most state laws allow remote participation and voting. Technological innovation has increasingly reduced friction for remote participation, and this trend will no doubt continue. Allowing for remote participation has strategic implications. First, such participation may encourage more participation from the influential board members alluded to earlier”but it may also produce a race to the bottom in which members lose the incentive to attend in person. Second, remote participation produces a very different dynamic than the intimacy of in-person meetings. Third, a remote participant may be much more likely to give limited attention to board proceedings than an in-person participant. An influential board member may be able to influence proceedings to a lesser extent remotely. In these considerations, a video conference may be preferable to teleconferencing, as the former retains a level of accountability for participation, and allows for the influence of body language and the sight of physical presence.
And finally, in the realm of innovation, a non-profit may consider allowing proxy voting for quorum purposes. Proxy voting is used to a much lesser extent in non-profit corporations than in for-profit corporations but some states, such as Arizona, do allow this form of participation. It is common for influential leaders to send a deputy to represent them at many forms of meetings, and proxy voting allows this for board meeting voting. As with the strategies outlined above, this may be a way to engage board members important for fundraising, if a non-profit using this strategy can find other ways to keep such board members personally engaged.
Ellis Carter is a nonprofit lawyer with Caritas Law Group, PC. To contact Ellis, call 602-456-0071 or email us at email@example.com.