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Writing Nonprofit Bylaws

a guide for worker self-directed organizations

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Want to see a recorded presentation of this toolkit?

Click here for a 90-minute workshop on using this toolkit to draft participatory bylaws:

https://youtu.be/MY_DiRAPgLo

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Quick Disclaimer:

The following guide is not legal advice. This is purely information for the sake of creativity and empowerment.
The law that applies to a nonprofit’s governance differs based on what state it is incorporated in. Most states’ laws are very similar, but there are some important differences. This slideshow is based on California law.
You’ll probably want to check in with a lawyer in your state.

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Using this Guide:

This guide is designed to help you facilitate conversations within your organization to create bylaws that reflect your organization’s structure and culture. Feel free to make a copy of this slideshow so you can work through it and make changes with your group.

We will walk through 21 sections that you might include in your bylaws. Each section includes an explanatory slide [those with green headers] and a sample bylaws clause [those with orange headers].

With your organization, you can move through this slide deck, have a conversation about each topic, and then either create a new clause or build off the sample included here. The explanatory slides include a lot more detail in the presenter notes beneath each slide. We recommend that at least one person from your organization read these in detail before engaging in a broader conversation with your organization.

And yes, your bylaws can be in a slideshow format if you want! Choose whatever format will work best for your group. You can find all the sample clauses in one document here.

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DON’T FORGET THE SPEAKER NOTES!

Most slides have additional important information in the speaker notes below the slide -- don’t forget to read these too!

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MORE GOOD STUFF DOWN HERE!

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What Are Bylaws?

Written agreements about power, decision making, and values.

Bylaws are the private law that applies within the organization. As long as they don’t violate state law, they will be the rules by which the organization is governed, and they will be the rules enforced by the state in the event of a lawsuit.

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Why Should I Care About Bylaws?

Helps people know how to work together
Supports clarity and transparency
Increases (or decreases) access to power
Allows organization to change over time
Opportunity for popular education

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There are lots of decisions to be made when we are working together: big picture impact strategy, specific tactics/interventions, business strategy, investments/expenditures, program goals, and more.

How these decisions are made, and who has voice, matters a lot. It will change what the group decides, what the organization serves, and is a direct manifestation of whether people in your group have the agency and sovereignty to participate in decisions that affect their lives.

Agreements/norms about how decisions are made and power is exercised and allocated in your group will live in many places in your organization. They could be in employee handbooks, onboarding documents, training materials, meeting processes etc. The entirety of the explicit rules and practices you create are called your “organizational structure.”

Clear organizational structure is important because it provides an opportunity to make intentional and transparent choices about power and decision making. When we don’t intentionally create dynamics you actually want, then we often unconsciously reproduce the dynamics we inherited from imperial capitalism. Sometimes this looks like oppression appearing inside our organizations, and sometime is just looks like people stuck in a state of unclarity, chaos, or friction. The antidote to oppressive structure isn’t structurelessness, it’s a liberating structure

Your bylaws are one part of your organizational structure. They include some of the agreements you make about power, decision making, and values. Generally speaking, they include the agreements that you want to be the most long lasting. As your organization grows and changes, so will your practice around sharing power. Writing core aspects of your intentions into your bylaws can create supportive stability and anchor your group deeper into your intentions.

Good bylaws can also serve as education for people you work with. Being a part of an equitable collective enterprise requires lots of skills and awarenesses. One of those is the ability to understand processes, participate in them, and advocate for their change if they aren’t of service. Bylaws that are clear and accessible can support people’s participation.

But remember! Bylaws (and many aspects of organizational structure) are just words on paper. It requires culture, practice, education, relationships, and behavior to actually make them real. If you just write bylaws and put them in a drawer, then they won’t serve you much. More on that later :)

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Your state + the IRS

You incorporate your entity with your state. In California, most “nonprofits” are incorporated as Nonprofit Public Benefit Corporations.

Tax status comes from the Internal Revenue Service, a federal agency. Most “nonprofits” receive recognition of exemption under Section 501(c)(3) of the Internal Revenue Code.

Throughout this guide, the term “nonprofit” refers to a California Nonprofit Public Benefit Corporation organized to satisfy 501(c)(3) law.

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What needs to be in the bylaws for nonprofit public benefit corporations?

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Legally required by State (CA)	Number of board members Method of director selection Officer roles (At least: Chairperson, secretary, Treasurer) Regularity of Board meetings
Required For Tax Exemption	Purpose Clause Dissolution Clause
Practically Speaking	Board Function Board decision making norms Term length of board members
IRS 990	Conflict of interest Whistleblower Document retention and destruction Compensation Determination

It might be a little surprising to see how little the law actually requires to be in the bylaws, but it makes sense when we know how what a nonprofit entity looks like through the eyes of the law.

The law sees a nonprofit as an entity that has all kinds of rights (like entering into contracts, collect fees, make donations, and more). It is allowed to exist because it promises the State it will serve a public benefit. Of course, the legal invention of the nonprofit can’t do anything without actual people, and the law understands the board to be those people who hold and exercise the power. The law understands the board to be the origin of the power of the legal entity, and gives them lots of discretion. So from the law’s perspective, all the organization needs to get clear on in their bylaws is who’s on the board and when they meet to exercise their power. There are other legal restriction that apply to nonprofits, but not to their bylaws.

For many of us, the idea of a board of directors with largely unfettered power over an organization gives us the willies. There is a pattern that has arisen from a confluence of histories wherein boards tend to be people with privilege, who do not represent the communities they want to serve, do not have intimate knowledge of what is required for the organization to be truly successful, and are not personally impacted by the organization’s decisions, yet still use their legal power to direct (or misdirect) staff. That’s a bummer. And that’s why we’ve included the four elements in the “Practically Speaking” column, they will require a tad bit more explanation.

Board Function

This is an important fulcrum for us all to understand if we want to avoid replicating exercise of disconnected top-down directive power that is common in organizations.

If we do not specify the function that we want the board to play, then the board will likely default to what has passed for “best practice” for the past hundred or so years. This means acting as the center of power, vision, and leadership for the organization. In some groups, this can be a good thing (like if you want to make sure you serve a specific community so you put members of it on the board). More often, it can create tension by inhibiting staff, volunteer, and community’s ability to respond to things as they emerge.

Your bylaws can specify the precise function that you want your board to serve. Do you want them to be the center of strategic development? The final decision maker for operational concerns? Stewards of collective process? Or something else entirely?

We are going to come back to this issue in more detail in this slide. We are mentioning it here because its a important bit to think about early in your process. Even if you aren’t prepared to fully articulate the exact function you want the board to serve, you can include some guideposts in even your early stage bylaws.

You don’t need this piece in the strict legal sense. But if you want to have an intentional relationship between your board and the rest of your staff/volunteer/community that is protected from replicating the very thing we are trying to transform, then you will want it.

Board Decision Making Norms

Your board is a group of people that are going to make decisions together. Do you want that to happen by consensus? Consent? Majority? Gradients of Agreement? Some specific process?

There’s no legal requirement for how this has to happen, or even that you specify it, but it is good practice for any group of people to be very clear on how they will be coming to agreements. It can seem a bit unnecessary during the early stages of your organization, but it becomes very important when your group begins to make impactful or contentious decisions.

3. Term length of boards

The law defaults to one-year term lengths. If you want it to be different then you can put that in your bylaws. It’s worth including this in your bylaws just so everyone is on the same page.

A NOTE ON THE 990:

The things listed in this section are not, strictly speaking, legal requirements. However, your yearly tax filing requires you disclose whether you have these various policies. You won’t incur a penalty for not having the policy, but it may raise a flag.

Also, Section VI(A)(3) asks if you delegated any responsibilities customarily performed under supervision of officers, directors, trustees or key employees to a management company or other person. Generally speaking, if you use worker-self direction, you should still answer “no” to this question. Your activities are still legally “under the supervision of directors” and they are still carried out by key employees.

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What can be in the bylaws?

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Collaboration Agreements	Gratuitous Detail	Legal Formality
These describe how we work together. They address topics such as: Values Decisionmaking bodies Voting Membership Boards of directors Power distribution	Many bylaws contain detailed specifications for how to act in unlikely scenarios such as: Distributing assets upon dissolution Making loans to directors When improper notice of a Board meeting is given *Gratuitous detail can be important. Often if you don’t specify what happens, then State law will control.	Bylaws also often contain statements that pretty much mean “we will comply with this particular law.” It is good to put them in there so that board knows what the law is, and there is record they they knew about it. Some examples are: Dedication of assets to purpose Duty of Loyalty Statement of prohibited activities

The majority of what comprises most bylaw templates (like these) that you’ll come across doesn’t legally need to be there, and it likely falls until in the “Gratuitous Detail” or “Legal Formality” categories.

Those two categories can serve important functions, but they are a bit peripheral to the bylaws’ ability to function as a document that actually helps people work together equitably and transparently.

Gratuitous Detail:

The state law is filled with detailed processes and mechanisms to respond to as many different situations as the lawyers could think of. Often time, the detail that is included in bylaws is just a description of what is in the law so that people are purportedly aware of it (as if anyone reads it).

The bylaws are also an opportunity to specify that you will do something differently than it is described in the law. We won’t go far into this terrain in this guide. We recommend that you have at least a few folks in your organization read your state’s corporation code and some mainstream model bylaws to get a sense of all of the different things in there, and then bring specific conversations about relevant pieces as needed.

Legal Formalities:

Including legal formalities can be an opportunity for popular education. There are laws that are foundational to understanding what a legal entity is, and/or will apply to your organization and board regardless of whether you put them in the bylaws. By including some plain English versions of these in documents that people will actually read, you can help people find more power and creativity.

Most of this guide you are reading is about your collaboration agreements. We are going to walk through how to use the bylaws and the process of creating them as a way for your group to be intentional about power, decision making, and values. Once you have a sense of those foundational pieces, you can make decisions about the formalities and detail. Those can get technical, so speaking with a lawyer could be useful.

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The Process of Writing Bylaws

Start with basics and build them out as necessary
Enable participation
The process matters as much as the product

If the journey to your bylaws includes real conversation between real people about things that they really do need to clarify, then the written document becomes the output of a very important process of alignment building.

If the journey to bylaws involves paying a lawyer to create a 30 page document that you will have to pay another lawyer to interpret for you, then the bylaws will likely just gather dust somewhere.

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The bylaws are a written record of agreements made between people, but written records are really only a small part of what enables an agreement to take effect in the world. For bylaws to actually matter, people have to understand them, be invested in them, and feel good about behaving in accordance with them. If the journey to your bylaws includes real conversation between real people about things that they really do need to clarify, then the written document becomes the output of a very important process of alignment building. If the journey to bylaws involves paying a lawyer to create a 30 page document that you will have to pay another lawyer to interpret for you, then the bylaws will likely just gather dust somewhere.

Creating bylaws can be an emergent process. It’s not always a good idea to create a detailed mental model of an organization, write bylaws that describe it, and then try to get the organization to develop in accordance with the script that you pre-wrote. Trying to figure all of it out ahead of time can require a huge time investment, and you will likely need to do substantial revisions as your organization grows and shift in ways you never would have been able to expect.

One good option is to start with the most basic bylaws possible. Then begin a participatory conversation about the basic values that you want to materialize in your structure. As you try to implement these values, you will start to mature a practice that works, and then you can record the practice in the bylaws once it’s something that you want to make a little more stable inside the organization.

As your organization is confronted with important questions like “how will we decide our strategy?” or “should we accept this donation/investment?” you will be forced to not only make decisions, but also make decisions about how and by whom are those decisions made. Each time you bounce up against a process question, it's an opportunity to make an intentional choice about power, and it’s an opportunity to further refine your bylaws.

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What happens if we don’t write bylaws?

It won’t matter, until it does
Boards won’t have guidance or guardrails
State law will control
Lack of clarity and transparency

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It’s not like the State is waiting around to find groups that don’t have bylaws and shutting them down. In fact, in CA you don’t have to file bylaws with the State, you just have to keep them at your office. This is not to understate the value that good bylaws can provide, its just to reduce the anxiety around getting them “wrong” or not doing it “fast enough.” But honestly, you should be able to get you most basic bylaws up pretty darn quick.

Bylaws are meant to guide relationships between people in your organization. Not having agreements can work for a while, but it's really useful to have a clear and transparent way of working through important issues that can serve as a reference point if a confusion, disagreement, or conflict comes to the point where a definitive resolution is necessary.

It’s best to have good agreements in place before these types of situations arise. Big picture agreements about how power, decision making, and values can be put in the bylaws. And lots of other agreements about conflict transformation, culture, and operational processes can be recorded elsewhere, like employee manuals.

Bylaws are also your opportunity to customize your relationship to State law. There’s all sorts of clauses in the CA law that say “in the absence of anything to the contrary in the bylaws …. blah blah blah.” Well, if you don’t want blah blah blah, then you have to put something in the bylaws.

In all likelihood, this won’t matter at all because the rule in the law is so far from your awareness that it won’t matter. But in the event that there is a legal dispute, it will be resolved in accordance with the state law, unless there’s something different in your bylaws.

One of the places where the lack of customization could really pop up and matter is with the relationship to your Board. The law says that the board can exercise the power of the organization. If you want to help the board understand how to use that power, how to relate to staff, or even go so far as to restrict the ways they use there power, then you will need to put that in the bylaws.

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Will we be sued if we mess up?

Probably not. There isn’t an agency that is looking for orgs to sue for their bylaws. It will really only become relevant if your breach fiduciary duties, encounter deep conflict with your board, or have fracture with staff.
Lawsuits are about more than the law. They are about fractured relationships.
You can’t really “mess up.” There are very few strict requirements for your bylaws, and most of the creative governance solutions are within the bounds of the law.

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To understand the legal consequences associated with you bylaws, we have to get really clear on how the law views bylaws.

Bylaws are private agreements that can be enforced with State power. In a sense, they are like contracts. You can form a whole bunch of written contracts with your friends and the state really won’t care. But if someone feels like the other has acted out of alignment with the agreement and they can’t resolve the conflict, then they can file a lawsuit and the State will enforce whatever agreement it thinks the two parties made.

Bylaws are pretty similar. It’s a set of rules that govern people’s relationships that the State will enforce if and only if a lawsuit is filed. Two things have to happen for a lawsuit to get filed. (1) someone has to want to sue and (2) the State has to be willing to enforce that type of claim between those parties. Let’s break that a part a little:

Someone wants to sue

There’s two really important variables to think about here: relationships and money.

When someone is suing, it’s usually because they feel wronged in some way and they are not able to rely on extra-legal power and relationships to resolve the issue. Given that bylaws only apply to people in your organization, this means that a person will only sue if all of the other relationships, conflict engagement processes, and cultural cohesion have failed so substantially that the person wants to call on the State. If someone really wants to sue, then they will sue regardless of what you do, but more often than not the vast majority of disputes between people can be resolved by mechanisms you create inside your community.

Also, lawsuits are really expensive. So the person who is suing needs to feel so strongly (or have so much money) that they are willing to make a big investment.

(2) Enforceable Claim

Directors, members, staff, and state cannot file a lawsuit to compel each other to do anything except in three circumstances:

To prevent an unauthorized actions
To dissolve the organization
Suing directors or corporation for violation of their authority

There are five different groups that can file a lawsuit:

(1) The corporation, or a member in the name of the corporation.

(2) An officer of the corporation.

(3) A director of the corporation.

(4) A person with a reversionary, contractual, or property interest in the assets subject to such charitable trust.

(5) The Attorney General, or any person granted relator status by the Attorney General.

So lawsuits happen when boards and their members do things that they aren’t authorized to do. Boards are implicitly authorized to do pretty much anything that’s legal on behalf of the organization. The things they are unable to do would be the things that are outside the charitable purpose, or that the bylaws dictate they cannot do.

(**GET MORE INFO ON AG SUITS**)

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Bylaws, Incorporation, and Tax-Exempt Application

Bylaws, Incorporation, and

Tax-Exempt Application

You do not need fully developed, values aligned bylaws ready before applying for tax exemption.
Getting your bylaws and governance structure where you really want it can be a long process.
It many cases, it can be wise to use simple preliminary bylaws to get yourself going and to include on your application for tax exemption, then take the time to change them over time.

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We tend to be proponents of innovate governance structures because we recognize that some of the ones we’ve inherited are antithetical to liberatory values.

The bylaws we create are always legal, but they also often contain clauses that are unfamiliar to traditional nonprofit lawyers and the IRS.

When you apply for tax-exempt status, the IRS will review your bylaws to make sure the basics are in there. Reviewers skim quickly and tend to look for things that are familiar. For this reason, it can be good to include the language they expect to see in the bylaws you use for the application.

You can always change and evolve your bylaws over time. The IRS will not examine your bylaws after your application, and no other state agencies or courts will refer to them unless there is a dispute. And if there is a dispute, people will be able to read them closely and understand them deeply (unlike in the initial IRS review).

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Starter Bylaws

Check out these starter bylaws for a short and simple document that could be adopted while your organization develops a more democratic organizational structure.

Starter Nonprofit Bylaws

to be used alongside this guide to creating more participatory and democratic bylaws

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BUILD-A-BYLAW

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SECTIONS OF BYLAWS

Purpose Clause
Mission Statement
Values
Management Principles
Power-holding Groups
Accountability
Strategy Process
Role of the Board of Directors
Board Meetings and Notice
Board Decision Making Norms
What decisions require board approval ?

Board Member Roles
Selecting the Board
Board Qualifications
Employee Compensation
Binding the Organization
Conflict of Interest
Whistleblower Policy
Amending these Bylaws
Document Retention
Dissolution

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Purpose Clause

What tax-exempt purposes does your organization serve?

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A purpose clause is different from a mission statement, though, technically speaking, you could have a single statement that fulfills the requirements of both.

A mission statement is something that describes the work you do in a way that helps orient your organization and communicate with outside parties (like funders, partners, and service recipients).

A purpose clause communicates how your activities align with tax-exempt purposes defined by 501(c)(3) status. It essentially says “we’ve read the law regarding tax exempt status and we will only do things that fall within the scope of the law.”

You will need a very clear purpose clause for your 1023 tax-exempt application. The IRS will be looking for whether the language you use is specifically aligned with the language of the tax-code.

Here’s what the IRS has to say about it.

“Your organizing document must limit your purposes to those described in section 501(c)(3). Those purposes are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The generally accepted legal definition of “charitable” includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency. Therefore, the phrase “relief of the poor” in your organizing document properly limits your purposes. Limiting your purposes by reference to section 501(c)(3) generally will be sufficient to meet the organizational test under section 501(c)(3). Your organizing document may also sufficiently limit your purpose by reference to a specific charitable purpose such as “relief of the elderly within the meaning of section 501(c)(3).” However, purposes listed in your organizing document broader than those listed in section 501(c)(3) may cause you to fail the organizational test. In that case, you will need to amend your organizing document before applying. A reference to section 501(c)(3) won’t ensure that your purposes are limited to those described in section 501(c)(3) if other provisions describing your purposes include one or more non-exempt purposes.”

The basic gist is that you want to describe your activities in terms of the language used in the IRS code. It may not be the statement you share with anyone else to communicate your activities, but it's good to have a really clear purpose statement in your bylaws.

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Sample: Purpose Clause

“The organization is organized exclusively for charitable, religious, educational, and scientific purposes under section 501(c)(3) of the Internal Revenue Code, or corresponding sections of any future federal tax code.”

“The organization is organized to provide relief of the poor through direct services to increase access to housing.”

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Mission Statement

What is the purpose of your organization?

How does it contribute to the world you want to see?

How does it relate to other groups working toward similar goals?

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Your bylaws can contain a mission statement that is narrower than your purpose. This opportunity to be specific about what your organization is doing can guide strategy in the future, and can shed light on the other issues to be addressed in the bylaws.

Your mission isn’t just what you want to see happen in the world, it’s the specific role that you want your organization to play. A good mission statement is written with an awareness of your particular role in the ecosystem that surrounds your work, and an intention about how to you want to relate to other partners.

Consider the difference between these two mission statements:

We organize a mass movement to end fracking
We provide training and infrastructure to a frontline community-led movement to end fracking

The end goal of these two missions is the same (to end fracking) but the way they might relate to communities and leadership are different. Remember, the mission statement is something that guides the legal entity, and the entity may be just a small part of the movement you are organizing or acting within.

If it’s not required in the bylaws, then why put it there at all?

The bylaws are where you are building agreements about power, decision making, and values. Those agreements are functions of your mission. In a way, they are just attempts to achieve your mission. So having you mission present to refer back to and ground your conversations and inform your leadership can be useful.

It’s an opportunity to anchor your specific mission deeper into your organizational praxis. Bylaws often feel like a more formal and permanent document then other pieces of written infrastructure. Including your mission statement can be valuable if you want to reflect that you are really committed to a particular articulation of your mission, or to raise the threshold required to change the nuance of the mission.

It’s also another opportunity for public education. If you want new folks to read your bylaws as a way of understanding what you are doing, how you are doing it, and how they can participate, then it will be helpful to include a clear articulation of your mission.

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Sample: Mission Statement

Sustainable Economies Law Center cultivates a new legal landscape that supports community resilience and grassroots economic empowerment. We provide essential legal tools - education, research, advice, and advocacy - so communities everywhere can develop their own sustainable sources of food, housing, energy, jobs, and other vital aspects of a thriving community.

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Values

What values will anchor your organization’s activities?

How do you want to relate to each other and behave inside your organization?

Are their values or principles you want to guide your programs or activities as an organization?

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Including values in your bylaws is a good way to anchor your organization to what is important to you. But just because they are in the bylaws doesn’t mean that they have to be written in some magic legalese. Write the values the way that your community understands them.

A value statement is not legally required, and is not likely to be legally enforceable. It’s a way for you all to increase alignment and accountability amongst yourselves. It’s important to remember that a statement is meaningless without practices and culture that makes it real, and those are things that need to be created and maintained over time.

When you are crafting your statement, its wise to attend to the process you use to create it. If you just have two people write it and put it on paper, it won’t do much for your organization. But if you engage your participants in a process of reflection and conversation that builds trust and creates shared understanding, then reflect this is a collaboratively written record of agreements, you are much more likely to cultivate the kind of investment in the values that will make them real in your organization.

Also, consider having a tiered value statement system. You could have a short value statement included in your bylaws, but then have an appendix that includes more detail and conversation about that value. For example, you could have value that says the following:

We are people of color centered and aim to create deeply diverse communities by actively embracing culture, practices, language, people, leaders, and communities that are representative of diverse people of color. We believe that centering people of color in this way is essential to counterbalance and decenter white dominant culture in realms of landownership and development.

And then have an appendix that includes notes and explorations of what that actually means. That way you have a clean record stating what is important to you, and if someone wants to make sure the group also tracks a specific subtlety, they can add it to the appendix. When new folks come into the organization they can read the bylaws, see what’s important, and get caught up on the history of the orgs thinking on the issue. The balance of definitive statements and the welcoming of many different truths can be powerful.

These are some values you may want to consider:

We prioritize the leadership of people of color
We set strategy based on input from impacted communities
Decentralized power is core to our mission
Generating earned-income is central to our self-sufficiency
Staff are best situated to sense needs and opportunities

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Sample: Values

Participatory Governance:

People involved in and touched by our organization deserve to be a part of the decisions that impact them. Power and decision making structures that involve people with direct experience of issues are not only more supportive of personal sovereignty, but also more effective in achieving goals.

Radical Inclusivity:

We are creating a space where all people can belong, regardless of nationality, religion, race, class, gender, sexual orientation, ability, or any other dimension of their experience. We acknowledge that we live within and have been conditioned by a system that centers some dimensions of humanity at the expense of others. In order to create a radically inclusive space we must take proactive steps to elevate the people, identities, cultures, energies, and characteristics that our dominant system marginalizes.

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Power With, Not Power Over:

We are creating a space where all people can step fully into their power. We support each other to exercise our power in ways that support the power, visions, and development of one another. We interrogate and transform relationships where one person’s empowerment relies on the disempowerment, control, or coercion of another.

Accountable Solidarity:

Our work and our liberation is deeply bound together with many communities. We foster relationships and understandings that will allow us to do our work in a way that uplifts all people. We recognize that this requires taking proactive steps to ensure our activities do not unintentionally reproduce the oppression of the dominant system by excluding the needs of women, people of color, indigenous people, disabled people, or any other group that is often denied voice in the decisions that impact them. We engage in the ongoing practice of solidarity, and remain open to feedback from all communities we touch.

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Management Principles

How will you coordinate activities inside your organization?

How will you make decisions, delegate, and be accountable to each other and your work?

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Every mission-driven group needs a way to organize and coordinate the various people and tasks that are involved in the work. This organizing and coordinating is often referred to as “management.” This necessary function can be filled by specific individuals (i.e. managers), participatory process, rotating role fillers, or any other solution you can come up with.

You do not need to put lots of detail about how management in your organization will work into the bylaws, but it’s a good idea to plant some seeds in the bylaws so that the system grows in alignment with your intentions and your values. It’s also valuable because it will help your board understand how to fill their role, and help your lawyers understand what you are really trying to do.

These principles don’t need to a permanent and/or comprehensive articulation of how you will do things. They are there to provide a basic orientation and guide future development. They are also useful to give board, staff, volunteers, and external support (like lawyers or consultants) a general sense of how you work.

In some ways, this can be understood as a further grounding of your values: How are you operationalizing your values in the way you are working together?

Here are two quick examples of very different statements of management principles:

The organization will be managed by an Executive Director that serves at the discretion of the Board.

The organization will be managed through participatory processes designed and executed by the staff. The Board will monitor and support staff self direction.

Starting with something simple like this can help your group get on the same page about what you are trying to do. Over time you can build in more specificity to anchor yourselves deeper into intentions.

A statement of management principles can also help resolve an odd little legal ambiguity that can give rise to a serious and unnecessary friction. The ambiguity appears in the CA law like this:

“The board may delegate the management of the activities of the corporation to any person or persons, management company, or committee however composed, provided that the activities and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the board.” Citation

Essentially this says that the board has all the power, but that it can delegate the power, as long as it maintains ultimate direction. If this doesn’t make a lot of sense to you, have no fear, you’re not alone.

This rule often manifests as a board that delegates power to an executive director (ED) and reserves the right to fire the ED if the ED doesn’t meet their expectations. If we don’t put anything in our bylaws about management then the inertia of “best practices” and rote legal interpretation has more room to creep into our organization. But we have other options! This is a legal gray area, and that means there is lots of room for creativity.

The statement of management principles helps the Board and the staff understand how they should be showing up. A highly refined statement will also detail what it means to you for the board to exercise “ultimate” management and direction. Does this mean giving specific commands? Does it mean acting as a body for disinterested reflection in support of emergent growth? Does it mean holding staff accountable to staff-created norms and metrics? Is it management like a classical concert conductor who works to create a specific unified piece that meets her own interpretation? Is it management like a soccer coach who tries to get the right people on the field with the right tools and let them do their thing?

Here’s a set of management principles that you might want to play with:

People with the most direct experience of issues have the most insight into what action is best.
People who are affected by decisions should have the power to influence those decisions.
Professional and technical expertise should be leveraged to support, not overpower, the voice and needs of those directly connected to the issue.
Spaces and people that are distant from ongoing activities and their impacts are useful to coordinate collective action and hold long term concerns, but they also risk breeching principles one through three.

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Sample: Management Principles

The organization is managed through participatory processes designed and stewarded by the staff. These processes include input from external stakeholders when appropriate. The processes are expected to emerge over time in response to the activities of the organization. Staff is responsible for maintaining a self-management handbook that details the practices they are using to coordinate their activities. The Board monitors and supports staff self-direction.

The following four rules are general guidelines to inform the creation of participatory management structures.

People with the most direct experience of issues have the most insight into what action is best.
People who are affected by decisions should have the power to influence those decisions.
Professional and technical expertise should be leveraged to support, not overpower, the voice and needs of those directly connected to the issue.
People and teams that are not directly connected to impacted communities can be useful to help coordinate collective action, support logistics, and hold long term concerns (like financial planning), but can also run the risk of mistakenly consolidating power and breeching principles one through three.

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Power-holding groups

Power-holding Groups

What groups make decisions? What decisions do they make? Who is in these groups?

Is there a board? A management team? A strategy team? A policy team? Others? What is the role and power of each?

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If every single decision had to incorporate the feedback from every single person in the organization, things would move incredibly slowly and increasing membership would be nearly impossible. And if important decisions start to get made by subgroups of people, but those processes are not transparent and accessible, all sorts of nefarious power dynamics can creep in.

The basic idea behind defining power-holding groups is to transparently empower smaller groups of people to make decisions, create, and execute. When we clearly articulate what powers and responsibilities fall in what group, it becomes easier for the groups to know their specific priorities without needing to be instructed by a “supervisor.” And when we make it clear how people can join those different teams, we can enable people to participate in the places they feel most called.

Picking which groups to write into your bylaws is a delicate processes. It probably isn’t a good idea to create a complicated mental model of how you hope your organization will work, because it may not support the actual lived experience of working together. On top of that, it is natural for groups to come and go throughout the lifespan of your organization (i.e. program-specific working groups and policy advocacy coalitions), so it can be tricky to get the bylaws to reflect the full picture at any point in time.

The groups that you want to write into your bylaws are the ones that you know you want to always be in operation and that form the basic scaffolding of your organization’s vision. You don’t need to define every activity they do, but just give basic guidance of the ways they interact. Here are some specific examples:

Board
Staff
Strategic Alignment Team
Fundraising Team

As you develop both your governance practice and your bylaws, you will likely want to think deeply about what groups make what decisions. Here are just a few of the groups and decisions that you may find relevant:

Groups

Staff as a whole
Staff teams
Executive Directors
Project Leads
Board
Board Committees
Advisory Committees
Community Teams
Collaborations between staff and partners
Teams formed from combinations

Decisions

Fundraising strategy
Short term priorities
Labor delegation
Hiring/Firing
Budget allocations
Project goals
Evaluation metrics�

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Sample: Power-Holding Groups

Sample: Power Holding Groups

General Circle:

The General Circle is comprised of all staff members. This body sets policies for the organization, makes high-level decisions about strategy implementations, delegates decisions and activities to appropriate program circles, and approves creation of program circles.

Program and Admin Circles:

Program circles are comprised of staff and, when appropriate, external partners. These circles are responsible for fulfilling the purposes that have been defined for them by the General Circle. The exact number, configuration, and membership of these circles will change over time. Members of these circles have the power to make decisions and execute their purpose in accordance with their best judgement. If their activities will impact another circle or the organization as a whole, they must seek advice/input from other affected people.

Board of Directors:

The Board does not direct the on-the-ground work of the organization. Rather, the Board primarily directs

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the processes of governance that enable staff to accomplish the on-the-ground work. For more information on the role of the board, see the “Board Role,” “Board Approval,” and “Board Member Roles” sections below.

Financial Management Team:

The financial management team is comprised of staff members and one board representative (the Financial Owl, more info below). This team is responsible for ensuring responsible banking, accounting practices, and financial transaction practices. They are also responsible for stewarding a participatory budgeting process, and ensuring the final product of that process is financially feasible.

Strategic Alignment Team:

The Strategic Alignment Team is comprised of representatives from the staff, representatives from impacted communities, representatives from partner organizations, and one board member (the “Mission Owl” defined below). This team helps staff reflect on their priorities and their impact on issues and people.

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Accountability

Who outside your organization do you want to be accountable to?

What mechanisms exist to make this accountability real?

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Accountability groups can act as gatekeepers for the organization. This can be a great opportunity to put representatives of specific interests or populations in positions to hold the organization in integrity without also demanding that they contribute significant time and labor.

To create an Accountability group, you will want to be clear about what they are to be consulted about, what they have the power to say “no” to, who is in the group, and what constitutes a “no” (is it a down vote from one member, a consensus of no, a majority?).

For example: The staff of a policy advocacy organization might do all the work of researching, developing legislation, and running a campaign, but they might want to gather an accountability group comprised of representatives from key partner organizations that represent impacted communities and give them the power to halt the process before moving into the campaign phase.

Giving groups this type of power is delicate business. It’s a powerful mechanism to hold you in alignment, but it can be corrosive if the members of the accountability body do not wield their power mindfully.

It may be appropriate to include accountability groups directly in your bylaws, and it might be better for you to just think critically about who you want to be able to tell you to stop because you are unintentionally doing harm, and create other mechanisms to make sure you get that feedback.

Your power-holding groups can also be accountability groups. The reason we’ve described them as separate here is to emphasize the difference between a group that has the positive power and responsibility to do things, and a group who has the power to say no to someone else’s efforts.

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Sample: Accountability Statement (additional detail in notes)

Sample: Accountability Statement

(additional detail in notes)

There are three levels of accountability in the organization: Interpersonal, Intra-organizational, and Community.

Interpersonal: We foster a culture of direct and compassionate communication, personal growth, and acceptance. We encourage and welcome loving feedback about the impacts of our behavior on the work and our community.

We engage in a bi-annual self and peer review which gives us an opportunity to reflect on our own activities and get supportive reflections from each other.

Intra-Organizational: Decision-making bodies within the organization are accountable to one another. If a program circle makes a decision that might impact another program circle, they are required to get that other circle’s consent. If a program circle makes a decision that impacts the organization as a whole, they are required to get the consent of the General Circle.

Community: Every member of our organization is expected to actively build relationships with people outside our organization that are impacted by our work. Our strategy is developed by the Strategic Alignment Team which includes representatives from those communities.

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There are three levels of accountability in the organization: Interpersonal, Intra-organizational, and Community.

Interpersonal:

We foster a culture of direct and compassionate communication, personal growth, and acceptance. We encourage and welcome loving feedback about the impacts of our behavior on the work and our community.

We engage in a bi-annual self and peer review which gives us an opportunity to reflect on our own activities and get supportive reflections from each other.

We use a consent based decision-making model that gives anyone directly impacted by a decision the ability to say no to that decision, provided that the impact is so troublesome that it (1) interferes with their ability to do their job in a way they cannot accept, (2) contradicts the values of the organization, (3) sets the organization back in its mission, (4) makes it so they can no longer participate in the group with integrity.

Intra-Organizational:

Decision-making bodies within the organization are accountable to one another. If a program circle makes a decision that might impact another program circle, they are required to get that other circle’s consent. If a program circle makes a decision that impacts the organization as a whole, they are required to get the consent of the General Circle.

Once per year, the Mission Owl stewards a process where the circles report their activities to the entire organization and receive feedback on how well they were aligned with the overall goals and strategy of the organization.

Community:

Every member of our organization is expected to actively build relationships with people outside our organization that are impacted by our work. Our strategy is developed by the Strategic Alignment Team which includes representatives from those communities.

Program Circles are expected to regularly work in close partnerships with people outside the organization. All policy advocacy, media campaigns, and site-specific projects must receive the input of at least one partner organization that represents the interests of impacted communities.

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Sample: Accountability Group

Vision Protectors

Parts of the Bylaws are intentionally difficult to change, in order to prevent powerful stakeholders from steering the Organization away from its vision or pressuring the Organization to sell off assets intended for permanent community benefit. Any page of the Bylaws with a footnote that says “Amendment of this slide requires approval of Vision Protectors,” may not be changed without the approval of 2/3 of the below individuals (the “Vision Protectors”), if living.

A proposal to amend such a page must be sent to the below individuals by email with a request for written approval or disapproval and a deadline to respond within 50 days. Organization shall maintain records of all such communications. A Vision Protector will be presumed to have approved the change if, after Organization sends them two reminder emails spaced a week apart, they fail to respond with approval or nonapproval within 50 days of the first email.

The following Vision Protectors were approved with unanimous consent by the Board and Staff:

_______________________ ____________________________ ________________________

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Strategy Process

How is your long term strategy created?

Who is involved in creating it?

How do you hold yourself in integrity with it?

How do you balance the benefit of planning in advance with the benefit of responding to emerging needs?

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The group that creates your strategy has significant power to set priorities, determine activities, and define success. If your organization follows the strategy, every member will feel the effects of the decisions made by the group that set it. This makes it very important to think about both who and how the strategy is created.

There are limitless possibilities for who has power to influence the strategy and what processes you use to include voices and synthesize them into a coherent vision. It’s important to be intentional about who’s values and perspectives you want to guide your work.

The full articulation of this doesn’t actually need to be in your bylaws. The real purpose of including it is to help your board members orient to the character of your organization. Many board members arrive thinking that it is the board job to steer strategy -- if you want a different arrangement, simply mentioning that in your bylaws can be helpful. You can include a clear statement about how you actually do want to create strategy.

This could begin with a broad statement like:

Multi-year strategy will be created through a participatory process that includes staff, partner organizations, board, and community members. The board of directors will steward the logistics of the process to ensure a strategy is developed, and will have a voice in the actual creation that is equal to all other stakeholders.

And it could evolve into a more specific articulation of principles or practices involved in the creation of strategy. Or, the bylaws could stay the same even if the practice evolves. The process could be recorded and iterated upon elsewhere and the bylaws could just include a note to refer to that other document.

Here are some options for setting strategy to consider:

Board retreats?�Staff retreats?�Staff and board retreats?�Feedback from community?�Responsiveness to partners?�

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Sample: Strategy Statement

Strategy emerges from a worker-directed process that incorporates the input of community partners, impacted communities, and the board of directors. The board of directors helps the staff reflect on the efficacy of the process.

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Role of the Board of Directors

Role of Board of Directors

Generally speaking, what is the mandate of the board?

How do they relate to bodies such as staff or volunteers?

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This section is in some ways a further specification of what you have decided about power holding groups (slide 24). It’s helpful to get really specific about your board because its common for people to get unclear or come into conflict when there are not clear expectations. This is particularly true because most people have built in assumptions about board based on prior experience or training in nonprofits.

As we saw in the notes for Management Principles, the board is legally required to exercise the corporate powers and ultimately direct the organization, but there is tremendous ambiguity about what that actually means. And that ambiguity creates the space for us to define exactly what it means to our specific organization. Your bylaws can include a specific statement that describes the role you want the board to play as it relates to the rest of the organization.

Here’s an example of what that could look like:

The primary role of the Board is to create and oversee a system of decentralized, participatory, and inclusive governance and operations. In other words, the Board stewards the process through which work is carried out, as opposed to directing the substance of the work. The Board will provide ongoing oversight of the activities and internal functioning of the Organization. The Board will provide feedback and will avoid direct intervention, unless the governance process results in harm, undue risk, or movement away from the Organization’s mission and anchoring principles.

As you define the role you want your board to play, it is important to track what the legal duties of the board actually are (hint: they are less than most folks would expect). You don’t want to set up bylaws that prevent the board from filling their duties.

This varies by state, but generally speaking, board members have the legal responsibility to fill the duty of care and the duty of loyalty. The duty of care is basically “make sure the money is spent on the mission.” The duty of loyalty is basically “don’t spend the money to benefit yourself.” The board cannot delegate away these duties, filling them is pretty much the reason for the board’s existence.

One way to fill these duties is to dictate mission, oversee finances, and approve the budget. If the board is doing that, then they can be sure about what’s happening. But that’s not the only way to fill their duties. They could also oversee collective process and/or double check accounting practices.

Here are some ways boards could fill their duties:

Planning strategy, or
Creating budget, or
Reviewing staff created budget, or
Facilitating collective processes, or
Hold staff in integrity with community generated priorities, or
Accounting, recordkeeping, and issue spotting, or
Something else entirely!�

A Note on the Law:

Fiduciary duties are a big deal in the eyes of the law. Failing to perform them is one of the few reasons a board member could be held personally liable. This makes it important for your bylaws to specifically articulate how the board members will fill their duties. The clarity also helps them avoid reverting to exercising directive power over staff in an attempt to avoid legal repercussions.

For the record, legal repercussions for individual board members are pretty unlikely. They usually happen when a board member embezzles money, or tries to use money intended for one purpose (say feeding the homeless) to do something totally different (like buying a museum). The cases tend to arise when things are so bad that the Attorney General steps in, or when another board member issues a challenge. These duties are important to keep track of, and there’s more space to experiment here than most “best practices” suggest.

At the end of the day, there’s also this thing called the “business judgement rule” which says that a board member can’t be held liable for doing anything a “reasonable person in like circumstances” would do. If you ask us, releasing most of the power to determine strategy an executive director, a staff collective, and/or a community council and simply maintaining enough power ensure solid accounting, financial planning, and basic strategic alignment is pretty reasonable.

Helping your board members get clear on their actual legal responsibilities and how they are going to fill them can help put their minds at ease.

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Sample: The Role of the Board

The Board does not direct the on-the-ground work of the organization. Rather, the Board

primarily directs the processes of governance that enable staff to accomplish the on-the-ground work.

The role of the Board shall always be to fulfill its duty of care by:

● Closely monitoring the activities of the Organization,

● Regularly reviewing financials and budgets,

● Ensuring compliance with the law,

● Reviewing internal policies adopted by staff and ensuring that the staff is engaging in a participatory governance process that meets the standards described in these Bylaws,

● Intervening to change or make a decision when the Board reasonably believes that staff have made a decision, are contemplating an action, or have taken an action that is overly risky, illegal, threatening to the Organizations tax exempt status, or contrary to the mission of the Organization; any such intervention shall be temporary in nature until the Board is satisfied that the system of Staff Trustee governance can carry on, uninterrupted, to carefully govern and advance the mission of the Organization.

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Board Meetings and Notice

How often should the board meet?

How can those meetings take place?

How are meetings called?

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Unless you otherwise state in your bylaws, California law provides requirements for how often meetings of the board should be take place, how they can be called, how notice of meetings should be provided to board members, and more. Your organization should either be familiar with these requirements, or clearly state in your bylaws how your organization will coordinate meetings of the board.

In general, your bylaws should probably state the minimum requirements for board meetings. If your organization doesn’t follow the procedures written in your bylaws, you could be at risk of failing to uphold all the required “corporate formalities.” For example, if your bylaws say the board will meet every month, but in practice you only meet quarterly, you could open yourself to some risk. However, there’s no problem with saying in your bylaws that the board will meet at least once per year, and in practice you decide to meet monthly or quarterly.

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Sample: Board Meetings and Notice

The Board will meet at least twice per year, with at least 15 days notice. Any 2 Directors may call additional Board meetings with at least 2 days notice, and meetings may be virtual.

Organization may provide notice by mail, text message, email, or an electronic platform accessible to Directors.

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Board Decision Making Norms

Board Decision-Making Norms

When the board gathers, how will it make decisions?

What constitutes quorum?

Consensus? Gradients of Agreement? Vote?

How are meetings facilitated?

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There are tons of different ways to do decisions.

One of the more familiar ways is to just do a majority (50%+) or supermajority (66%) vote.

You can also get more creative by using any type of consent, consensus, or gradients of agreement based decision making systems.

All you need to do is make sure the details of how you will do the process are recorded in your bylaws.

For more on consent-based decision making, check out this short resource. (There are many other resources out there.)

For the last question (how are meetings facilitated?) you do not need to be detailed in your bylaws, you can just say something generally like “the board chair will facilitate meetings” or “we will use Robert’s Rules of Order (or any other system that’s aligned with your values.” As you develop, you may want to include a more detailed statement about this somewhere like your board handbook or onboarding documents that explains things like how the agenda will be set, how people can get items on the agenda, and whether you will tend to have open conversations, use stack, or speak in a council-style circle.

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Sample: Board Decision Making Norms

Sample: Board Decision-Making Norms

Quorum is considered two-thirds of voting board members.

All decisions are made through a consent-based process. When deciding, all board members can ask clarifying questions and voice reactions to the proposal. After questions are answered and reactions either responded to or incorporated as changes to the proposal, the meeting facilitator will ask if there are objections.

Any board member can object to a decision on the grounds it violates a fiduciary duty, does irreparable harm to the organization, or sets the organization backward in its mission.

A decision is adopted if there are no objections.

The board may make decisions outside of a meeting if all directors unanimously consent to the decision in writing. For the purposes of this Section only, “all directors” shall not include any “interested director” as defined in Section 5233 of the California Nonprofit Public Benefit Corporation Law and the Conflict of Interest Policy of these bylaws.

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What Decisions Require Board Approval?

What are the specific decisions that will require board approval?

When does this happen via a proposal generated by staff or another body that is then brought to the board?

When does this happen via a board led process to generate the proposal?

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Defining exactly what kinds of decisions need to be approved by the board helps the board understand its role, and helps the rest of the organization understand their own power.

Clear norms help people in the organization self-monitor the exercise of their own autonomy. They know what they are empowered to do, and they also know when they need to check in with the board.

In our experience, people in participatory governance structures with non-traditional boards often find themselves asking “do I need board approval in order to do XYZ?” Having a clear statement of when they actually need approval is really helpful, and it helps the board make sure they don’t overstep.

This is one of many opportunities for you to discuss and define how to balance decentralized autonomy while maintaining the structural/financial resiliency of the organization and being accountable to the mission. The question of “what body should make what decisions?” will likely pop up all across your organization. The exact contours of your practice will shift over time. Remember: some of it might live in you bylaws, and some of it might live elsewhere such as an internal staff handbook.

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Sample: Board Decision Matrix

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Board Notice (but not approval)	Board Notice & Vote	Board Exclusive Authority
Annual Budget (Board can veto within 30 days)	Hiring and Firing Decisions	Amending bylaws or articles
Exceeding 80% of adopted healthcare budget	Change to Mission Statement	Adding or removing board members
Any staff decision made after considering a conflict of interest	Staff Compensation and Benefits
	Asset purchase >$50,000

Board Notice (but not approval) - Staff will provide board members with notice of each of the decisions described under this heading within a reasonable time after the decision is made. Appropriate Staff Liaisons will report to the relevant Board Owl.

Board Notice & Vote - The decisions or actions under this heading are originated by staff as needed and require staff to give the board notice and seek approval by vote by the Board of Directors. The notice and board decision can take place either at a board meeting or outside of a meeting (e.g. by email).

Board Exclusive Authority - The decisions or actions listed here are within the exclusive authority of the Board of Directors. Staff may make recommendations to the board, but the Board of Directors ultimately can choose to accept or not accept these recommendations.

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Board Member Roles

Are there specific roles held by individual board members?

How do these support the functioning of the board and organization?

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In addition to specifying how you want the board (as a body) to relate to the staff (as a body) you can also create roles to inform how specific members of your board show up. Guidance for board members helps them figure out how to best support your work, and reduces the chances that they slip into an unconscious pattern while doing their best to figure out how to help. Creating roles can also sharpen into focus what types of people you will want to recruit onto your board. For example, if you realize that one of the roles you want is finance and accounting oversight, then you will quickly realize it’s important to get that skill set on the team.

You will also want to carefully track the required board roles for your State. Make sure you have people who are filling them and that you define what it means for someone to fill that role at your specific organization. For example, CA law requires that a board have a President, a Secretary, and a Treasurer and that the President and Treasurer be different people. You’ll likely need to list the names of these people on official documentation, and in the unlikely event the state wants to intervene in your organization, these folks will be among the first contacted.

Importantly, the law doesn’t really specific what exactly the President, Secretary or Treasurer actually do. It’s a good idea to name how you want these roles to function in your organization so that folks know how to fill them without just defaulting to assumptions associated with “Presidents.”

The Sustainable Economies Law Center provides one example of an organization of board roles (for more detail see the Law Center’s Board Handbook and Orientation Guide). They’ve named their roles “owls” to indicate that these people are supposed to observe, reflect, and share wisdom as opposed to direct or control.

Staff Representative (President)

Does logistics, facilitation, and sets agenda for the board

Mission Owl

Ensures mission alignment by reviewing programmatic activities and discussing any concerning activities with staff

Financial Owl (Treasurer)

Maintains awareness of finances and reflects any potential issues to staff and board

Legal Compliance Owl (Secretary)

Keeps records of board meetings, reviews legal compliance needs, and maintains sensitivity to 501(c)(3) related issues

Governance Owl

Ensures staff create a participatory polycentric governance system

Please remember, it’s not always advisable to create sharply delineated roles. And even if you do, be prepared to hold them loosely and tinker with them as people and workflows start to fall into place. There’s a bit of a dance between our pre-created mental models and the emergent needs of our team. Letting either one dominate can lead to roadblocks.

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Sample: Board Member Roles

The Organization shall have between 6 and 12 directors and collectively they shall be known as the board of directors. The number of directors at any given time shall be determined by the board. The minimum and maximum number may be changed by amendment of this bylaw. Board members shall serve 2 year terms.

Directors may remove a Director for any reason with approval of 2/3 of Directors and appoint someone to replace them.

The following roles and offices shall exist:

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President - The President coordinates board logistics, facilitates board meetings, and sets board meeting agendas

Financial Owl (Treasurer) - The Financial Owl ensures the organization is using responsible financial management and accounting practices. They sit on the Financial Circle.

Legal Owl (Secretary) - The Legal Owl keeps board notes and ensures the organization has systems to remain compliant with relevant laws.

Governance Owl - The Governance Owl supports the creation of a staff self-management system through monitoring, reflection, and advice.

Mission Owl - The Mission Owl helps the organization reflect on whether its programs, strategy, mission, and vision are aligned.

Solidarity Owl - The Solidarity Owl helps the organization reflect on how well it is acting in concert with related organizations and impacted communities.

Board Roles In Detail

The following level of detail can exist in a board handbook or in the bylaws themselvces.

Mission Owl

The Duties of the Mission Owl shall be:

● Reviewing Organization’s programmatic activities on a roughly monthly basis.

● Ensuring that Organization is effectively advancing its mission.

● Discussing any concerning activities with staff and bringing unresolved concerns to the Board.

Mission Owl is expected to be able to describe to other board members the types of strategies the staff is using to forward the mission. They are expected to notice activities that may not be aligned or may jeopardize tax-exempt status. Staff does not need to seek approval for specific activities. Mission Owl does not have the power to end a program, but only to call to the board's and staff’s attention how it might jeopardize tax status, alienate funders, or be unaligned.

Financial Owl (Treasurer)

The duties of the Financial Owl and Treasurer shall be:

● Serving as the corporation’s Treasurer as required by the California Corporations Code,

● Communicating with Staff Trustees in charge of managing Organization’s finances on at

least a quarterly basis to learn about current expenditures, projected revenue, and any changes to the budget.

● Reviewing internal procedures for managing and reviewing finances,

● Ensuring that Staff are keeping adequate and correct accounts of the corporation's properties and business transactions, including accounts of its assets,

liabilities, receipts, disbursements, gains and losses.

● Asking Staff about any confusing or concerning budget items, expenditures, or transactions, and bringing any unresolved concerns to the Board.

● Ensuring that the full Board receives reports about the financial status of Organization

● Ensuring that Organization makes its financial information available to the public, in accordance with any Policies regarding transparency.

The Financial Owl is not expected to take part in financial decision-making by Staff Trustees, but may intervene when there is concern about misfeasance, expenditures which do not advance Organization’s mission, or financial instability of Organization .

Legal Compliance Owl (Secretary)

The Duties of the Legal Compliance Owl and Secretary shall be:

● Annually reviewing a legal compliance checklist prepared by Staff and ensuring that Organization is staying up-to-date with all filings and is operating in compliance with the law.

● Ensuring that Organization is keeping proper meeting records and following procedures under the Corporations Code

● Ensuring that Staff provide the public with all reports and information required by Organization policies on Transparency and Recordkeeping

● Fielding and responding to complaints and grievances by Staff in accordance with any Whistleblower or Grievance Policies adopted by Organization

● Keeping an online folder shared with all Directors containing minutes of all meetings of the directors, and, if applicable, meetings of committees of directors, recording therein the time and place of holding, whether regular or special, how called, how notice thereof was given, the names of those present or represented at the meeting, and the proceedings thereof. See that all notices are duly given in accordance with the provisions of these bylaws or as required by law.

● Reporting to the rest of the Board about legal compliance status and the status of any complaints

● Maintaining familiarity with the limits and possibilities of 501c3 law and ensuring that Organization stays focused on its tax exempt purposes

Governance Owl

The duties of the Governance Owl shall be:

● Developing an understanding of internal governance practices and procedures of Organization

● Reading new proposals and policies adopted by Staff

● Ensuring that the Staff are working to create polycentric governance structures

● Communicating with individual Staff to assess how smoothly internal governance structures are operating

● Discussing any concerning proposals, policies, or governance practices with Staff and bringing any unresolved concerns to the Board

● Reporting to the Board about the overall status of internal governance practices

● Reviewing decisions at all levels to ensure that they were made in adherence to any Organization policies

● Scheduling and facilitating meetings, or appointing and overseeing others to schedule and facilitate meetings

The Governance Owl is not expected to exert an influence on any particular policy or proposal. The Owl is expected to be knowledgeable enough about policies to be able to notice troubling trends. The Owl is expected to make an inquiry into whether the process being used is functioning in a manner that keeps the organization aligned and the staff fulfilled. Staff are expected to coordinate a yearly evaluation of the governance and share it with the Governance Owl.

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Selecting the Board

How will you select who is on your board?

By vote by existing board members? Applications? Membership vote? Staff vote? Some combination?

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The “right” way to choose your board will depend on your organization and on the role that you want the board to play. Also note that you can choose different selection methods for different board seats. For example, maybe you want a staff representative on the board who is elected by the staff, and a Legal Compliance Owl appointed by the rest of the board.

Here are a couple questions that might help guide you.

Do you want them to feel a mandate to lead?

If you want the board to feel like they are generating strategy and momentum on behalf of the organization/community/members, then electing them by vote is probably a good idea. That will make sure the people who will be impacted by their decisions have a say in who fills those roles, and it will help your board members feel seen and accountable.

But you may not want them to feel that mandate. You may really want them to be showing up to supply specific technical expertise. If that is the case, then you may not want to do a vote. The vote could give them the false impression that they should be supplying vision and direction, and might result in someone without the specific expertise required being elected to the position.

�Do you want to frame the board as central to your org?

The more focus and attention the process of creating a board entails, the more important the board can appear and become. A big public process might create the impression that the board is doing something it’s not. Of course, a quieter process can appear clandestine and subvert trust.

In any event, you will want to be very clear about exactly what role your board will be playing and why the structure has been designed that way.

�Do you want to ensure certain technical expertise is present?

If it is important that certain key skills are represented on the board, then it is important that everyone who influences the board membership know what those skills are, why they are important for the board, and (ideally) can evaluate whether a potential board member has those skills. Sometimes this can mean that board transitions should happen through appointment or election by existing board members, sometimes it means that the entire membership needs good education about how to make an informed vote in an election.

�

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Sample: Selecting the Board

Board candidates can be nominated by members of the staff or the board. Candidates are nominated for a particular role.

Any member of staff or board can object to a nominee on the grounds that they would (1) interfere with their ability to do their job in a way they cannot accept, (2) contradicts the values of the organization, (3) sets the organization back in its mission, (4) makes it so they can no longer participate in the group with integrity.

After any objections to nominees have been processed, board members are chosen using a majority vote of existing board members and staff.

If there are more than one nominee for a position, the vote is between the multiple nominees.

If there is only one nominee for the position, the vote is between that nominee and continuing the search process to find a better fit.

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Board Qualifications

Who do you want on the board?

What identities and backgrounds do you want represented?

What specific skills do you want them to have?

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The naming of the characteristics of the folks you want on your board is usually NOT included in formal bylaws. It is more often included in board handbooks or other non-legal organizational policies.

We are including it here in this guide because, even though it might not live in your bylaws, it is an inquiry that is intimately tied up with your vision of your structure.

Like any team, who you will want on your board is a function of what you want your board to do.

For example, if you are going to want your board to set the strategy of your organization, then having people who can think strategically and are impacted by the issues you are addressing will be particularly important. But if you are designing a board to specifically to not guide the direction of the organization but instead support the staff vision, then you may want people with specific technical skills and are clear on the fact that they are not there to guide the strategy.

Diversity, inclusion, equity, and representation always matter; but they matter differently in different circumstances. If you see your board’s role as providing technical, financial, and HR advice in service of the staffs vision, then it is really important that the staff is representative of and connected to impacted people; whereas it may be less important for the board because they are actually playing a support role.

When choosing your board, also consider the ways that board membership can provide both training and credibility. Welcoming young leaders or leaders that are marginalized from other forms of training/credibility can be a way to enact values around equity.

At the same time, it is important to consider legal exposure. If, for example, your organization is engaging in direct action or other strategies that might attract opposition from State actors or other large institutional forces, your board members might be exposed to personal pressure or lawsuits. So while it may be valuable to prioritize representation on your board, it may also be valuable to have your board play a bit of a buffer role. For example: an organization of undocumented immigrants that’s primary activity is civil disobedience at detention centers might not want the people legally/publically identified as their board to be undocumented immigrants. They may instead want a board that primary serves a support function and is populated by allies who’s privilege insulates them more from potential attacks.

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Sample: Board Qualifications

The following are characteristics all board members should have:

Compassionate communication
Support of staff-directed participatory governance
Familiarity with the issues the organization seeks to affect
Demonstrated commitment to solidarity
Awareness and ownership of their social identities
We particularly value identities that are commonly marginalized

Additionally, board members must have the skills necessary to fulfill their roles (MORE DETAIL IN NOTES)

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Employee Compensation Policy

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How do you determine how much people are paid?

Are you making sure that you are not over-paying people and thus violating the restrictions on private benefit?

How will you make sure your practice is fair, just, and equitable?

What parts of your policy do you actually want in your bylaws?

There are three reasons to have a compensation determination policy: (1) Equity/Justice, (2) Staff Coherence, and (3) Legal responsibility

Your whole compensation policy does NOT need to be in your bylaws. All you need is the bit that will ensure that you don’t overpay a staff person so much that it violates the restrictions on private benefit

Equity/Justice

How much we pay people and the logic and process we use to make those decisions has everything to do with equity and justice. So much of our conscious and unconscious values are built into our decisions about pay, and they have a tremendous impact on our lives. A compensation determination policy is an opportunity for you to get clear on your practice. For more ideas about how to create a policy that is really aligned with you values, check out this resource: https://drive.google.com/file/d/1ZTwrxPtaj2rISOUCgep6fp0DiVonxGXa/view

Staff Coherence

Compensation can bring up a lot for people; especially when there are differences in the amount that people are paid. It’s really helpful to communicate to everyone how decisions about compensation are made so they can understand the decision, and they can voice concerns in a principled way.

It’s also worth remembering that you will have to publicly report the salaries of anyone making more than $50,000 on your yearly 990. This means that your employees can access this information. If they see differences in pay without understanding why those differences exist (or if you don’t have principled and just reasons for why they exist), people on staff can rightfully get a bit upset about it.

Legal Responsibility

The legal responsibility is essentially to make sure you are not using money that should be dedicated to your mission to benefit a highly paid employee unduly. This becomes more of an issue the more you are paying someone and/or if they person has significant informal power over the decision (for example, a founding ED who recruited all the board members personally).

For these kinds of decisions, you’ll want to consider some extra safeguards such as getting independent review of the decisions, comparing the salary to other comparable positions, and recording the way that you deliberated the decision.

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Employee Compensation Policy

Sample: Employee Compensation Policy

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Employees shall be fairly compensated.

Either of the following two methods of determining compensation shall be presumed to be fair, though other methods of determining fairness may be applied:

The employees collectively chose and all voluntarily agree to their rates of compensation, and the Board approves it; or
Employees receive, at minimum, the amount considered by the MIT Living Wage Index to be a living wage for 1 Adult and 1 Child living in the County they reside in.

Employees shall be equitably compensated.

Either of the following methods of pay calculation shall be presumed to be equitable, though other methods of determining equitability may be applied:

All employees are paid at the same rate, or
The ratio of highest to lowest paid employee shall not exceed 2:1 and the exact rate of pay for employees is determined with substantial input from all employees.

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Binding the Organization

Who can sign contracts and make binding commitments on behalf of the organization?

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The Board can designate anyone to sign legal documents and make binding agreements on behalf of the organization. Typically this power is given to an executive director, CFO, or members of the Board but it can be given to other individuals on staff through a board decision/resolution.

In the absence of an executive director, are there people or staff members you can give an important-sounding titles to, like Financial Director or Operations Director? An important sound title isn’t necessarily required, but typically banks, landlords, foundations, and others you are contracting with will want to be sure that whoever is signing documents with them has the clear authority to do so.

Having clear, accountable, and transparent processes for making financial decisions is probably the most important thing! If it's clear how decisions get made and why, ideally with multiple sets of eyes on things, that reduces the risk of mismanagement or fraud.

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Sample: Binding the Organization

Any Officer may sign a document or make a binding commitment on behalf of Organization, and the Board may designate other people, such as certain Directors or staff, to do the same.

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Conflict of Interest Policy

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How will you make sure that decisions are made in the interests of the nonprofit and its mission, and not in the interests of the individuals making the decisions?

How will you identify when there is a risk of a decisionmaker choosing a direction that benefits themself unfairly?

What checks and balances will you create to navigate that moment?

Conflict of interest policies are important for two interrelated reasons: (1) Practical and (2) Legal.

The practical reason is that you want the people who comprise your organization to act primarily in service to the organization and not themselves. While this may seem obvious, there are lots of ways that people can consciously or unconsciously use the resources of organization to benefit themselves.

The legal reason has to do primarily with the legal restriction on private benefit. Tax exempt status is dependent upon a commitment to use resources in service of your mission and exempt purpose. If your organization starts using its resources to benefit the individuals operating the nonprofit or those closely related to them, then you run the risk of losing your tax exempt status or incurring other forms of legal liability.

One clear way to see this is in the hypothetical case of your nonprofit renting office space. Imagine that you are looking for an office to lease, and one of the members of your board owns an office building that rents space. If that board member causes the nonprofit to rent from the office space they own, that board member will benefit personally. This doesn’t mean the nonprofit can’t rent that space, it just means you have to be extra careful about the transaction.

The basic logic is that if there is someone that might personally benefit, then they shouldn’t be involved in the final decision AND you need to go through a bit of extra process to make sure that the decision is really in the interest of the nonprofit. In the case of the office rental, this would mean doing something like keeping a record of the fact you checked out other office spaces and that, if you choose the space owned by your board member, you do not pay more than market rate for it.

In addition to these guardrails, it’s also important to make sure decision makers are on notice of their responsibility to disclose conflicts, and there is a healthy culture of transparency. Any time you are making a big decision, particularly one that involves using your orgs financial resources, people should know to check in with themselves about whether they (or people close to them like family or business co-owners) might stand to benefit.

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Sample: Conflict of

Interest Policy

When the Board is thinking about entering into a transaction that might benefit the financial interest of a Director, the Board shall use the following process to vet the transaction.

Key definitions:

Interested Person: A person who – personally or through a member of their household or family – has a direct or indirect financial interest, defined as:
Financial Interest: Direct financial benefit from the transaction or an actual or potential ownership interest, investment, compensation interest, or governance role in an entity that the Cooperative is transacting with.

Duty to Disclose:

The interested person should let the Board know. This could be through a presentation of facts given in writing or at a meeting.

Investigating alternatives:

The deciding body may appoint a committee or another disinterested person to investigate alternatives to the proposed transaction.

Does a conflict of �interest exist?

After a presentation and conversation with the interested person, the Board (not including the interested person) may discuss and vote on whether a conflict of interest exists.

Does someone deciding on the proposed transaction have an actual or potential financial interest?

Better Option is Available:

Using due diligence, the Board determines a more advantageous arrangement is possible without a conflict of interest.

No Better Option Exists:

The Board (not including the interested person) determines it’s not reasonably possible under the circumstances to find a more advantageous arrangement without creating a conflict of interest.

Vote not to approve proposed transaction.

May vote to approve the proposed transaction.

If no conflict of

interest exists

If conflict of

interest exists

X

✔

The Board shall keep a written record of its decision process

*Law: 12373 (suggesting a process for vetting transactions where a conflict exists) and 12592 (regarding requirement to report on conflicts)

This sample policy is used by the Sustainable Economies Law Center. It’s nice because it is a flow chart that is (hopefully) easier to understand than big written policies.

The IRS Form 990 asks if you have a policy like this. So, theoretically, if you do not have a policy like this it could flag your organization for a deeper audit.

Additionally, if your org does engage in a transaction that personally benefits a board (or staff) member, it can constitute a violation of the entire board’s fiduciary duties. And, if that happens, and if the case were to go to administrative review at the IRS or to civil court, the reviewing institution will inquire into whether there was a conflict of interest policy and whether it was followed.

Whatever conflict of interest policy you do adopt, it’s wise to take a look at the model policy offered by the IRS here in Appendix A: https://www.irs.gov/pub/irs-pdf/i1023.pdf

That will give you a sense of a more formal and comprehensive approach, then you can get creative from there.

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Whistleblower Policy

If someone notices that your nonprofit is engaging in illegal or unethical financial/accounting practices, how will you make sure they are encouraged to say something, and protected if they do?

Who should such practices be reported to?

Do you want to welcome “blowing the whistle” on other forms of unethical or misaligned behaviors?

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Sample: Whistleblower Policy

Two Examples:

https://blueavocado.org/hr-and-employment-issues/sample-whistleblower-policy/

https://www.councilofnonprofits.org/sites/default/files/Sample%20WhistleblowerPolicy%202.2010.pdf

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Both of the links offered in this slide are good, legally sound policies.

In addition to having a policy, it is helpful to also build a welcoming culture around whistleblowing and to make sure everyone knows who they can tell if they see something that’s a bit off.

It’s not about creating a culture of policing or hyper vigilance, it is really about saying to your whole organization “we are committed to legal and ethical behavior, and if you see us slipping we want you to tell someone as soon as you see it.” If you spot things when they are small, then they won’t become big issues that warrant legal consequences. And if you welcome reporting as a service to the organization and the mission, then people will feel more invited to name what they see and the whole organization will be more accountable.

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Amending the Bylaws

What process creates the proposed change?

How do you decide whether the change is accepted?

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Sample: Amending these Bylaws

All changes to the bylaws must be approved by a two thirds vote of board members, and must receive consent from the staff via the collective decision making process defined in the staff handbook at the time of the bylaw change.

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Purpose Clause

Document Retention and

Destruction Policy

Where will you keep your original tax exempt application?

Where will you keep your yearly 990s?

Where will you keep other documents that could help the organization prove for itself what it has been doing? (i.e. employee records, contracts, insurance)

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“A document retention and destruction policy identifies the record retention responsibilities of staff, volunteers, board members, and outsiders for maintaining and documenting the storage and destruction of the organization’s documents and records.” IRS Form 990.

Nonprofits are legally required to have their initial tax exempt application (Form 1023) and the past seven years of their 990s available for public inspection. This could be on their website, on a third party website, or upon request.

It is also wise to have a plan of what other things you will hold onto. This is particularly important for things that might be helpful as evidence in a legal dispute with an employee, or an administrative dispute with the IRS.

Here are some more documents that might be good for you to hold onto:

Articles of Incorporation
Audit reports, from independent audits
Corporate resolutions
Checks
Determination Letter from the IRS, and correspondence relating to it
Financial statements (year-end)
Insurance policies
Minutes of board meetings and annual meetings of members
Real estate deeds, mortgages, bills of sale
Tax return

For more information, check out this article: https://www.councilofnonprofits.org/tools-resources/document-retention-policies-nonprofits

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Sample: Document Retention and �Destruction Policy

The Board will maintain meeting agendas, minutes, and financial statements.��

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Dissolution Clause

What will happen to your organization’s assets in the event that you close your nonprofit?

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Section 501(c)(3) requires that your organizing document provide that upon dissolution, your remaining assets be used exclusively for section 501(c)(3) exempt purposes, such as charitable, religious, educational, and/or scientific purposes. Depending on your entity type and the state in which you are formed, this requirement may be satisfied by operation of state law. Beyond the legal necessity, it’s nice to have a basic plan in place for if you decide to close up shop.

There are two important things to make sure are clear in your dissolution clause: (1) Ensure that assets will go to an exempt purpose / public good and not a private party, and (2) make sure the folks who are stewarding the organization through the dissolution have a clear sense of how to move. This doesn’t mean you need to make everything really specific, but it does help to give some parameters and guidance.

The following is an example of an acceptable dissolution clause, according to the IRS Form 1023 tax exemption application: “Upon the dissolution of this organization, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code, or corresponding section of any future federal tax code, or shall be distributed to the federal government, or to a state or local government, for a public purpose.”

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Sample: Dissolution Clause

“Upon the dissolution of this organization, assets shall be distributed for one or more exempt purposes within the meaning of section 501(c)(3) of the Internal Revenue Code.”

“Upon dissolution of this organization, all assets shall be distributed to [insert name of partner organization] in furtherance of their tax exempt purpose within the meaning of section 501(c)(3) of the Internal Revenue Code.”

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Voila… you have bylaws!

Here’s a recap of some helpful resources to see how it can all come together:

Here’s the full template bylaws in document form
Here are more conventional “starter” bylaws for just getting started
And here’s another sample set of bylaws from The Center for Dynamic Community Governance

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Where to Get More Hands On Support

Harmonize offers:

Bylaw process facilitation and drafting
Consultation to create other parts of collaborative organizational structures
Strategic planning, conflict engagement, and culture building
Blog about participatory organizations at Writings

Sustainable Economies Law Center offers:

One time consultations for your organization
On-the-spot legal advice at our Resilient Communities Legal Cafe
Workshops, webinars, sample documents, and more at www.theselc.org/wsdn

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