I often wonder if it is productive to try to fashion a catchy title for a post, particularly when you could be the only person who thinks it is catchy. This one’s a stretch.
The driver for this title is that I recently encountered several nonprofits with approaches to the use of officer titles that I found to be a potential source of confusion, both internally and for unrelated parties dealing with these nonprofits. In some cases, the approach was also inconsistent with statutory requirements.
This prompted me to revisit the relevant New Jersey statutory language and to give some thought to the subject of management structure and officers and their titles and responsibilities.
The titles given to officers are not as important (but see below) as the description of responsibilities and reporting relationships. Although the responsibilities signified by some titles, such as president, secretary, and treasurer, are commonly understood, the responsibilities and reporting relationships still must be considered by the board and adequately described.
Some of the unusual (in my view) structures I have recently seen include an organization having an individual with the title of President and CEO who is not a corporate officer. Another organization has a position titled “CEO/Executive Director” that is not listed as an officer position in the bylaws but the duties of which are described in the bylaws. Outside parties dealing with someone whose title includes “CEO” will quite logically believe they are dealing with an officer, indeed the principal officer, of the corporation.
The New Jersey Nonprofit Corporation Act requires that all nonprofit corporations have a president, secretary, and treasurer. If the nonprofit chooses different titles for the three required officers, it must indicate in the bylaws what alternate titles correspond to president, secretary, and treasurer.
The statute also describes additional officers that may be considered, including a chair of the board, an executive director, and vice presidents, as may be prescribed in the organization’s bylaws. Certainly, chief executive officer is a title often used. In the nonprofit world, the executive director title is used more often, but both titles are generally understood to identify the principal executive officer of the corporation.
Generally, the officers are elected by the board of trustees, but the bylaws can provide otherwise. Their duties may be provided in the bylaws or in resolutions adopted by the board.
There is no requirement that the officers also be trustees, although in some cases that might be advisable. For example, it would be quite unusual and a difficult structure in practice to have a board chair who is not a member of the board. Members of the board of trustees of small nonprofits with no paid staff will, of necessity, hold corporate officer titles.
The board, in conjunction with the principal executive officer, should determine the most appropriate organizational structure for the nonprofit’s operations and the skill sets of its management team, including skill sets that need to be added. Officer titles and responsibilities will flow from that structure.
Most bylaws describe in a general way the duties of corporate officers. They don’t always cover reporting relationships. To avoid confusion internally and externally, the responsibilities and reporting relationships of the nonprofit’s management team should be clear. It may be a good practice to have job descriptions in addition to and more detailed than those in the bylaws that make clear each position’s roles, responsibilities, and reporting relationships.
A clear description of roles, responsibilities, and reporting relationships is important in small nonprofits as well as large organizations. Even with board members who are also officers, it is essential to define responsibilities and reporting relationships to avoid confusion and provide for operational efficiency.
The management structure should be reviewed periodically and changed as necessary or advisable. If activities or people in senior level positions change, the board should determine whether the management structure should be changed as a result.
The key is for the board, and the principal executive, to be thoughtful about the management structure and see that roles, responsibilities, and reporting relationships are sufficiently described to ensure a management team that functions well together.
An Unrelated Note on Committees and Trustees
While officers need not be trustees, all board committees that are empowered to act on behalf of the board must only include trustees. If a nonprofit wants to involve nontrustees on committees, those committees must be advisory only.
An Unrelated Concern Regarding Corporate Bank Accounts
I also want to share a story unrelated to the subject of this post. Over the last several weeks, I have had two clients ask for assistance due to an inability to access their bank accounts. In both cases, the clients had small business corporate accounts with a major bank, with one signatory on the account. The signatories became unavailable and the bank did not permit the clients to access their accounts.
I spoke with two different departments at the bank and the managers of two financial centers (branches), emphasizing that these are corporations; the accounts are not the property of the signatories. Each time, I was told that the nonprofit owner of the account would not be permitted to access the account unless the signatory was involved.
Curiously, I was advised that the nonprofit could open a new account, close the existing account, and transfer the funds to the new account without the signatory’s involvement. I’m not quite sure how that is different from simply accessing the funds in the existing account.
In any event, it may be wise to check with your bank and make sure that your account relationship is structured in such a way that a change in personnel will not have an impact.
Kent E. Hansen is a senior staff attorney with Pro Bono Partnership, Inc. Pro Bono Partnership provides free business and transactional legal services to nonprofits serving the disadvantaged or enhancing the quality of life in neighborhoods in New York, New Jersey, and Connecticut.