We have had a number of clients ask about whether it is mandatory to include term limits in their nonprofit bylaws. The arguments for and against term limits are equally valid, and we suggest that each board must make its own decision about whether term limits are essential to the board’s governance function.
Those who argue for term limits typically cite the need to bring “new blood” onto the board. New directors bring a freshness of insight, and changes in the operating climate may require new skill sets. A systematic rotation on and off the board lessens the likelihood that a board becomes tired and loses vitality.
Those who argue against term limits cite the need for institutional memory and worry about the loss of dedicated volunteers who have a proven track record of board participation.
The IRS tends to favor term limits on grounds that a board with static membership can adopt unhealthy insider attitudes, and begin to govern out of self-interest rather than for the good of the organization. State charity regulators often voice similar concerns. But there are no laws – either at the state or federal level – that mandate term limits.
Defined Terms of Service are Important
Regardless of where you fall on the issue, it is essential that every nonprofit adopt specific terms in office — of two or three years, for example. The fact that there are specified terms allows a board to cull out those who have proven to be unproductive, incompetent, uncooperative, or perpetually absent. Removal can be accomplished by simply not re-electing the director to another term. The volunteer can be thanked for his or her service and sent on. Competent and committed directors can be re-elected indefinitely.
Imposing Term Limits
Where an organization wishes to impose term limits, the questions to be first answered are: (1) how long is a term; (2) how many consecutive terms are permitted; and (3) can there be any options for longer service to the organization?
- How Long Is a Term?
Most organizations select two (2) or three (3) year terms. A single-year term is just too short for any significant service, and it requires the board to hold elections for every member on an annual basis. Two-year terms are still short, but some nonprofits adopt two-year terms because they fear that a three year commitment is daunting for potential board members.
This office usually recommends three-year terms because they allow a new board member a bit of space to get acclimated to Board involvement before the term is over. A board that adopts a staggered board rotation then will be re-electing or retiring one-third of the board each year.
- How Many Terms are Desirable?
Some nonprofit boards adopt term limits that expire a board member’s involvement after six years. If the board terms are two years, then bylaws will typically limit involvement to three (3) 2-year terms. If their terms are three years, then they limit involvement to two (2) 3-year terms.
If term limits are desired, this office prefers that nonprofits provide a longer service to the organization by adopting a limit of three (3) 3-year terms. This allows for a full nine (9) years of board involvement before a director retires, during which the organization can reap the benefits of an individual’s mature judgment and deep knowledge of the organization’s programs, history, and ethos. However, we realize that this is not possible in many cases, and that a shorter term of service is often preferred.
We also serve many excellent nonprofit organizations that have no term limits at all, where the absence of term limits enhances the board’s ability to retain good volunteers. Some of our clients have positive and productive board relationships that last for years and even decades. The benefit of long term participation is that capable board members will remain in place, while “new blood” is brought in when directors leave the area, retire voluntarily, or are incapacitated by age or illness.
- Options for Longer Service
It’s always sad to lose a director or officer who is committed to the organization, is knowledgeable about its governance issues, and who wishes to remain an active volunteer. How can you retain such a person if the board wishes to do so in spite of term limits? Here are some techniques:
- Eliminate term limits but provide strong periodic evaluation systems.
- Allow a time-limited board member to be re-elected to the board after a one-year hiatus.
- Appoint the board member to a key committee such as the finance or nominating committee as a non-director.
- If there is a supporting foundation, allow the retired board member to serve on its board.
- Create an “Advisory Board” or committee for continued informal involvement with the board or chief executive.
- Find other ways to include the individual in volunteer activities.
Any of these techniques must be paired with a rigorous evaluation system to ensure that the board remains viable as a governing body. Nothing does more to kill enthusiasm of energetic volunteers than finding that board meetings are peopled with “dead wood” – that is, people who are fatigued by too-long involvement, and thus are disengaged from board work.
By Kathryn Vanden Berk
This article is provided for general information and should not be relied upon as legal advice for a specific situation. If you are in need of specific advice or legal representation, please do not hesitate to contact us.
©2014 Bea & VandenBerk