Hiring (and Firing) the Boss of a Nonprofit Organization – Part I: Whose Job is it to Hire an Executive Director?

Hiring (and Firing) the Boss of a Nonprofit Organization – Part I: Whose Job is it to Hire an Executive Director?

The hiring and firing of an executive director (President or CEO – pick the title) of a nonprofit organization is a strenuous task. Basically, it is the volunteer leader’s equivalency of a root canal. Why is it so hard?  Because the people who have to undertake the chore are typical volunteers with full time jobs and lives that they also need to lead and contend with.  And hiring or firing a nonprofit executive can be (and usually is) a short-term full-time job for at least one or more volunteers.  Lawyers from Avisen Legal’s Nonprofit Practice Team and Employment Law Practice Team hope to provide at least a little bit of guidance to those going through the process of with this series: Hiring (and Firing) the Boss of a Nonprofit Organization.

Whose Job is it to Hire an Executive Director?

Role of the Board.

No matter what anyone says, it’s the Board of Directors of a Nonprofit Organization’s job to find and hire a new executive to run the nonprofit organization.  Many volunteer board members look right and look left (but never straight) when being asked to participate in the hiring of an executive director.  Most volunteer board members’ primary interaction with a nonprofit organization is with the executive director.  So, when a board member is asked to participate in HR matters, they tend to be stumped (unless they have had the unique pleasure of serving on or chairing many boards).

According to the National Council of Nonprofits, one of the most important roles of a Board is to hire, fire, and set compensation for the executive leader of the nonprofit organization. This obligation is true both practically and legally.  Since there are no “owners” of a nonprofit organization, the board of directors is “legally” charged with the oversight or management of the business and affairs of the organization.  This duty exists regardless of the employment of an executive.  The duty becomes heightened in the absence of an executive to run a nonprofit or in the time in between the hiring of new executive.

Role of the Chair.

When it comes time to hire a new executive, leadership of this task tends to fall most heavily on the chair of the Board.  Board chairs fulfill several functions on the Board of Directors of a nonprofit organization.  Generally, Board Chairs are thought of as the chief volunteer officer, and in that role, they are tasked with leading the board and its functions, including its most important function – hiring an executive.

Role of a Search Committee.

Due to the importance of the task of finding and hiring an executive director, oftentimes a Board Chair or the board as a whole will appoint a search committee that is tasked with either conducting the search itself or engaging a search firm to conduct and assist with a search. Even if a board or a board chair appoints a search committee, the ultimate responsibility for making the decision to hire a new executive is the entire Board of Directors.  A search committee may manage or conduct a search, find a candidate, negotiate an offer and compensation, but it does not have the corporate authority to make the final “official” decision to hire and set the compensation for the new executive. The Board of Directors, acting as a body of the whole is charged with this responsibility.  It is important to properly document these decisions for both state law compliance purposes and IRS compliance (it needs to be disclosed in an organization’s Form 990).

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Kimberly Lowe

Kimberly Lowe

For over 20 years I have lawyered from the trenches with experience based on a comprehensive knowledge and understanding of how both for-profit and nonprofit enterprises operate. I guide entrepreneurs, executive management teams, boards of directors, multigenerational families, shareholders and investors through all aspects of the business life cycle from formation to operation to exit. Read Kim's Bio.

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