The Art of Nonprofit Governance: The Emeritus Director vs the Invited Guest

The Art of Nonprofit Governance: The Emeritus Director vs the Invited Guest

So, while I was sitting in my office this morning, a client asked me what to do about a departing board member. This made me think of Shakespeare and his thoughts on Emeritus Directors…

 

Emeritus Directors: To Bylaw Amend or not to Bylaw Amend? That is the Question.

During a nonprofit board meeting today, the question arose on how to retain the continued involvement of two long-term active directors who had recently termed off the board. After a long discussion on the value to be gained from continued involvement of these people, the concept of emeritus directors surfaced as an option.

In contrast to an emeritus director, I suggested the invited guest concept as a way to expedite this action, as the term just ended and the new fiscal year had just begun. I favor invited guests over emeritus directors for a whole host of reasons; just a few being that invited guests can easily be uninvited without implicating a governance event and emeritus director status should be reserved for fundraising purposes only. What option do you prefer: a bylaw amendment or an invitation?

Director Emeritus Does Not Always Work

For better or worse, the term director emeritus (or emeritus directors) carries with it a certain value connotation.

Director emeritus equals important old person who has served his or her time and deserves a title. If the goal of a nonprofit board is to retain volunteer energy and talent, the director emeritus label/status does not guarantee this result.

In addition, creating a director emeritus requires a nonprofit corporation to amend its bylaws to massage its governance structure. Amending bylaws to obtain continued involvement is a trap for the unwary that triggers additional actions rarely understood or completed by the untrained. Bylaw amendments should not be done on a whim nor should they be undertaken without the guidance of experienced nonprofit tax-exempt counsel.

It is also very hard to get rid of a director emeritus. Once a board bestows this lauded title on an individual, the organization is stuck with that person for his or her life. Either death or a letterhead reprint will be needed to get rid of this person.

Term limits exist for a reason and that reason should not be forgotten – a mechanism to compel turnover. The director emeritus is just a passive aggressive way of saying “we did not mean it, except for fundraising purposes.”

Why the Invited Guest for Nonprofit Boards

The invited guest is a happy compromise between “director for life” and “we love you now since you have been a great contributor to the cause but we don’t know if we will always love you.”

What the invited guest signals is that the nonprofit organization meant it when it put in place term limits, but it acknowledges and requests the continued service of the former director in whatever capacity that former director wants to give for as long as the organization requests that service and continues to issue the invite.

Guidance on Invited Guest

When dealing with invited guests, I borrow heavily from the concept of board observers in the for-profit context.

Board observer rights are typically granted to an equity holder (or some other party who has a relationship with the entity) who has a sufficient stake in the oversight of the entity to want to be at the table, but who does not want to have the burden of a fiduciary relationship.

An invited guest is the same: a person who has a stake in the organization (either in the form of contributing or guiding) who does not need or want a fiduciary burden.

Navigating Nonprofit Governance

In the realm of nonprofit governance, the departure of board members often prompts a critical question: how to retain their valuable expertise and involvement.

While the allure of bestowing the title of Emeritus Director through a bylaw amendment may seem appealing, its practical implications and permanence warrant careful consideration. Conversely, extending an invitation as an invited guest offers a more flexible and pragmatic approach, allowing for continued engagement without the entanglements of a formal title or permanent commitment.

By drawing parallels to the for-profit sector’s practice of board observers, the invited guest model provides a framework for meaningful involvement while respecting term limits and organizational dynamics.

Ultimately, the decision between these options hinges on the organization’s goals, values, and governance structure, highlighting the delicate balance between tradition and innovation in nonprofit governance.

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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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