Q: Our organization is a subsidiary of a larger voluntary health organization. The governance is handled at the national level, though we are encouraged to work with an advisory council locally. We have two questions. First, is this sufficient, given that we have our own 501(c)(3) designation, which requires a board? Second, will we be able to attract the right people to an advisory council, or would such people only be interested in serving on a board?
A: This must be the question of the month… I’ve gotten it from several different sources recently! Let’s start with your first question. Yes, as a 501(c)(3) you are required to have a board. But, the IRS says nothing about it being a local board. Therefore, the national board can serve as the governance arm for your local entity. However, there are advantages and disadvantages to that decision.
The advantages are that there is consistency across units, a bigger picture viewpoint, and, conceivably, a higher level of governance due to the board having the bigger picture. Often, a national entity also has the ability to attract directors with significantly higher levels of affluence and influence – though contrary to popular belief, research indicates that affluence and influence is not necessarily beneficial to a board’s governance.
Some of these advantages may also be seen as disadvantages. Not all locals are the same. Different communities sometimes have to approach their tasks differently and make very different decisions to achieve success. The desire for consistency may make national players oblivious to the different needs. Being further away, the national board may also fail to move quickly enough when circumstances dictate speed. And, not being “of the community,” may make the directors less capable of – or at least less well received when – speaking for the community. Probably one of the most dangerous reasons one might not want a single board controlling the whole enchilada is the potential for conflict of interest. It is natural that the group’s allegiance will be to the national organization and its needs. Do you risk, for instance, money raised to further the mission locally being siphoned off to support national endeavors?
There is yet another consideration… What does your state law say? Corporate law differs in different states. Some may require local representatives. More typically, they may require specific positions that the national board may not wish to employ. If there is but the national organization and a single local entity, these issues can be worked out. But, if your entity is one of a dozen or one of 50, it may be impossible to resolve this to every state’s satisfaction.
As to your other question about whether you will be able to attract the “right” people if you can’t invite them to join your board, the answer is that probably you needn’t worry. Of course, this answer presumes that you have carefully determined what you need for your local organization to be successful, and that you’ve been strategic about identifying, cultivating, and asking people to participate. Many experienced, highly skilled and well-placed individuals don’t even want to be on a board. They’d rather focus their efforts more narrowly and/or avoid the liability that goes hand in hand with board service. Advisory councils can achieve a lot – often far more than boards, which are required to operate in so many arenas. For instance, you can have advisory councils that focus merely on major gifts fund raising or advocating on behalf of your issues – both essential to local success.
You will be most successful with your advisory council if you create a job description, spell out specific goals to be achieved along with your expectations of each council member, provide a solid overview of your organization – its programs and impact – and arrange for time for the group to come together at least once a year to network, play and feel a part of something larger than themselves. By the way, you can have more than one advisory council. It’s a great way to involve more people in your mission and vision!