Caveat Emptor

by | Jan 7, 2015 | Board Capacity Building

As you know, the Latin expression “caveat emptor” means “Let the buyer beware.” This is certainly sound advice in the field of nonprofit governance, which, unfortunately abounds with what I call “fallacious golden rules” – untested and untrue gems of wisdom that are all too often authoritatively recommended to board members and CEOs. Seasoned, really board-savvy CEOs have learned to be wary consumers of advice in the governance arena, asking probing questions about the real-life experience undergirding such advice and carefully considering the costs that might be incurred before acting on the advice.

A call I received from a nonprofit CEO last week provides a good case in point. She and I had worked closely together a few years ago, updating her board’s role, committee structure, and governing processes, and we have since stayed in close touch. She and her board had recently received a consulting report that recommended, among other things, that every time her board chair changed, her nonprofit’s bylaws should be reviewed and updated. She was really troubled.  “I don’t think this is standard practice – at least I’ve never come across the advice in my reading,” she said, “and I’d really like your take on the recommendation.” She went on to say that she couldn’t see any obvious benefit of re-examining the bylaws every time the board elected a new chair, and she was worried about the time it would take.

“I’m really glad you called,” I told my CEO colleague, “since this is terrible – indeed, nonsensical – advice, and you’d rue the day you put it into practice.” I pointed out that, for one thing, bylaws, being the constitution of her nonprofit, are intended to have a high degree of permanence since they deal with the fundamental legal structure of her organization. It’s standard practice, I informed her, for the CEO to alert the responsible committee of the board – often governance or board operations – when a particular bylaws provision needs to be updated because of changing circumstances or practices. I went on to say that while it might make sense every five years or so to do a thorough review of the bylaws, to tie bylaws review to a new board chair would be ridiculous. There is no rational connection between the two. It would be like saying that every time the US elects a new president, we should review the US Constitution to determine where we need changes.

Thank heaven my CEO colleague had the good sense to question such wrong-headed advice. What’s disquieting is that it was formally recommended as part of an “expert” report. Caveat Emptor, indeed!

About the Author: Doug Eadie

President & CEO of Doug Eadie & Company, Inc., Doug Eadie assists CEOs in building rock solid partnerships with their boards.

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