What policies should our board have in place?
It is essential for every governing body to have in place policies that clarify the components and implementation of its legal fiduciary responsibilities. Having a board policy manual or handbook maintained by the board professional and shared with all new board members enables the board to monitor the currency of the policies that guide its work.
While there are a number of essential and recommended board policies, clearly the most essential are the board’s bylaws. Bylaws are a core legal document that defines the structure and operation of the governing board. The board’s bylaws, updated periodically and overseen by the board’s governance committee (or committee on trustees), should be reserved for the board only. Other structures that are part of institutional governance should have their own statements of purpose and organization and be subject to formal board approval. Bylaws must state clearly that they ordinarily take precedence over all other institutional documents, including, for example, the faculty handbook. Exceptions would include contracts, such as collective bargaining agreements. The boards or institution’s general counsel should be certain that the bylaws are consistent with applicable laws, the board’s needs, and the highest principles of fiscal integrity and that they are amended as necessary. The bylaws need not include detailed statements of responsibilities for the board’s standing committees.
Committee charges should be approved by the board and maintained as part of the board’s policy manual. Exceptions include the executive committee, the audit committee, and the governance committee, whose responsibilities are central to the board’s own operations and likely to be amended less frequently than others; these committees might be considered for inclusion in the bylaws.
There are a number of other essential governance policies, including a statement on trustee responsibilities. This statement details expectations for individual board members, including guidance on such matters as communication with the institution’s constituencies, philanthropy, and conflict of interest.
Additional policies that boards should consider include a code of conduct and ethics, criteria for selection of new trustees, and an investment and spending policy. The board should also give regular attention to the currency and application of its conflict of interest policy. Monitoring board conflict of interest requires diligence and oversight. The board should demonstrate a commitment to prevent not only actual or material conflict but also the appearance of conflict. The board should promulgate a rigorous code of trustee conduct, seeking a commitment from every trustee annually. The board should engage its general counsel to be certain that its conflict of interest policy adheres to the public charity laws in its state and maintains currency.
Finally, boards should be aware of the new regulations associated with the implementation of the revised IRS Form 990 (effective in tax year 2008), which urges boards to share the form with each board member before its submission to the IRS. The board should establish a policy that clarifies its process for sharing the completed Form 990 with board members. For example, a board may specify a board committee (such as the audit committee) to oversee the process and inform the full board about the contents of the form and issues associated with the annual filing.
Sources and Resources: