All organizations undergo leadership turnover. It is important to ensure that new church directors and leaders are fully equipped to be successful in their roles. The process of training new leaders is often called orientation. Orientation is a program where new directors, officers and management figures undergo an introduction to their roles in the organization. These leaders must become familiar with the church and their official roles. Here, we will explore some guidelines to help…

Good corporate governance begins at the top. For most organizations, the top is defined as the Board of Directors. Atop the board is the presiding officer. The presiding officer for the board is often called the chairman, chairperson, or chair. Some churches use different titles such as president, pastor, elder, or deacon. The governing board may also go by different names as well. Consistent with effective board leadership is the presence of a competent chair….

Most leaders face the question of capital adequacy for their institutions. Having insufficient capital can empower or handicap an organization’s plans. This is a conversation around the amount of reserves a church should have on hand. In this article, we share a governance perspective on the dialog around capital. Capital is the church’s savings account for a rainy day. Capital is important because it provides a financial cushion for future perils. Officials who focus on…

It is not uncommon to see for-profit companies use a merger and acquisition (M&A) strategy to grow. These corporations believe combining their organizations with another can lead to greater profits and market share. It might seem unusual to think about churches in the manner of M&A activity. While not typical, church leaders have a responsibility to consider all possible strategies to improve their corporate performance. In the October 2019 edition of Legal Counsel for Churches,…

One of the signs that an organization is ripe for underperformance is the stagnation of its board. A healthy board accepts the idea that rotation of its directors is good for its growth. In this article, we will explore why turnover can be an important governance strategy. All organizations go through turnover of its officers. People leave for various reasons. In some instances, officers leave for voluntary choices. There are also occasions when board members…

A Lesson On The Duty Of Loyalty Church board members are generally not held personally responsible for the business decisions they make on behalf of the institution. This is one of the advantages of serving a corporation or an organization that has separate legal recognition. The protection from personal liability comes with strings attached. Directors are expected to uphold their fiduciary duties and act as any prudent corporate officer would under the circumstances. For the…

Corporate governance is a vital duty for church leaders. Effective governance protects the church and its officers. Most organizations recognized under the 501(c)(3) law must file a tax return. The tax return form is called Form 990, Return of Organization Exempt from Income Tax. The Form 990 calls for reporting on the organization’s financials, accounting methods, property, activities, vendors, and compliance. For the purposes of this article, we focus on the governance and management section…

One of the most important responsibilities of corporate leaders is strategic business planning. Strategy planning is the forward- looking exercise that defines where a business is going and how it plans to arrive. This is a governance issue as a matter of reasonableness. Church directors and officers have a fiduciary duty of care in their capacities. This duty is measured by the reasonable person standard. Courts look to what a reasonable person would do under…

Keeping effective records of all official meetings is an important job for the governing board of a church. Minutes memorialize actions for historical purposes. Minutes help inform future boards of the rationale for past policy choices. A written record can help demonstrate the board’s diligence to its fiduciary duties. The minutes-keeping role is usually delegated to the elected Secretary. In some instances, a staff person is appointed assistant secretary to attend meetings and record the minutes. However,…

Church directors have a fiduciary duty to make decisions that are in the best interests of the church. These duties include a duty of care, duty of loyalty and duty of obedience. These responsibilities are the same for any board of directors. No matter the organization, industry or charter, directors must keep a primary focus on the institution’s interests. Board members must act prudently to fulfill their obligations. Courts weigh a director’s conduct by comparing his/her actions…