Many nonprofits do not distinguish between the two types of legal committees under the California Nonprofit Corporation Law: board committees and committees that are not board committees (“other committees”). Sometimes, there may be no issues raised by conflating these two different bodies within a nonprofit corporation. But other times, it may create some unanticipated problems.
Composition
A board committee is composed exclusively of board members (at least two).
An other committee may be composed of any individual or combination of individuals, whether or not they are board members.
Accordingly, the moment a board committee adds to its membership someone who is not a board member, it becomes an other committee. Note, however, that an other committee might be composed of exclusively board members if the committee was not appointed by the board or if the committee’s membership is open to individuals who are not board members.
Other committees may encompass internal groups within the nonprofit that go by names like advisory committee, advisory board, advisory council, work group, and task force. Some nonprofit may use different terminology to differentiate between such other committees based on their purposes, roles, and length of existence.
Delegated Powers (California Nonprofit Public Benefit Corporation)
A board committee may be delegated with all the authority of the board, except with respect to the following:
- The approval of any action for which this part also requires approval of the members (Section 5034) or approval of a majority of all members (Section 5033), regardless of whether the corporation has members – including, but not limited to, approval of an amendment to the articles of incorporation, a merger, a disposition of substantially all of the corporation’s assets, and dissolution.
- The filling of vacancies on the board or in any board committee delegated to act with the authority of the board.
- The fixing of compensation of the directors for serving on the board or on any committee.
- The amendment or repeal of bylaws or the adoption of new bylaws.
- The amendment or repeal of any resolution of the board which by its express terms is not so amendable or repealable.
- The appointment of board committees or the appointment of any board members to a board committee.
- The expenditure of corporate funds to support a nominee for director after there are more people nominated for director than can be elected.
- The approval of any self-dealing transaction except as provided in paragraph (3) of subdivision (d) of Section 5233 of the California Nonprofit Public Benefit Corporation.
An other committee cannot act with all the authority of the board but can be delegated with substantial management powers if the delegation is made with due care based on the (1) powers and responsibilities delegated to the committee; (2) the skills, expertise, and capacity of the committee to reasonably exercise such powers and meet such responsibilities; and (3) the reasonableness of the ultimate oversight provided by the board. It’s important to understand that an other committee is not required to be a purely advisory committee with no powers other than to provide advice to the board or some person or persons associated with the corporation. Because many nonprofits label an other committee as an advisory committee, they may unnecessarily limit how an other committee might be used as part of a valuable governance structure, particularly where more distributed power is desired.
Reliance
A board member can rely on information, opinions, reports or statements, including financial statements and other financial data, in each case prepared or presented by a board committee upon which the board member does not serve.
A board member can similarly rely on an other committee, but only if the individual members apart from the other board members are (1) officers or employees of the corporation whom the director believes to be reliable and competent in the matters presented or (2) counsel, independent accountants or other persons as to matters which the board member believes to be within that person’s professional or expert competence.
Practical Tips for Boards
- Make sure your bylaws distinguish between board committees and other committees.
- Only create board committees to the extent you have sufficient capacity on the board to make them functional and effective.
- Delegate powers and responsibilities to an other committee with greater care than you would to a board committee, but with the understanding that other committees may possess more than advisory powers and responsibilities; build in greater oversight structures for other committee actions.
- Consider permitting other committees to operate under different rules from the board or board committees in terms of any formal notice requirements, actions through written consent, etc.
- If empowering an executive committee with very broad powers, strongly consider defining the executive committee as a board committee and limiting its membership to board members (see also Executive Committees: Why You Should Limit Their Authority).
- Recognize that an audit committee, as required under California law, is not required to be a board committee (see also How Independent Audits and Audit Committees Protect Nonprofits (Hana Takagi)).
- If a group of individuals is intended to possess delegated authority, ensure that there is understanding by all parties whether this is an other committee and internal body of the nonprofit covered by the nonprofit’s insurance or an outside body that may not be accountable to the nonprofit, absent a contract, and not covered by the nonprofit’s insurance.