Transparency Tips: Foundation By-Laws, In-Laws, and Outlaws
(Mary Gregory is vice president and director of program at Pacific Foundation Services, a San Francisco Bay Area-based company that provides customized and strategic management services to private foundations.)
As a philanthropic advisor who has a portfolio of six family foundations, I have become a great fan of foundation by-laws, and in particular, of well written by-laws. So I was particularly pleased to discover that by-laws are included on Glasspockets, since they tend to be either misunderstood or only considered at the founding stage and then forgotten.
So, what are by-laws and why do they matter? They are the basic operating instructions for any nonprofit organization including all foundations. By-laws define an organization and how it does its business: who may serve on the board (for instance, are in-laws eligible or only descendants?), how many people sit on the board and their terms of service, what officers need to be elected and how often and what their roles are. By-laws can tell you when and how members of the board can be removed (“outlaws”?). They specify how decisions are made, and they even inform trustees about how they can change the by-laws in the future.
But, true to the old saying, “You’ve seen one foundation, you’ve seen ONE foundation,” there can be many varieties of by-laws. I work for a small company that manages 23 family foundations, and recently the president of one of our client foundations said to me, “We want to change our by-laws to adapt to new leadership by the next generation. What should we include?” I was able to send them straight to Glasspockets to view the sample by-laws that are available through the “Who Has Glass Pockets?” feature. I suggested that foundations that have smaller asset sizes might be the best place to look, since those would likely be family foundations and not independent foundations, and thus more relevant to the vision these trustees have for their own small family foundation. And I knew that the information that the trustees would find on Glasspockets had been freely placed there by foundations willing to share their experience and their ideas (including three of the six foundations with which I work directly).
Whether you are creating a first set of by-laws for a new foundation, or you are re-visiting by-laws to reflect current circumstances, looking at examples may help you think about aspects of stewarding a foundation that you haven’t considered before:
- Should trustees be compensated?
- What standing committees should there be?
- Can decisions be made without a meeting, and if so, how?
- What are the duties of each officer?
- What happens in the future if a successive generation wants to partition the foundation?
- When and where should the annual meeting be held?
Some by-laws are more detailed than others, so although you can learn a great deal from examples that relate to other foundations, it is always a good idea to have a lawyer look at your by-laws in order to make sure that they are complete. Once you have your by-laws (and it is a good idea to read them every year to make sure that they still seem relevant to the current trustees), consider adding them to the growing knowledge base on Glasspockets. Although by-laws may communicate some of the priorities of a family, they are not personal documents, and your example may help other foundations in the future.
Foundations often think that they need to be highly original, but I would urge you to use your imagination for developing new ways to collaborate to solve social problems, not for creating new phrasing of by-laws. Use Glasspockets as the great resource it is, and contribute your information to Glasspockets to make it even more useful.