While term limits for nonprofit boards of directors aren’t legally mandated, many organizations consider term limits to be a best practice. Term limits aren’t right for every organization, though. This article highlights what pros, cons and practical steps involved before adopting them.
Upsides of limits
Term limits recognize that board members can lose enthusiasm over time or become less committed. Some long-time board members may be ineffective, disruptive or absentee. Negativity of any kind is often contagious and can taint the rest of the board and your overall organization. At the other end of the spectrum are those board members who do so much they’re at risk of burnout. Term limits give all of these members a way to make a graceful exit.
Other reasons to consider term limits include:
Enhance board diversity. Term limits allow organizations to add new skills and perspectives necessary to keep their boards up to date and functioning effectively. Similarly, they make it easier to ensure a board represents its community’s gender, racial, economic, religious and other diverse groups.
Reduce power concentration. In boards that don’t regularly turn over, power can become concentrated in the hands of a small, entrenched group. These cliques might intimidate new members, as well as staff, and block necessary change. Term limits can preempt such issues and provide regular opportunities to improve group dynamics.
Expand your circle of stakeholders. Term limits also allow nonprofits to expand their circles of invested stakeholders. An organization can become more ingrained in the community, rather than relying on just one passionate group of volunteers.
Prevent fraud. Finally, term limits can help prevent insider fraud. It’s easier for long-term board members who know an organization’s ins and outs to override internal controls and hide fraudulent schemes.
Of course, term limits could have disadvantages — namely, the potential loss of institutional knowledge, expertise and donations from both board members and their networks. You could lose significant volunteer hours, as well. But your organization may find other board members to step up to fill the gaps.
Regular turnover does require a greater investment of time and resources, though. You’ll need to regularly identify, recruit and train new members, and work to build the cohesiveness required for collaboration.
If you decide to establish term limits, you’ll need to amend your bylaws. First, though, you should determine the appropriate term lengths and limits.
You might, for example, allow two consecutive three-year terms or a total of six years with a minimum one-year hiatus between terms. It’s best not to adopt terms that are too long because it could discourage potential members from applying. On the other hand, terms that are too short don’t give members sufficient time to make meaningful contributions. Short terms also mean holding frequent elections. To avoid a mass exodus, stagger member’s terms. For example, you might structure it so that only one-third of the board departs at a time.
Your CPA and/or other professional consultants can provide assistance when an organization is weighing change on this scale. It’s sometimes easier for outside experts to raise the issue of term limits — in the context of good governance or best practices — than for current board members or staff to do so.
Keep good ones “on board”
If you adopt term limits, ensure you tap the talent and knowledge of departing board members by conducting exit interviews and requesting feedback. Finally, consider conferring emeritus status or establishing advisory boards to keep departing board members invested.