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Understanding The Role And Voting Rights Of Ex Officio Directors
Many misconceptions exist regarding ex officio directors on California nonprofit boards, particularly concerning their voting rights. This article clarifies some of the most common misconceptions and provides guidance on how your organization can effectively leverage ex officio directors while avoiding common pitfalls associated with ex officio positions.
Ex Officio Directors Serve By Virtue of Their Office
The term “ex officio” comes from Latin, meaning “from the office.” An ex officio director is an individual who holds a position on the board because of another position they hold. This means that ex officio directors are not elected. Instead, they assume their position automatically based on a particular role or office they hold. For example, some bylaws provide that the individuals holding a local office or a specific position at a governmental agency are ex officio directors. Two affiliated nonprofits may have bylaws that provide that the chair of each nonprofit sits on the board of the other nonprofit. As a final example, some nonprofits have their Executive Directors sit ex officio on the board.
It is important to understand that the ex officio seat on the board is tied to the other external or internal position rather than the individual. Accordingly, the term of office of an ex officio director coincides with the director’s respective term of office in the specified position entitling them to sit on the board. Therefore, when an individual retires or leaves the position tied to the ex officio seat on the board, that individual relinquishes their board seat, and their successor in the external or internal position takes their place on the board.
Unless Stated Otherwise in Bylaws or Articles, Ex Officio Directors Can Vote
It is also very important to understand that ex officio directors are directors like any other directors on a board unless your articles of incorporation or bylaws provide otherwise. This is provided for in Section 5047 of the California Corporations Code, which states in pertinent part:
If the articles or bylaws designate that a natural person is a director or a member of the governing body of the corporation by reason of occupying a specified position within the corporation or outside the corporation, without limiting that person’s right to vote as a member of the governing body, that person shall be a director for all purposes and shall have the same rights and obligations, including voting rights, as the other directors.
Accordingly, unless your articles or bylaws clearly state that an ex officio director has no voting rights, any ex officio directors have the same fiduciary duties and rights as regularly elected directors, including the same voting rights.
Benefits and Alternatives to Ex Officio Directors
There are many reasons to have ex officio positions. Ex officio positions can strengthen ties and help facilitate collaboration between affiliated organizations, particularly in anticipation of a merger. People with the experience and expertise to serve in the position tied to an ex officio board seat will bring that experience and expertise to your board, adding valuable insight at board meetings. Additionally, their connections and influence, especially when the ex officio seat is tied to an external position, may enhance fundraising efforts and contribute to realizing long-term strategic goals. Because ex officio board members typically serve longer terms, they can also be a good source of institutional knowledge.
However, a major concern with ex officio positions is potential conflicts of interest, particularly when the ex officio seat is tied to an internal position, like the Executive Director position. Because the Executive Director serves at the pleasure of the board, this arrangement can undermine the independence and oversight that the board should exercise over the Executive Director and is generally not considered a best practice. Where the ex officio seat is tied to an external position, the person may be presented with decisions where the interests of your nonprofit and the other organization they work for are not aligned or in conflict. To protect against those situations, it is important to have a robust conflict of interest policy that provides directors guidance on recusing themselves from decisions implicating conflicting loyalties.
Another thing to consider is alternatives to ex officio directors. Often ex officio positions are used when a nonprofit wants to honor a long-time director who is rolling off the board. If your organization wishes to honor its long-term members without giving them voting power, consider alternative designations such as “Honorary Advisor.” These nonvoting titles can acknowledge a valued person’s contributions to your organization while avoiding confusion about whether the person is a director with voting rights. Alternatively, you can still call them ex officio directors so long as your bylaws make clear that such individuals are not considered full members of the board with voting rights and are not counted as official directors for legal purposes.
Ex officio directors can play an integral role in many nonprofit organizations, but to use them most effectively, it is crucial to be mindful of their rights and potential challenges that may arise. By implementing some of the best practices discussed above, we hope your organization will be in a stronger position to leverage an ex officio director’s experience and expertise effectively.
Author was Chase Booth, a former Summer Associate at Liebert Cassidy Whitmore