Are Term Limits Right for Your Board?

KELLY BUCHHEIT, CPA

While term limits for not-for-profit boards of directors are not legally mandated, many organizations consider term limits to be a best practice. Term limits are not right for every organization, though, so you should consider the pros, cons and practical steps involved before you adopt 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 permeate throughout the rest of the board and your overall not-for-profit organization. At the other end of the spectrum, are those board members who do so much that they are 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 to keep their boards fresh and functioning effectively.
• Reduce Power Concentration
  In boards that do not 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 not-for-profit organizations 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 is easier for long-term board members who know an organization’s ins and outs to override internal controls and hide fraudulent schemes.

Potential downsides

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.

Additionally, regular turnover will require a greater investment of time and resources. You will need to regularly identify, recruit and train new members and work to build the cohesiveness required for collaboration.

Implementing limits

If you decide to establish term limits, you will need to amend your bylaws. First, you should determine the appropriate term lengths and limits. For example, you might allow two consecutive three-year terms or a total of six years with a minimum one-year hiatus between terms. It is best not to adopt terms that are too long because it could discourage potential board members. On the other hand, terms that are too short do not allow members sufficient time to make meaningful contributions. To avoid a mass exodus, stagger members’ terms. For example, you might structure it so that only one-third of the board departs at a given time.

Your ORBA CPA and/or other professional consultants can assist when your organization is weighing change on this scale. It is 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 in your organization.

Related Read: Growing Your Board of Directors and Finding the Right Balance

For more information, contact Kelly Buchheit at [email protected], or 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.