Can an Executive Director Also Be an Officer of a Nonprofit Corporation?

It can be difficult for a fledgling nonprofit to fill all its positions with different people. The demands on the board are often more than a small group of volunteers can handle, but finding an executive director from outside the corporation could be a difficult and expensive proposition. Conversely, filling a board vacancy with the current executive director may initially seem an efficient and expedient solution. But having the executive director be an acting board member, though not illegal, is rarely wise.

An executive may be a board member as long as the proper steps are taken to insulate the corporation against the reality or appearance of conflict of interest. Since the board decides on compensation for the executive director, it is inappropriate for the director to be part of that decision-making process. If a board member must be an executive, make it clear in the bylaws, as well as in practice, that the executive may not vote or participate in compensation discussions.

When a nonprofit is started or during transitional periods between executives, it is common for the board president or another officer to act as the corporate executive. However, this should always be seen as a temporary solution, not a permanent one. This is because the relationship between the board of directors, who are the corporation's officers, and the executive director is an employer-employee relationship. The board chooses a direction for the organization, and the executive makes the corporate vision a reality. In the case where the executive sits on the board, the division of labor and of power is upset, because it becomes difficult for her to separate her executive duties from her corporate and fiduciary responsibilities. Thus, in the case where the executive also must cast the tie-breaking vote, there is a built-in prejudice that cannot be avoided.

For a fledgling organization, the executive must often be a board member by necessity. When this common case occurs, it is important to establish an exit strategy early on. If a board member is working without compensation as an executive, or if she is given an honorarium to cover expenses, a clear trajectory of involvement should be mapped out from the start. In the case where a board member is an acting executive -- during a search for a new executive, for instance -- there is not much cause for concern. But when a board member seeks to become an executive, say, once the organization can afford to employ a separate executive, it should be clear from the start how and when that person will be required to resign from the board.

If it is absolutely necessary to have the executive director sit on the board for an extended period of time, the sitting board should consider amending the bylaws to reflect the change.Standard practice is for a nonprofit corporation to have a section in its bylaws that excludes board members from receiving compensation. If a set of bylaws has this provision, a suspension or adjustment clause should be added that allows for payment to the executive acting as a board member.