Over the past 18 months, American religious organizations, like much of the country, have experienced deep division over numerous issues: politics, race, COVID, abusive leadership, cancel culture, etc. Our clients have handled these issues differently from organization to organization – some addressing issues head-on, others touching upon sensitive subjects peripherally, and others avoiding the topics all together. It has been a difficult season.
Regardless of the varied approaches, one thing is clear: religious organizations seem to be quite divided — among themselves and certainly within each organization. Although this may feel new, it is not unfortunately. Jockeying for power, whether in good faith or bad faith, has been a historical theme of religious organizations. Who has control? Who can make hard decisions when there is strong disagreement? Who can hire/fire? The lead pastor, other staff, elders, the congregation? These issues have been highlighted in the very popular podcast “The Rise and Fall of Mars Hill.” Episode 7 expounds upon the classic power struggle between a popular lead pastor and the larger group of elders and gives us a real-world example of how “a house divided against itself cannot stand.”
How do you protect your organization from such division and outcomes? Or, more aptly put, what can enable you –leadership – to continue to shepherd your flock well throughout such divisive times – with clear rules of engagement on how disagreements are managed, and ultimately how very difficult decisions are made?
Bylaws set forth the corporate governance parameters of the religious organization. It’s in essence the “how-to” handbook for the organization: who we are and how we operate. Bylaws address how the religious organizations is governed, who makes the key decisions, whether the organization has members, whether those members can vote and what they vote on, what happens in the case of an emergency, what the organization believes, who can hire and fire, and, importantly, avenues to facilitate resolution of internal disputes.
While we have no Mosaic staff, we can offer practical guidance to help prevent or mitigate usurpation of corporate power within a religious organization. The answer is found primarily within an organization’s Bylaws – yep, that old, dusty, 20+ page document that no one really reads or understands. But proper Bylaws are extremely important – and can provide great freedom for a religious organization to smoothly operate, navigate through difficult decisions, and ultimately, remain viable long-term.
We thought it would be helpful to provide you with our thoughts regarding what are the most critical items that you should make sure are covered in your organization’s Bylaws:
- How is your Organization Governed? – That is, who has what powers? Powers can be vested in different groups: elders, deacons, the members, a small team of the key clergy (senior leadership team), and/or the lead pastor. We believe, generally speaking, that best practice is to vest important decision-making across various groups (and not within one segment of the organization). Take a look at our country’s balance of powers and how that has led to great success and viability over the long-term. Similar checks and balances work well within religious organizations. Many of our clients utilize an elder board that functions much like a Board of Directors in the for-profit world. They set vision of the organization in accordance with the organizations mission, hire/fire the lead minister, but are also accountable to the members on key issues (e.g., approving an annual budget, building a new building, taking on debt, dissolving the entity, etc.). We do recommend term limits and staggered board terms for an elder board.
- Formalities Required for Action – Often overlooked, Bylaws generally contain very specific requirements regarding how various groups may meet or vote on certain topics in order for those actions to be effective. Must meetings be in person or can decisions be made via video, phone, email, text? What constitutes appropriate notice for a meeting, what constitutes a quorum for a meeting, and what percentages constitute a passing vote? If an organization operates outside of the defined parameters, executives may have personal liability/exposure for such actions or omissions (and that’s where D&O coverage becomes very important!).
- Membership – Do you have members? If yes, are those members entitled to vote? If yes, what can they vote on? And what are they required to vote on? Are there regular membership meetings, and how frequent? Can members be disciplined? Setting the record straight on all these questions can save a lot of heartache. If you have members, consider letting them vote on the key issues, as noted above. But also specify what they cannot vote on, which is sometimes as easy as: “Other than as specified in these Bylaws, the members have no other voting rights or powers to bind the organization in any action or matter.”
- Statement of Faith – Set forth your organization’s position and beliefs on numerous key topics (i.e., theology, key tenets of the religious organization’s beliefs or practices, etc.). Specifying these beliefs provides clarity on who you are as an organization and anchors the organization from temporary swings based on any particular employee or board member. Also, setting forth with clarity the religious nature of the organization is important to preserve the tax-exempt status of the organization.
- Amendments – Knowing what is required to change the Bylaws is critical. The threshold should be quite high in our opinion because you don’t want key things about the organization to easily be changed or altered. A common threshold for our clients for Bylaw changes is board approval, plus 75% of members.
- Dispute Resolution – Unfortunately, litigation within religious organizations is not uncommon. One way to prevent, or mitigate, potential legal action, is through a dispute resolution provision in your Bylaws. This funnels internal disputes to mediation, which can be private and much less costly than formal litigation. Also, litigation is public record and can create public relations issues.
The above is not an exhaustive list, but it’s a great starting point. Take some time with your leadership to determine if your organization addresses these important concepts well. We certainly recommend you involve legal counsel. We have drafted and revised numerous sets of Bylaws for religious organizations, and we’d be glad to connect with you. Last tip – have a one page executive summary of the Bylaws created as a reference tool for everyone. Much easier than reading a lengthy document every time you have a question!
Preview Attorney's Biography
Keith represents business and corporate clients in conflicts and litigation encompassing complex contract and commercial disputes, intra-company disputes between shareholders and members, employment matters including workers’ compensation, and other areas of risk management. He also represents churches and other religious organizations in matters of governance, internal affairs, risk management, and litigation.
Preview Attorney's Biography
James is a trusted advisor to companies, entrepreneurs, nonprofits, and religious organizations on a range of transactional and general business matters. He advises clients on incorporation issues, mergers, acquisitions, company divestitures, transactional due diligence, and the drafting, review, and negotiation of contracts. James also has significant experience assisting businesses in matters of commercial real estate, employment law, intellectual property, estate planning, regulatory compliance, insurance, risk management, and dispute resolution.