Formal Membership Matters

[Rezwan]

Hello Formal Members, and Registered Website Members.

Per our bylaws, FFS is a membership organization. And formal Members are distinct from website members:

III. MEMBERSHIP: A member in good standing is any person who is a paid-up member, or no more than three months in arrears. No individual may be denied membership on the basis of race, religion, creed, gender, sexual preference or handicapped status.

As of today, FFS has 67 members with an average donation of $100 (most donations are in the $30 range, but a few big ones bring up the average). A big thank you to our paid up members!

An additional ~1300 people are registered on the website (there’s some overlap). If every website member chipped in with the average donation of $100, we’d have $130,000 more to carry on the work of FFS. We’ll be sending out a fundraiser and membership drive email shortly.

This post isn’t about fundraising, however. It’s about what it means to be a formal member. Note that most nonprofit organizations don’t have formal membership structure. People who give money to the organization without formal membership are often called “supporters, patrons, contributors, or advisers”. You may pay “dues” to a museum, for example, and get “membership” with discounts, newsletters and benefits – but the membership is informal. You don’t have a “say as a formal (legal) member in the museum’s operation and management.”

Our organization is set up as a membership organization, and paying members are automatically assigned legal status as formal members. We don’t have a provision to opt out of this. This has been fine up until now, with small membership. But if we plan to grow and become a real force for fusion, we need to clarify these matters.

[Rezwan]

Here is more information on Membership law, per the Nolo Nonprofit Corporation book:

if a nonprofit corporation establishes a formal membership structure in its articles of incorporation or bylaws, then members of the corporation will be granted basic rights to participate in the affairs and future of the nonprofit corporation. We refer to members who are give these special legal rights as formal members.

It is optional for a nonprofit corporation to have formal members with legal voting rights. To avoid the problems (including the paperwork and expense) of having to put elections of directors and other major corporate decisions to a vote of the members, most nonprofits choose not to have formal membership structures.

Not having formal members is organizationally simpler than adopting a formal membership structure because only the directors are legally entitled to participate in the operation of the corporation. People interested in a nonmembership nonprofit, although they may play fundamental advisory roles, need not be notified nor allowed to vote for directors or approve changes to the corporations’s articles or bylaws. Normally this works well – because most people become involved in nonprofit organizations out of interest in the group’s activities and purposes, or in some cases because they receive attendance privileges or discounts to nonprofit events or programs, not because they wish to participate in the legal affairs of the corporation.

In other words, the basic difference between formal and informal membership is voting rights. Both types of members would end up getting other privileges and perks of membership (to be discussed in a separate thread).

Below, Nolo sums up the “cons” of formal membership. It seems to me the cons apply to regular board membership as well, but there are just fewer people to manage. In other words, a membership just multiplies the problems of the board.

Why Not Having Members Makes Sense

Here are some reasons why most nonprofit incorporators prefer not to have members:

* Setting up a formal membership with voting rights dilutes directorship control over corporate operations.

* It isn’t always easy to expel a member. State law may require that members only be expelled for good cause following a formal hearing. [no idea if that applies in New Jersey]

* Nonmembership groups can still receive suport from subscribers, sponsors, patrons, friends, benefactors, and so on. You can offer discounts or other benefits to outsiders who participate in the activities and programs of the corporation without giving them a legal right to participate in the management and other affairs of the corporation.

In some states, you may even call these outside supporters “members” of the corporation without running the risk of entitling these persons to voting and other legal membership rights in the corporation. Nontheless, to be safe and to avoid confusion and controversy later on, we suggest you use another term for persons who will not be legal members of your corporation but who will otherwise contribute to, or participate in, corporate affairs and activities.

And, of course, with members voting, you have to set up voting procedures and quorum and voting rights.

And now, how about the pros?

[Rezwan]

Per Nolo again,

Formal Membership Rights in a Nonprofit Corporation

A formal (legally recognized) member of a nonprofit corporation is usually entitled, under the state’s nonprofit corporation law, to vote on the following matters:

* election and removal of directors
* Amendment of articles and bylaws
* approval of merger or consolidation with another corporation
* election to wind up or dissolve the corporation
* sale of corporate assets, and
* approval of a transaction involving an interested director or officer

It is possible to have different classes of membership, such as voting and nonvoting membership classes. One could thus have different matters be votable by different classes. For example, you could have most of the voting be restricted to the board, with options for members to propose ballots and vote on them if they wanted to bring something up that the board is not addressing, or if they disagree with what the board is doing. Also, one could have members vote on board members, and then let the board members do the rest of it.

We did not make any distinction in our articles. Neither did we address quorum and voting rules. I think that a quorum in New Jersey is the actual number of voting members that attend a meeting [Anyone with New Jersey law experience know differently?], which in our case has been very small.

An example of an organization with formal membership is the Sierra Club. Here are their policies.

As the key admin around here, and anticipating a growing organization, the difficulties of membership management are at the fore for me. I will leave it to someone else to discuss the pros of formal membership.

[Rezwan]

Then again, here are some pros:

Boardsource.org has this to say about why some organizations take the formal membership route:

Some nonprofit organizations, including some charities and most trade associations and professional societies, intentionally have a large category of members who play a part in organizational governance by electing the board of directors, approving amendments to the articles of incorporation and bylaws, and sometimes approving certain other key decisions. (In trade and professional associations, membership sometimes creates a contract right between the association and its members.) The purpose of this structure is to give members a role in major decisions, while at the same time allowing the board of directors to continue to be the main decision-making and policy-setting body.

The Focus Fusion Society is a mixed bag, professionals and the public. It would be interesting to come up with a clearer picture of the role of members, their rights and responsibilities – or to evolve the trade and professional dimensions…

Another thing that many nonprofits do is to give members very limited voting powers.

All of these would have to be made explicit in the bylaws.

If you’ll note, our bylaws currently give members only one right, to vote for the Executive Director. Thereafter, all decisionmaking is in the power of this one person.

[Rezwan]

Until this point, the Focus Fusion Society has been a small enough organization where the simplicity of our bylaws haven’t been an issue. We do, however, plan to grow.

If we elect to continue with the membership model (we can amend this, if we want), we will need some dedicated volunteers to handle membership issues, or we might need to hire staff for membership.

A few more quotes from boardsource.org on the “cons” of Formal Membership, and then I yield the floor for discussion:

Because true members are entitled to certain procedural rights under state law, and because complying with membership notice and meeting procedures sometimes can be quite onerous, it is important to think very carefully before arbitrarily creating one or more classes of members.

If an organization does have one or more classes of voting members, those members are usually entitled to various procedural rights under state law, as well as whatever rights and privileges are stated in the bylaws. For example, members typically are entitled under state law to a certain number of days of prior written notice of member meetings, and the notice may have to contain certain details…

…an organization with hundreds of members can incur significant costs and expend significant time and effort just sending out meeting notices…

…members who cannot attend a meeting in person are generally allowed to vote by proxy, and tallying those proxies can be time consuming. If either the content or the timing of member notice is improper for any reason, disgruntled members may successfully challenge the vote taken at the meeting, which can then result in the need to call a replacement meeting with a new round of notices.

[Brian H]

Seems like asking for problems. If and only if some specific need arises, IMO.

[Author]

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