General Information

Recently, one of our private club clients requested we furnish it with some of our corporate policy templates. The request stimulated a concern that while most private club governing boards and executives generally are careful to monitor and keep bylaws and club rules up to date, many of them do not pay much attention to written policy outside of the bylaws and rules until an urgency is present.

However, attempting to formulate policy in the middle of a crisis or urgency may prove to be futile.  Indeed it is probable many if not most clubs do not even have a crisis management policy.

Written organizational policy is as much part of the club's private organic documentation as are its possibly director, officer and management personal liability.  Its absence may also adversely affect liability insurance coverage, capacity or premium cost.

By the term "private organic document" we mean any document (other than the club's public organic documents, e.g., its articles or certificate of incorporation, filed as a public record), that also determines the internal governance of an entity. [2]

Organic documents are distinguished from organic law, i.e., the statute(s) principally governing the internal affairs of a club or other organization. [3]

As a result of the passage of SOX, [4] some provisions, such as protection of whistle blowers and prohibiting destruction of corporate records, have been deemed to apply to all entities, including nonprofits.  Further, many states have begun enacting laws applying SOX-like provisions to nonprofit corporations.  Finally, other SOX provisions may be applied to nonprofits through "best practices" emerging in response to SOX.  Thus, pertinent provisions of SOX and applicable state law emulating SOX, may be thought of as constituting organic law as applies to nonprofit clubs.

Written club policy needs to exist independent of the club's bylaws and rules.  First, some policy needs to be flexible to meet changing factual and legal conditions. If member approval of bylaw amendments is required, the time it takes to effect amendment to reflect necessary policy revision may be too slow; further, member approval is not always forthcoming.  Much of the necessary policy deals with management issues, generally within the sole province of the governing board's prerogatives. Other policy is directed towards the club's employees and is not appropriate for bylaw or club rules inclusion but may be incorporated in employee and supervisor manuals or handbooks.

Clubs need to take inventory of their written (and unwritten) policies to insure their currency and adequacy.  Unwritten policies should be reduced to writing and adopted by formal board resolution.  "Sunset" procedures should be in place for policies to ensure their periodic review, revision or termination when appropriate.  Policies affecting members should be periodically published to insure member awareness and adherence.  Long standing policies should be considered for inclusion in the club rules themselves.

While we have been privileged to assist numerous private clubs with their articles, bylaws, rules and employee manual revisions or amendments, we are not called upon very often to assist with evaluation of their stand alone policies.  We suspect but do not know that the failure of our club clients to request assistance with policy formulation or updating, is a function of their unawareness of the need for and thus failure to adopt and maintain the necessary written policies necessary to protect the club, its directors, officers and professional management from unnecessary legal and other risks.

"Best practices" for private club governing boards and management should encompass the maintenance of a directors manual given to all board members upon assuming office.  The manual should include not only the basic private and public organic documents, i.e., the articles and bylaws, but all club rules and written policies adopted by the board and not previously revoked. A code of conduct for board members is normally included in the director's manual along with other material believed to assist directors in the pursuit of their duties.

By way of illustration, but not limitation, among the policies we recommend for consideration are the following:  Records and Data Retention, Destruction and Safekeeping Policy; Employee Records privacy and separation; Whistleblower; Media Relations; Anti-harassment; Member Privacy; Collections; Lightning; Website Privacy; Security; Alcoholic Beverage Server; Conflicts of Interest (directors and employees); Crisis Management (who speaks for the club?) and Confidentiality.

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[1] Club rules themselves may be also considered as "policy" as adopted by the governing board. The basis for considering policy as a constituent of the club's private organic or governing documents is usually by virtue of the bylaws themselves giving the board authority to make rules and policies for the operation and management of the club and its affairs.
[2] Occasionally, when reviewing a club's bylaws for the purpose of recommending revision to comply with modern private club "best practices" or for statutory compliance, we find conflicts between the bylaws and articles of incorporation. By statute, these conflicts are normally resolved in favor of the articles as the articles are of a higher order of legislation.
[3] See  Model Nonprofit Corporation Act (3rd Edition April 2009), Chapter 1, Subchapter C, Section 1.30 (American Bar Association Section on Business Law Committee on Nonprofit Corporations), for the distinction between organic law and organic documents and the distinction between public organic documents and private organic documents.
[4] The American Competitiveness and Corporate Accountability Act of 2002, commonly referred to as Sarbanes-Oxley or "SOX."

 

This web site is designed for general information only. The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship. Lawyers listed in this Web site are not certified by any state agencies or boards of legal specialization. This web site may constitute attorney advertising in some jurisdictions. © 2016 Fred L. Somers, Jr., P.C