Trade association boards, like the boards of other private companies, often consist of stakeholders who are personally and professionally invested in the organization. Board members typically also possess significant business acumen and expertise in a relevant industry, though not necessarily in the business of the trade association itself, which includes collective action, consensus-building, and organizing and operating trade events, conferences, and other member programs.

For this reason, we hear a regular pattern of questions in our work advising trade association boards and their leadership:

1. What is my role as a trade association board member, and how can I fulfill it without becoming an expert on the company’s operations, staff, and finances?
2. How can I improve collaboration with other board members and the company’s leadership?
3. What are best practices for our board to operate more effectively?

While there’s no single, right answer to these questions, we’ve seen a common set of practices work well. Boards are most effective when they adopt consensus-based policies and procedures in their governing documents, serving as routine reminders of the board’s approach to governance and balancing the individual director’s responsibilities with the board’s consensus-based oversight.

Trade association boards can help foster optimal board effectiveness by adopting written policies that confirm the board’s uniform understanding of key board functions:

• What routines should the board follow, including the cadence of meetings, the length of meetings, the flow of meeting agendas, and the purpose of meetings?
• How are agendas set, and what role do directors have in setting them?
• What is the chair’s role during meetings?
• How are directors expected to contribute to meetings?
• How should directors engage with their single employee, the company’s chief executive?
• Can staff members other than the chief executive attend board meetings?
• How will new directors be onboarded?

We often recommend that boards address these through a combination of three documents: bylaws, a code of conduct, and — often overlooked — a policy on board operations.

The Director’s Role: Fiduciary Oversight Through Consensus-Driven Action

To address the board’s function, directors must first be familiar with the overall objectives of the trade association board: to oversee the organization on behalf of the members. However, for most boards, this does not imply that the directors run the company. Far from it.

Being a board member is a significant commitment that carries substantial responsibility. As fiduciaries of the company, each director must be satisfied that the company is complying with its legal requirements and maintaining appropriate financial controls. Each director must independently make a well-informed judgment that they are sufficiently assured that the company is managing its funds appropriately in the active pursuit of a financially stable plan that serves the interests of the association’s stakeholders (its members).

While these are individual duties of each board member, they do not require that every, or even any, individual board member expertly guide the company’s financial, marketing, and strategic operations, or delve into the minutiae of the day-to-day work. As an example, each director should not scrutinize every receipt and contract. No single board member is — as a general matter — responsible for the board’s actions or for driving decision making. It is through the board’s collective insight that an effective board operates to guide a company forward. Typically, boards are effective when they engage in detailed review — including probing questions and discussion — of quarterly financial statements, the annual budget, the strategic plan, key performance indicators tied to the budget and strategic plan, and the annual report of the outside auditors. Boards remain properly focused on their responsibilities when agendas are tied to these core elements of board responsibility.

Individually, each director’s fiduciary duties are relatively straightforward and may be categorized into three requirements.

1. Pursue the Association’s Interests Alone

A well-run board operates through trust and consensus. To achieve those outcomes, each board member should come prepared to set aside their outside interests and engage deeply in the tasks at hand in collaboration with their board colleagues.

To accomplish this duty, board members must disclose and manage conflicts of interest, if possible, with sufficient time to consult with legal counsel and avoid potentially clunky and awkward discussion during a board meeting. As a board member, you bring your knowledge and industry expertise to the table, which are critical to your ability to contribute. However, you must remove your other “hats” and put on your “association hat” to focus on the interests of the association, not your personal or professional interests.

2. Engage Substantively With the Agenda

If directors come to a meeting with a passive, back-seat rider mindset, they are unlikely to engage with the materials and issues in a way that contributes to the discussion and decision making. Directors should arrive at meetings prepared to discuss agenda items and engage in meaningful consideration of important decisions, ideally without needing a lengthy presentation to get up to speed. This may involve asking for input from experts when needed, such as consultants, financial advisors, auditors, or legal counsel.

Directors also have the obligation to read the pre-read materials, which staff and committee members often spend many hours preparing, to think about questions to raise during the meeting, and, if possible, to share initial concerns with the chair, chief executive, and legal counsel so they can manage the meeting to address questions efficiently.

Directors should also keep discussion — including comments and questions — within the agenda topics. There may be opportunities for “new business” if you identify topics that cannot wait until the next meeting. Otherwise, new ideas often can most effectively be raised outside the meeting for discussion at a future meeting; directors should raise ideas for new projects or feedback on existing tactics if they are within the scope of the agenda, but otherwise typically should discuss these outside of the board meeting.

Directors should engage with leadership and other board members in a respectful, inclusive manner to reach decisions supported by at least a majority, but ideally, the entire board. In this vein, and as a general matter, directors should engage directly with the chief executive as a whole board and through board meetings. A single director should not ordinarily make requests to the chief executive or other staff, as this would not represent an official, authorized request.

To this point, directors should take great care when interacting with staff, who report to the chief executive, not to the board. Board members may be tempted to “get the inside scoop” from staff or to request detailed information about their work. However, directors should generally avoid such conversations. This type of conversation may undermine the chief executive, intimidate staff, and create an information disparity among directors. Except for rare occasions (for example, when there is reasonable concern about the veracity of the information being shared with the board), directors should keep social conversations with staff to social conversation.

3. Comply With the Governing Law and Policies

Directors must work within the organization’s governing documents, including the bylaws, a code of conduct, and the policy on board governance.

Directors also must bear in mind three key legal requirements:

1. Avoid any discussion that may implicate the antitrust laws, such as suggesting an agreement on margins or to avoid dealing with a particular company. Legal counsel should regularly review the association’s antitrust policy with the board, as well as review each agenda and minutes.
2. Some states, including New York, impose specific requirements related to the oversight of a nonprofit company’s investments. These requirements generally stipulate that a reputable advisor oversee the investments and that the board regularly review the investment activity.
3. Directors must comply with workplace nondiscrimination and anti-harassment laws, consistent with the company’s anti-harassment policies. Accordingly, directors must treat all staff professionally and with respect. Board meetings are often paired with social activities that include staff, and directors must follow the association’s policies at these events. Off-color jokes, stories, and comments, or otherwise unwanted actions (like hugs and touches) are grounds for harassment claims. Be sure to promptly and tactfully take action to stop these if they arise and report them to legal counsel.

Establishing Board Policy that Supports the Director’s Role

By developing a common set of core understandings among board members about their individual and collective roles, board members with diverse backgrounds and expertise can be empowered to achieve better results. This consensus-driven approach relies on directors to adopt policies that define their conduct and set the direction for the chief executive. The board then iteratively re-evaluates those policies and provides guidance to the company’s leadership as they report during board meetings on how they are carrying out those policies.

Three policies in particular consistently drive effective board performance, especially when the board gives them regular and substantial consideration to ensure they reflect the board’s consensus for how the company should operate to best serve its stakeholders. These three policies are the bylaws, a policy on director conduct and expectations, and a policy on board governance.

Bylaws Provide Structure and Empower Board Governance

Bylaws are the “constitutions” for boards, providing the ultimate boundaries for their makeup, authority, and activities. Bylaws can be long, difficult-to-read documents and often need updating to make them work effectively.

As a board member, start your review of the bylaws by focusing on these three elements:

1. What is the purpose of the company? The bylaws’ purpose statement — often overlooked — typically captures a detailed, carefully written description of the mission that should be the overarching check on all board activities. In other words, if you’re asked to approve something, you should consider and be able to articulate how it aligns with the company’s purpose. Note that this requirement is different from, and more general than, the company’s current strategic priorities, which also serve as a board’s touchpoint for decision making.
2. What is the authority of the board as a whole, and what authorities are delegated to its committees? The bylaws typically empower an executive committee to act for the board between meetings and provide updates to the board. They also usually allow the finance committee to oversee and approve an annual audit report before presenting it to the board for review. Other authorities are delegated to a nominating committee in its work to find replacement directors, a finance committee in its oversight of regular financial reporting and investments, and ad hoc committees to address special issues.
3. What authority is reserved for the company’s members? The board ultimately must serve the company’s interests, which typically means serving the interests of its stakeholder members. Members are authorized to vote in annual elections to the board and on special matters brought by the board to the members for consideration.

Directors should take the time to review the entirety of the bylaws as well, but these provisions are critical starting points.

Director Expectations Should be Clear to All

Boards should adopt policies that set expectations for directors. For example, a code of conduct should address the procedure for handling conflicts of interest, as well as baseline expectations for decorum and respectful dialogue. This includes expectations for attending meetings, coming prepared to meetings, and engaging cooperatively with other directors and leadership to ask probing, focused questions to drive discussion and move the company forward. Each board tends to have its own sense of proper formality, and the code of conduct should describe what that means to your board.

Additionally, we have found that a policy on board operations can address what are often unwritten norms that govern each director’s work on the board. This policy should capture, for example, how agendas and minutes are prepared, how committees are intended to operate and who should be on them, and how the chair and other officers are intended to facilitate the board’s functions. This policy is often helpful to provide direction to board members when they seek to share feedback on matters outside of the agenda or on tactical details that do not generally belong in the boardroom, such as by setting up one-on-one or small-group meetings with the chief executive. This policy and the bylaws should together address eligibility criteria for directors, and the extent to which the board’s composition should represent the diversity and range of the association’s members.

The Role of Legal Counsel and Other Advisors

Tying all of this together, the company’s legal counsel acts as an advisor to the board, providing advice on policy interpretation and assisting directors to comply with their duties and the company’s policies. Legal counsel also often helps to craft motions and capture (or at least review) minutes. Counsel may be particularly helpful in guiding board members to navigate conflicts of interest, draft policy, and manage the process and documents associated with overseeing the chief executive. Counsel also may help to maintain a repository of board meeting materials, including minutes of executive sessions.

The board may also engage other advisors, including consultants to advise on strategic planning or fund management, accountants to perform the annual audit, and others with unique expertise to advise on special projects.

Ultimately, each director should feel comfortable that they are taking appropriate steps to serve the organization, whether through their own contributions, those of other directors, or through staff and advisors.

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