Is your board of directors arguing about bylaws and policies? Is there are difference between bylaws and policies?
Yes, there is a difference. Determining which it should be is not that difficult. The answer is usually apparent if you consider the different purposes of bylaws and policies.
Bylaws are the primary governance document of your organization. They are a 20,000 foot snapshot of how your organization operates.
Bylaws should address static, “boilerplate” topics, such as:
- corporate mission, purpose, and statement of values
- membership or ownership categories
- responsibilities of the officers, directors, and committees
- voting rights
- conflict of interest disclosure procedures
- indemnification procedures
- requirements for fundamental changes (mergers, dissolution, converting to another entity type)
- how to dissolve (terminate) the corporation.
True, the board of directors can amend bylaws at any time. However, bylaws are corporate practices that are intended to remain in place for the foreseeable future. In other words, they have a sense of permanence.
Policies are flexible and take into account current regulatory, ethical, competitive, and social norms. In other words, they are the topics and practices that are likely to change.
For example, common policy topics include
- personnel matters
- organizational charts
- operational matters
- safety procedures
- codes of conduct
- customer service procedures
- membership dues (for nonprofits)
Policies are topics that are likely change as your business grows, expands, or industry standards change.
Policies are the procedural and managerial functions that are usually more detailed and concern narrow, issue-specific matters.
So is it a bylaw or a policy?
Here is my rule of thumb: if the matter should be etched in the proverbial stone, it is probably a bylaw. If it is likely to change as business practices, technology, and laws evolve, it should probably be a policy.
When in doubt, call Concerto Law to discuss your situation and resolve a squabble between board members.