Can a nonprofit truly be controlled by its members, not a board?

Question

My understanding is that there are two main organizational structures for a nonprofit: one with a board of directors, and the other (only possible in some US states) to have a board of directors, where the members have voting rights to elect and replace members of the board of directors.

In this latter case, the members still only have indirect control. The board of directors has absolute control over the organization and could do anything they pleased with it, even against the wishes of the membership. (Correct me if I'm wrong.)

Is it possible to set up a nonprofit so that the members have complete control over the organization, in decisions large and small? I realize that seems difficult logistically--I have some thoughts on that. My concern here is how to do it legally. The members should feel they have the final say over what the organization does, even more than executive officers of the company or a board of directors.

Mainly, I greatly dislike the idea of a small, random group of directors being able to make decisions the membership would not want.

More specifically, I have a very unusual idea: imagine, say, that each member has a certain number of votes, based on how long they have been a member, how much effort they have contributed and how far they have proceeded through the group's educational program. Imagine that the founder, or founders, has a huge number of votes. In the early days, while the organization is small, the founders would essentially have total control. As membership grows, the founders' votes would represent a smaller and smaller portion of the total votes. Eventually they would only possess a tiny percentage of the total votes. They would be influencers, in a mild way, but would have little control. By this point the membership would be large enough that there would be no realistic chance of a special interest group seizing control of the popular vote and thus, the organization. This concept seems to me to be feasible, but I don't know if there's a way to get away with it legally in a nonprofit.

The most relevant post on this site would seem to be Is a nonprofit LLC required to have a Board of Directors?, but I'm not sure that it actually answers my questions.

Answer 1

Everyone hates anyone else having power. However Directors are not random. If your business is functioning at all, your Directors have platforms they labor toward, or at least social connections. This can often be annoying to the socially awkward who are on the outside looking in.

The Board of Directors does not have absolute control

They can be limited using the Articles of Incorporation or Bylaws to defer certain decisions to the Members. For instance many organizations have a Bylaw clause that requires a Member vote to effectively gut the organization e.g. to shut down the thing that is their mission. Others have buy/sell limits, etc.

Further, as Dale M discusses, they have a fiduciary duty to act in the interests of the organization, not against its interests nor in their own interests or that of private others. This includes self-dealing, which is called inurement when a Board or officer does it. The IRS is keenly interested in stuff like this; attorney generals can be hard to motivate, but dropping a dime to IRS can get them in BIG tax trouble.

Member direct vote

You need a Board of Directors, but you can limit their power via Bylaw to the point where they are toothless. Or become simply administrators, e.g. Members budget $1000/year for the electric bill and the Board makes sure it gets paid every month.

Another option is to make every Member a Director.

Read Robert's Rules of Order. A "Membership direct vote" is actually a supported form of organization, and it's often used where associations are formed informally i.e. haven'd filed formally with the state. Online voting certainly changes the logistics of group voting, however, it does nothing to cure the problem of mob mentality rather than competent leaders with a plan. If you want to organize, you'll need to pick apart state law on how to implement it. We're not your lawyer.

Vote by stock

Many states allow organization of nonprofits on a stock basis. Members become shareholders. Shares are allocated in some way which is not inappropriate.

• A condo association might allocate by square foot of condo.
• A beautification committee might allocate by street frontage.
• Volunteer orgs could allocate by years or volunteer hours, cash donated, or some system of credits.

Whatever you pick, Members will vote with their feet, and if your way is stupid, they won't support your organization.

The method must also be reasonably fair and pass the "stink test" both with the state's Attorney General and the IRS. The legitimacy of your method is not one you want to drag into the Federal appeals courts.

Answer 2

I will correct you as you are wrong.

The board of any organisation must act in the interests of the organisation which means acting in the interest of all of the members as a collective, in accordance with the constitution and applicable law of course.