for the rest of us non-lawyers
Disclaimer: The contents of these pages are offered as general principles, but not as legal opinions. Statutory law and entity policy on board structure, lines of authority and board discipline vary widely. Some of the comments here may not be applicable, or may be wrong in some situations, depending on the regulatory and organizational environment. When in doubt consult competent legal counsel. See the further disclaimer at the end.
Definitions and basic concepts for board governance are on the starting page.
Some scenarios illustrating fiduciary misconduct are collected on a separate page.
A Special Note on Churches
The only Church offices that the New Testament mentions are Elder/Pastor/Overseer (terms apparently used interchangeably) and Deacon. Most churches today have either two boards, one of each office, or one, on which both sit, or they ignore the distinction and call both elders.
Some argue that because the only model of governance that the New Testament seems to mention is leadership by its elders, a Board consisting of any but Elders, being the creation of modern governments and not the Scriptures, should play little or no role in Church governance. (This of course assumes that the elders in question are in fact New Testament ones, and that this is not merely a modern misusage of the term for any church leader, whether qualified in the New Testament sense or not.)
This can work out--provided that the church in questions happens to be operating in the manner thata first century one did--meeting in homes, no ownership of buildings lands, or vehicles, no desire for insurance, limited liability for members, or legal status as a charitable organization.
However, most modern churches do want:
- status as a charitable organization, which requires government (usual federal) registration to issue receipts for tax purposes. Naturally, such registration usually requires that the directors and officers be listed and reports submitted annually, for the sake of accountability.
- limited liability, so that a suit against the organization does not devolve on all its members, which requires government (usually state or provincial) registration as a limited liability society. Such registration usually requires that governance documents be submitted and approved under whatever act or statute governs such organizations. A list of responsible directors, officers, trustees, and like fiduciaries is usually required to be updated annually.
- employees, which requires compliance with labour laws, worker safety laws, tax withholding rules, a proper payroll system, etc.
- exemption from land and building tax, which again requires application and (generally annual) registration with the local taxing authority (county, municipality, or like body).
- land and building ownership, which requires approval from local authorities, compliance with building, plumbing, electrical, gas, fore, safety, and water standards, engineering approval, and numerous inspections, some ongoing.
- vehicle ownership, which requires meeting safety standards for equipment functioning and operatin, insurance, and regular inspections.
- insurance, (including fire, accident, malpractice, etc) which requires approval by a friendly insurance provider of safety plans, child protection plans and training, a monitored alarm system, and compliance with a variety of (possibly rapidly changing) conditions for issuance of a policy.
- a bank or credit union account, in order to do financial business, which may include asking for a loan. Of course the institution so importuned will want to see the balance sheet of an organization that can demonstrate sound financial management and that it is in a viable financial state.
- and there may be many other businesses and agencies that could, from time to time, demand proof of financial soundness, safety, compliance with standards, and sound governance.
Thus, even for a Church that strives to be as much like a New Testament church as that document portrays, operating in the preferred modern fashion requires some board governance. Indeed, for a church organized as a society, the law requires a board accountable to the membership.
Yet another practical consideration argues for strong board governance of a Church. Anyone can (and some do) claim to be appointed by God as an (or the) elder/pastor/overseer of a Church, and if theirs becomes the sole hand of governance, then in the practical considerations of this life, they are accountable to no other human being. Regardless of the context, we all ought to be wary about the ambitions of anyone who wants to be "number one", because both the desire for and the exercise of power corrupts. Sadly, there are numerous examples of non-accountable so-called pastors abusing their positions in a variety of evil pursuits, all of which instances argue loudly and convincingly for pastoral accountability to a board--one that is in turn answerable to members--as a better model than one person rule.
Moreover, in the New Testament, elders were appointed by Apostles or their personal delegates, and derived their legitimacy from said appointing authority. No one in the modern church can claim such authority, so today's elders must be recognized in some other way. The usual way today for a self-governing local Church is to conduct a search, and when a candidate is found, for the members to vote to "call" (i.e. recognize) a pastor to ministry there. Alternately, hierarchical church denominations assign pastors from headquarters, but any claim to have apostolic or other authority to do so is not credible. There is no chain of connection with the New Testament apostles nor to their authority to appoint elders. Thus a different system is, perforce, necessary in our times.
It is also worth noting that the gift of administration is listed by Paul (look it up!) as a separate one from preaching and teaching, as part of the argument that no one person has all the gifts required to make a church function properly as a whole body. He also tells Timothy to give double honour to Elders who rule well. This either implies there are ones that do not rule well or that there are ones that do not exercise rule at all, or both. At the very least it demands we ask "who teaches an Elder to rule well?" when it becomes apparent he is not or cannot?" It also demands the question, "who rules if an elder does not?" It is surely obvious that someone whose entire training is in Biblical knowledge, exegesis, and perhaps counselling, cannot also be expected to have deep practical knowledge of personnel appointment and supervision, building and grounds maintenance, community relations, childrens' ministries, legal matters, and especially of financial management, for example. Indeed, people with a primarily academic background are very often among the least likely to have significant mastery of practical matters, especially when it comes to legal and monetary issues, which are among the least understood of all.
Finally, one can argue that because all believers are priests of God, and have the indwelling Holy Spirit, that when they meet together enquire of God and make decisions, the common consensus will more probably reflect the will of God than would the decision making of a small group like a board, and certainly of one person deciding alone, no matter how convinced that individual is that he always decides and acts solely in the will of God for the church, as that will is expressed to him alone.
One can argue that an Elder's job is to equip the saints to do the work. Right on, but how can he equip financial managers to keep a correct set of books, a building project chair to pick reliable contractors, a janitor to clean the facility correctly,the AV team to run the sound system, the musicians to play their instruments, and a secretary to devise and maintain a filing system? He cannot, because he does not have all knowledge to do these things. Moreover, the sole work of the church is to make disciples of Christ. That, and not enterprise management, is the task of the Biblical elder. So it is neither Biblical not even possible for his "rule" to be comprehensive, or his leadership to encompass all aspects of modern church life and administration.
Taken together, these considerations argue convincingly for a congregational form of financial and legal governance working in tandem with the spiritual authority of the elder(s). After all, if a Church operates as a society, statutary law requires the members to approve the constitution, by-laws, and budget, and the board to hold the operating officers to the constraints of the law and the organization's defining documents on behalf of the members and as the public face of the organization.