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What’s the Difference? Policies vs By-Laws

The boards of voluntary and non-profit organizations normally govern by establishing policies. A policy is any written statement approved by the board or by the membership that:

  1. Articulates and defines important objectives, principles or values
  2. Limits or prescribes what kind of action will be taken in different situations
  3. Defines roles, responsibilities and authority

By-Laws

All organizations, as a requirement of incorporation, are required to establish by-laws in respect to specific matters. These are usually matters that relate to the functioning of the board and its relationship to members.

Under the Societies Act of Nova Scotia, for example, the by-laws must address eleven matters. In Newfoundland and Labrador, by-laws are required and must be kept on record however they are not filed with the Registry of Deeds and Companies of the provincial government.

The by-laws of the organization are those policies that cannot be adopted or changed without approval of the membership (2/3 in Newfoundland and Labrador) at a general meeting and any changes must be reported to the appropriate government department.

By-laws may include a statement on how the board of directors was formed; when and how future directors will be elected; an outline of the board’s powers and duties; or the process for setting up committees and their powers.

View more examples of by-laws.

Board Policies

General policies should also be set that are subject to change by the board of directors at any time. Indeed, it is in the interest of most voluntary and non-profit organizations to limit the number of policies designated as formal "by-laws" and focus their attention on creating other key policies.

This gives the board of directors the flexibility and opportunity to identify the organizational practices that are important to them in such a way that they can be easily modified when the need arises. This is often referred to as "governing by policy".

Key areas for policy setting

  • Organizational mission, objectives and values.
  • Role and responsibilities of the board.
  • Board decision-making and meeting practices (usually covered partially by by-laws).
  • Conflict of interest.
  • Board member conduct.
  • Role, responsibilities, and authority of the executive director or CEO.
  • Financial management.
  • Personnel, hiring and other human resource practices.
  • Treatment and protection of consumers, customers, clients or users.
  • Fundraising (including ethical considerations).
  • Advocacy and public education.
  • Accountability to members, stakeholders and community (may be partially addressed by by-laws in references to annual general meeting and annual financial report).

This article was reprinted in part with permission from Non-Profit Sector Leadership Program, Dalhousie University.

Source

Visit the Non-profit Sector Leadership Program at Dalhousie University for more Board Development resources.