Choosing Between Open or Closed Membership
Organizations that are legally incorporated are required to identify an ownership base. For non-profits, this takes the form of the “membership”. It is very common to have a small, “closed” membership base limited to exactly the people who make up the board of directors. However, it is also common to have a broad, “open” membership base from which board members are elected. We see different legal membership definitions for not-for-profit organizations that are large and small, that have active and engaged owners/members to passive disinterested ones. Whether you should open up membership or limit it to the number of directors on the board can be a big question.
What difference might opening up membership make? Will it impact our competitiveness for funding from government or quasi-government sources? What might be the impact on recruitment... on advocacy effectiveness? There are several factors to consider. Let’s take a look in more depth.
Whether the organization seeks to have a broad or narrow legal membership depends on its assessment of how it can best carry out its duties to direct and protect the organization in the best interest of the moral ‘ownership’. For example, the legal ownership of a children’s services agency may be defined as the board members while the moral ‘ownership’ of the agency is the community it serves. Not just the clients or customers it serves but the whole community.
At the heart of the matter is accountability to the moral ‘ownership’ of the organization. Accountability, we would argue, can be established in a various ways. Sometimes accountability methods are imposed by external regulatory agencies such as the Ministry of Health requiring certain financial reports. In other cases, accountability is achieved through legal frameworks, government regulations (e.g. the requirement to file an annual update of the directors and officers), board stewardship (policy governance and a monitoring protocol), professional standards, accreditation, codes of ethical conduct and outcome-based assessments of the organization’s performance1.
So, the impact of membership structure on accountability needs discussion: Will there be greater accountability if a broad membership can vote out of office any board members they deem are not acting for the benefit of the owners as a whole? Or, will there be greater accountability and effectiveness if board members are selected on the basis of their competency and ability to make sound decisions for the benefit of the moral ‘ownership’ of the organization? This is not easy to answer since we often see members vote based upon what they would receive as customers rather than in the best interest of the moral ‘owners’ as a whole. If your organization is a public benefit not-for-profit (e.g. social services agencies whose activities are intended to assist the public) and the community is not very engaged in or demonstratively supportive of the work of the organization, then you may prefer to retain control in choosing committed and competent individuals for the board. If however, you serve a mutual benefit not-for-profit (e.g. trade associations who lobby or negotiate bulk insurance rates or other benefits for their members) with many members interested in the vision and mission of the organization, you may want to offer them the opportunity to run for election to the board. There are many leaders who would marvel at the prospect of having several people compete for the same board position.
Other factors to consider regarding the membership question are:
Advocacy - Organizational credibility when advocating for a particular interest group can be established either by representation (e.g. x% of industry stakeholders are members of our organization so we can legitimately speak for this group) OR by experience and proven track record (e.g. we have successfully advocated for and achieved these benefits for our stakeholder group). Note, however, that you can offer “membership” to interested parties without necessarily giving them voting rights.
Funding - Are membership fees being proposed to help fund the organization? If so, and these fees subsequently represent a significant portion of operating revenue, it follows that members might wish to be eligible for election/appointment to the board of directors. On the other hand it is important to understand that many potential members may be only interested in the discounts and other services they get for their membership cost and have little wish to vote, attend an Annual General Meeting, or, least of all, be a member of the board. The good news is that various membership classes can be established with and without voting rights. So technically, the legal ‘ownership’ of the organization could be closed at the same time that associate membership dues are being collected to fund the organization.
Voluntarism - Open membership can be an advantage in organizations that rely heavily on volunteer support to operate. This gives passionate volunteers a mechanism to influence policy making for the betterment of the organizations.
Finally, as well as the benefits, it is important to weigh the potential pitfalls of each option:
| Pitfalls of Open Membership | Pitfalls of Closed Membership |
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Conclusion
While in some cases, it warrants consideration, I stifle at the notion of being a slave to perception. If your organization has a strong infrastructure of board policies, is reasonably transparent with stakeholders, and is making meaningful progress to fulfill your mission, then my bias would be retaining a closed membership, if that is your current structure. This gives the organization more control in ensuring a strong, committed and competent board. To avoid the perception of cronyism, the organization can advertise when open board positions come up. Incorporate an ethic of regular board evaluations and peer coaching, possibly defined term limits and proactive, competency-based nomination process; then, would-be criticizers are less likely to even think about pointing the finger at board structure.
If you already have an open membership, then, as they say, the horse is out of the gate and it will be difficult to turn it around.
Either way, work to enhance the governance and effectiveness of your board by avoiding the pitfalls of either approach, and instead focus the board towards serving the organization’s vision and mission ensuring accountability of the board to its moral ‘ownership’.
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