The board of directors of a nonprofit corporation has the power to create committees at its discretion, subject to the organization's bylaws and the laws of the state of incorporation. While not appropriate for every corporation, committees may be particularly useful in managing the various responsibilities of the board and helping to create efficient and effective oversight mechanisms. One committee that may be appropriate for the board to consider is a Human Resources (HR) Committee.
Duties related to the internal affairs of an organization are often divided among the board, the executive director, and the HR staff. This separation can be problematic, particularly when there is no streamlined process for personnel issues such as approving salary scales, adopting and amending employee policies, and/or handling grievances. Creating and appropriately utilizing an HR committee may be a helpful solution.
A primary consideration for the board in creating an HR committee is who should serve on the committee. Generally, the board will want to include individuals with significant HR experience, but there are two initial decisions the board may want to consider:
- Should the board seek committee members from outside the board?
If the answer to question 1 is yes, should the board include HR staff as committee members?
If the board decides to include only board members on the HR committee, it may be considered a board committee with the potential power to act with the full authority of the board relating to all HR administration. A board committee may be granted limited or broad powers to act without full board approval.
If the board instead decides to include individuals who are not board members on the HR committee, it may be considered a non-board (advisory) committee, which may be delegated with substantial responsibilities and authority, but which cannot act with the full authority of the board. Generally, the board may want to act more carefully in limiting the authority delegated to a non-board committee as opposed to a board committee, particularly if board members are not well represented among the HR committee's members.
The decision on whether to make the HR committee a board or non-board committee may depend in large part on the ability of the organization to create an HR committee with sufficient experience and expertise from among the board members.
If the HR committee is created as a board committee, it may want to invite the HR manager/director and/or other key HR personnel to participate (without voting rights) in committee meetings. If the HR committee is created as a non-board committee, the board should consider including the HR manager/director and/or other key HR personnel.
Typically, an HR committee is responsible for creating and/or monitoring values-based systems and policies to ensure that the organization is following local, state and federal laws and certain best practices relating to its employees and creating an attractive environment for current and prospective employees. The HR committee may also be responsible for policies regarding independent contractors and volunteers.
Some HR committees may be tasked with leading the creation of HR-related policies (like the employment handbook), possibly working with the HR manager/director, an HR consultant, and/or the organization's counsel. Other HR committees may be tasked with reviewing such policies, spotting potential issues, and offering suggestions based on their members' input. The authority delegated to the HR committee members will inform each member's fiduciary duties related to such authority and her exposure to potential liability for failing to meet such duties. While personal liability of a volunteer committee member may be rare, absent fraud or intentional misconduct, a committee member that accepts such responsibilities must not abrogate them or act negligently in attempting to discharge their duties.
HR committees may also be tasked to explore, examine, develop, advise, and/or implement:
- Executive performance reviews;
- Executive compensation policies (including obtaining reasonable compensation comparability data, recommending the compensation and/or bonus amount; and following the rebuttable presumption of reasonableness procedures);
- Review of pay scales;
- Executive and key management succession planning;
- Review of staffing structures and needs;
- Review of benefits (including health insurance, pension plans, and fringe benefits);
- Diversity initiatives;
- Independent contractor policies;
- Volunteer policies;
- Internship policies;
- Management of union organizing activities;
- Grievance policies;
- Retention of HR consultants and/or labor and employment attorneys.
When ultimately deciding which responsibilities the HR committee will have, the board should specifically delegate those responsibilities and provide guidelines to the committee for reporting back to the board. Additionally, the board should consider and adopt a process of oversight. For example, the HR committee may be charged with reviewing salary scale compliance every year, and then providing a report to the board or finance committee. This same process may also be helpful in reviewing the organization's benefits package.
The board will also want to consider areas within the organization where the HR committee should not be involved. One important consideration is how the executive and HR committee will interact. The board should provide a clear separation of power through formal guidelines, such as empowering the HR committee to review and approve personnel policies, while giving the executive director the duty of disseminating and implementing said policies.
An HR committee may be beneficial in alleviating common human resources and management problems within a nonprofit organization. However, it is important to keep in mind that ultimate oversight is the board's responsibility. The board of directors should carefully consider how personnel work is delegated and who would best handle the job.
Co-authored with Gene Takagi.