Should the Chief Executive of a Nonprofit be Non-Voting

Should Your CEO Be Allowed to Vote?

In Australia, whether the Chief Executive Officer (CEO) or Executive Director of a not-for-profit (NFP) organisation should have the right to vote on the board depends on several factors, including the organisation's constitution, relevant state or territory laws, and best governance practices.

While there is no universal answer, the current trend leans towards the CEO being a non-voting board member, and this practice is largely adopted to help avoid conflicts of interest and maintain good governance.

Considerations for NFPs in Australia

1. Constitution and Organisational Documents

The constitution of an NFP organisation typically outlines the structure and governance of the board, including whether the CEO serves as a voting or non-voting member. It's essential to review the constitution to understand the CEO's role in board meetings and decision-making processes. If the CEO is not designated as a voting member in the constitution, their participation in decisions will be limited to providing advice and insights rather than having direct influence over outcomes.

2. State and Territory Laws

Governance rules can vary depending on the jurisdiction in which the NFP operates. Different Australian states and territories may have specific regulations governing NFPs, and some may have rules regarding whether the CEO can hold voting rights. It’s important to check with state-based legislation (such as the Associations Incorporation Act) and seek legal advice to ensure compliance with local laws.

3. Conflicts of Interest

Allowing the CEO to vote on the board may lead to potential conflicts of interest, especially when decisions directly affect the CEO’s role, compensation, or organisational strategy. Many Australian NFPs address this by making the CEO a non-voting member, allowing them to participate in discussions and provide valuable input without the risk of undue influence on key decisions. This helps maintain transparency and fairness in board deliberations.

4. Best Governance Practices

Best practices in NFP governance often suggest that the CEO should be an ex-officio (non-voting) member of the board. This distinction supports a clear separation between governance (the board's role) and management (the CEO's role). As an ex-officio member, the CEO can contribute to discussions, provide necessary reports, and offer insights from an operational standpoint while ensuring that the power to make final decisions rests with independent board members.

5. Examples from Practice

• Some NFPs, particularly smaller ones, may choose to include the CEO as a voting member of the board due to the close involvement of the CEO in day-to-day operations and decision-making.

• Others prefer to keep the CEO off the board entirely, inviting them to attend meetings only when necessary, to preserve board independence and avoid the appearance of undue influence.

Conclusion

Ultimately, the decision about whether a CEO should be allowed to vote on the board comes down to the organisation's specific needs, governance structure, and legal requirements. It’s crucial to align the NFP’s constitution with both state or territory laws and best governance practices. Consulting with legal counsel and governance experts is advised to ensure that the CEO’s role is clearly defined and that the board's independence is maintained.

[Updated: March 2025]