By-Law Changes Up for a Vote

Annual Meeting Sunday, May 22nd, 2022 @ 2:00 PM
Old Town Hall, Great Hall

 By-Laws! By-Laws! By-Laws!

Letter to Our Members from Tom Kinzer, President
Please read the following post before reading the Proposed By-Laws linked below

Proposed By-Laws

Are you suffering from insomnia? Looking for a topic that will bore you silly and put you to sleep? Well, you could download all 800+ pages of the Structured Generalized Markup Language (SGML) standard and try to read it. This will cure most cases of insomnia. Or closer to home, you could read your Society’s official By-Laws. Yes, they do exist, and for most members of the Historical Society, the most likely reaction to their existence is, “Yawn!” So why is a committee of the Board of Directors re-writing them? Why do we need them, anyway? What’s the matter with the ones we’ve got, especially given that almost nobody reads them? This article is my attempt to answer, informally at least, some of these questions. It’s not a legal treatise on corporate law.

                For starters, By-Laws are an integral part of being a corporation, in our case a non-profit corporation. Being a non-profit corporation allows us to put “Inc.” after our name, and that, in turn, allows us to become a 501(c)(3) non-profit organization. Each of these things, and they are quite different, represents a status that is well worth having and protecting. Let’s begin at the beginning.

The Bedford Historical Society was founded in 1893. It did not incorporate itself into a non-profit corporation until November 1972. Until that point it had been a non-profit organization, i.e., a group of people working toward some reasonably agreed upon common goal without that goal including making money for an owner or owners. There’s nothing wrong with operating this way until some problem arises that potentially creates liability. If that happens, the liability, whether legal or financial, falls upon some or all the individuals in the organization. The basic purpose of a corporation is to move that liability onto the organizational entity itself. Perhaps the impending creation of a public museum space was one trigger for the decision to incorporate back in 1972, but it was probably a minor one, given that the Society’s By-Laws, as adopted, don’t even mention liability. Keep liability in mind, though; it’s a topic that needs rethinking now since our move out of the Police station.

                Our predecessors back then had another issue, too, that was probably the bigger one. The Society had for many years been a part of the Bedford Free Public Library; that meant that a donation to our organization was in a legal sense a donation to the library, a tax-exempt public entity. Such donations would thus be tax-deductible for the donor and had been since 1917. The library was and is an integral part of the Town, and it is essentially funded via the Town’s budget as approved at Town Meeting. Few people donate to it. The Society, as a part of the library, had no way to accept monetary donations for itself. With the separation from the library pending, who or what could a donation be made to? If made, how could the donor claim a tax deduction for it? Thus, our predecessors had another important reason, probably the major one, to incorporate as a non-profit.

                Incorporation provides a way to address liability and accept contributions, but it triggers certain requirements. These include: submission to the Commonwealth of Articles of Organization to describe the new corporation’s general nature and purpose; a set of By-Laws to govern the corporation’s functioning; a Board of Directors, and an elective process to decide how many directors will belong to it; the election by the Society’s members of the members of the Board of Directors; an Annual Meeting at which to hold each year the aforementioned elections; and three identified corporate positions called Officers. These three are a President, a Clerk, and a Treasurer. These positions carry legally defined responsibilities in addition to whatever the organization thinks these three people should do. (We have chosen to add the position of Vice-President to the list of Officers.)

                The corporation is required to have an Annual Meeting to vote on certain matters, the voting being done by the members of the corporation, if the corporation has members. In a for-profit corporation, the members are shareholders who hope to make a profit.  A non-profit corporation has no shareholders in that financial sense, but it may have members who are shareholders in a non-financial sense. In our case, we do have members; they are interested people who have signed-up and paid dues. The sole legal benefit they obtain from membership is the right to vote at the Annual Meeting, one vote per member per item on the docket. By contrast, a non-profit school (for example) has directors, employees and clients (students), but no members. A non-profit community newspaper has directors, clients, and perhaps employees, but no members. We have members

                In the United States incorporation is a state function, defined by state law in each of the fifty states, so here in Bedford, MA, incorporation involves submission of Articles of Organization to the Secretary of State of the Commonwealth of Massachusetts. To be a non-profit corporation means that no shareholders obtain financial profit from its operation and that the entity’s charitably oriented goals and activities qualify it to be “tax free” from the state’s perspective. (The exact meaning of “tax free” depends on the type of non-profit corporation, since that’s what determines exactly what kinds of taxes the corporation doesn’t have to pay, but that’s beyond the scope of this writeup.) Reports must be filed with the Commonwealth to retain this status. The 501(c)(3) designation is not a state-related designation, but a federally defined category related to the IRS and federal income taxes. It means that the entity’s charitably oriented goals and activities qualify it to be “tax free” from the federal government’s perspective. Reports, mostly tax returns, must be filed with the IRS to retain this status. Thus, a not-for-profit organization like the Bedford Historical Society, to have tax-free status, must become a non-profit corporation of appropriate type within the Commonwealth. It then must provide on-going documentation to the Commonwealth of Massachusetts to remain both a corporation and a non-profit corporation, and it must provide documentation to the IRS to obtain, and more documentation to maintain, its federal “tax-free” status.

                The Articles of Organization must be filed with the Commonwealth and must be re-filed whenever changed in certain ways. Certain pieces of information that change routinely don’t force re-filing, but many changes do. In practical terms the Articles of Organization, the By-Laws, the required state and federal reports, and everyday practice should fit together coherently.

                We, in moving out of our safe but confining cocoon in the Police Station, are at an inflection point where our By-Laws need revisiting. Our predecessors of fifty years ago apparently did not worry much about liability issues. We did not worry much about liability issues for the last quarter-century in our cramped office on the other side of the Police security barrier. We had a few items visible on our level of the building, but they and our office were effectively accessible only by appointment. In theory a visitor could have asked the Police Dispatcher for admission solely to see whatever historical material was visible in or near our office. In fact, this never happened. Now we have more things visible; we have thoughts about providing occasional open house access; we are now asking people to visit us in a way we did not before; we are physically accessible in a way we were not before; and we hope over time to provide more museum-like access to our collections. We still are focused on creating a real museum. We need to be prepared to manage our way into that sort of future.

                Terms related to the Society like “meeting” need re-thinking, too. COVID-19 has altered profoundly the way we hold meetings of our members, our Board, and our committees. Meetings have now been conducted and will continue to be conducted for some unknown period, not just in person, but virtually or on a hybrid basis. In 2020 and 2021 the Annual Meeting was held virtually, and elections were held even though no one was present in person. Moreover, the current By-Laws contain curiously interacting rules about who or what constitutes a quorum, who elects the Officers, and who can or can’t vote at a Board meeting. The By-Laws currently have the Officers elected separately at the Annual Meeting by the members, not the Board. The usual idea of corporate governance is that the Board of Directors is primary in importance. The Officers are appointed, elected, or hired by the Board, report to the Board, and serve at the Board’s pleasure. In terms of current corporate governance, the definitions of Officers’ titles and responsibilities aren’t well-defined in the current By-Laws.

                There are more questions: The current By-Laws say we present a complete Treasurer’s Report at every member meeting, every Executive Committee meeting, and every Board meeting; we don’t. They define explicitly in the By-Laws multiple categories of membership in the Society. In fact, the only legal right conveyed by membership is each member’s right to cast one vote on each item voted on at the Annual Meeting. These membership categories essentially give titles for contribution levels but nothing else. Informationally speaking, membership puts one on a mailing list that provides for informational mailings or emails that only members will receive, but the supposed membership levels don’t affect this in any manner whatever. In the current world, non-members can obtain such information anyway by joining our Facebook group or requesting our weekly Constant Contact emails.

                A major and important purpose of incorporation is to define how issues of liability, if any, will be handled, and to indemnify the Officers, employees, and other “agents” of the corporation. The current By-Laws say nothing about this. This provides only a very limited level of protection and indemnification. Today’s world is much more litigious than the world of 1972.

                A major area of complexity in the current By-Laws relates to the Executive Committee, which despite the name, little resembles the concept of an Executive Committee as currently understood and as the new By-Laws will propose to make it. Historically, perhaps the pre-incorporation governance of the Society revolved around a group called the “Executive Committee” whose familiar nature and shape the Society wanted to preserve. The result was to bolt the old Executive Committee onto and into the Board of Directors required by incorporation. (This is more than just a guess on my part!) The modern idea is that the Executive Committee is a stripped-down subset of the Board, more easily assembled, and nimbler when quick decisions are needed about something. Since the Officers will generally be a part of such an Executive Committee, the Officers ought to be Board members outright, not just ex officio. In most cases the Board can, if it chooses, overrule the Executive Committee, although this would not be expected to happen often.

                What benefits accrue to the Bedford Historical Society from retaining governance-related curiosities? What potential problems arise from continuing them? Those questions are the reason that a committee of your Board is rewriting the By-Laws. This is not a criticism of the way things were viewed or dealt with in the past. Things were viewed and dealt with quite successfully, thank you! Our founders in 1893 and 1972 and their diligent successors over the years have bequeathed us a rich legacy in terms of lore, documents, and artifacts. For a Society like ours, success depends on having a committed body of people working toward a valued goal. This approach and these people, not detailed text in the By-Laws, has given us the successes we have had. This will remain true with our newer proposed By-Laws. Do the details of By-Laws matter? They matter, perhaps, in terms of clearly defined financial governance and simpler and more clearly defined operational governance. Otherwise, I’d say that they probably don’t matter much until the day they do! When that day comes, they suddenly matter a lot. We are proposing to make our governance simpler, more compatible with standard corporate practice, and more compatible with what we actually do. “We’ve always done it this way!” is not a reason to keep old By-Laws. We need to show ourselves and others that we want to pass our legacy on and can effectively and safely manage the process to do that.

                We can build on the preceding paragraph to deal with an issue that may be of concern to some members. The proposed new By-Laws are heavier on legal terminology than the old ones are and more legalistic in tone. Some react to this as a “bad thing”. But wait! The By-Laws are a legal document, required by the Commonwealth! They are not an informal conversational document for everyday use. They are filled with words that look familiar but really aren’t, like “member”, “director”, “president”, “clerk”, “treasurer”, “notice”, etc., etc. In this context these are precise legal terms whose meanings have been honed and shaped by law and in court battles, and they need to be recognized and treated as such. Our everyday activities of filing or categorizing artifacts or rearranging shelving or writing things for the members aren’t dependent on the By-Laws, old or new. Our creativity and productivity don’t depend on the By-Laws, old or new. The day when we really need legally and textually clear and complete By-Laws may or may not ever come, but if it does, let’s be ready for it.

Tom Kinzer, April 2022

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