The individual members of a board of directors can sign contracts outside of a board meeting if the board has given them the authority to act as an agent of the organization. In many instances, boards have specific policies outlined either in the organization’s bylaws or in board-approved operating documents.
Board of Directors
The board of directors of a corporation or nonprofit consists of the officers who manage the affairs of the organization based on the stipulations of its bylaws. Bylaws are instructions that guide current and future boards in managing corporations. Some boards have little involvement with the day-to-day management of the organization’s business operations, focusing on managing the vision, goals and big-picture strategies of the entity. For example, a board might determine the date, location and theme for an annual conference, turning over the planning and execution of the event to an executive director and his staff.
Some organizations require some or all contracts to be approved by a majority vote of the board of directors. If contracts are approved, the bylaws or other formal document might designate who can sign them, such as the chairman, president, treasurer, executive director or chief executive officer. At larger organizations, the board might only approve large contracts, such as the employment agreement of its executive director or chief executive officer, or the purchase of a building. Boards often rely on the recommendation of their paid business manager, its treasurer, a standing committee that oversees the area under which the contract falls or an ad hoc committee created to research a purchase, lease or other contract.
Committee Chair Authority
In some cases, a committee chair can sign contracts outside of a meeting if the board has expressly designated this authority. For example, the meetings chair of a trade association might be allowed to sign contracts for venues, speakers, catering and entertainment without board approval. Boards that allow chairpersons to sign contracts on behalf of the organization might limit the dollar amount of a contract the chair can sign without board approval. In other cases, the board might require that the chair get board or executive committee approval before signing any contract. An executive committee is a group of board members who can act on behalf of the board when it’s not in session. An executive committee typically consists of a combination of the chairman of the board or the organization’s president, the vice chair or first vice president, the secretary, treasurer and/or a past president. Board members with contract-signing authority might not be legally able to sign contracts that present a real or perceived conflict of interest, such as awarding a contract to a family member, without board approval.
In some instances, an individual board member can approve a contract even if she can’t sign it. For example, the meetings chair might approve a catering contract, with the executive director of the organization signing the contract. Association managers often have contract signing authority that comes with limits on what they can approve. To further protect boards and their organizations, some corporations require two signatures on checks or on checks larger than a specific dollar amount.