What do NPO corporation officers do? A simple guide to general meetings, directors, and auditors
When providing consultation on the establishment and operation of NPO corporations, I often hear comments like these.
The general meeting is just a place to gather once a year, right?
Honestly, I don't know the difference between the board of directors and the general meeting.
What exactly should an auditor be looking at, and to what extent?
These are all very natural questions.
This is because the structure of an NPO corporation is not easily visible from daily activities. In this article, from my perspective as an administrative scrivener, I will organize
the roles and relationships of the 'general meeting,' 'directors,' and 'auditors' of an NPO corporation in the simplest terms possible.
Let's grasp the overall picture of NPO corporation decision-making
First, let's look at the big picture.
An NPO corporation generally has the following three roles.
Making final decisions
Carrying out daily operations
Checking if operations are being conducted properly
These are handled by the three positions of
• General Meeting (final decision) • Directors (Board of Directors) (operations) • Auditors (checking)
Understanding this division of roles makes it much easier to see 'who is deciding what.'
Role of the General Meeting | The 'Highest Decision-Making Body' of an NPO Corporation
The general meeting is the 'most important meeting'
In an NPO corporation, the general meeting is legally the decision-making body with the strongest authority.
To put the role of the general meeting in one word, it is 'a place to make final decisions on important matters for the corporation.' The 'members' here do not refer to employees hired by a company, but to the constituents of the NPO corporation.
The articles of incorporation define regular members (individuals and organizations that agree with the purpose of the corporation and actively participate in its operation) as members.
Members have voting rights at the general meeting and participate in the operation of the NPO corporation by attending the meeting.
Main things decided at the general meeting
The content to be resolved at the general meeting is determined by the articles of incorporation and the law. Typical examples are as follows:
• Changes to the articles of incorporation • Dissolution • Mergers
In addition to matters concerning the foundation of the corporation, it resolves important matters related to the operation of the corporation, such as:
• Business plans and activity budgets • Approval of business reports and financial statements • Appointment and dismissal of officers (directors and auditors)
In other words,
the general meeting is where the fundamental judgment of 'what kind of organization this corporation will continue to be' is made.
The general meeting is not a 'place to run the field'
Just because the general meeting is the highest decision-making body, if you decide that members will decide everything at the general meeting, the corporation's activities will not progress at all.
Therefore, we leave detailed daily operations and business matters to the board of directors and the secretariat. It is easy to understand the general meeting as a place to confirm whether the work entrusted to the board of directors is 'not deviating in direction' and 'whether the system is sound,' and to finally approve it.
Role of Directors: 'Operators' who turn the decisions of the general meeting into 'form'
Directors handle the daily operations of the NPO corporation based on the policies decided at the general meeting.
Specifically, the roles are:
• Planning projects, executing them while using the budget, and advancing activities • Establishing necessary rules and internal regulations • Interacting with the outside world as a representative of the organization
Directors consist of three or more people, and important matters are discussed at the board of directors.
Since directors are in a position entrusted with the execution of the corporation's business, once they accept the role, they must act with the responsibility to act sensibly, sincerely, and cautiously, rather than carelessly. (This is called the 'duty of care of a good manager.')
The Board Chair is the "representative," but they do not decide everything alone
Directors represent the corporation in its business affairs, and their actions are considered the actions of the corporation externally.
If stipulated in the articles of incorporation, you can limit which directors have representative power, rather than having all directors hold it.
The person with representative power is called the Board Chair or Representative Director.
The Board of Directors is a deliberative body of directors that makes important daily decisions on "what direction to take this organization and how to move it" and has the role of confirming that it is being operated properly.
The Board Chair is responsible for executing what is decided by the Board of Directors and coordinating the whole.
The Board Chair, who is chosen from among the directors, is in a position to represent the corporation, but the Board Chair cannot decide everything alone.
If this is misunderstood,
• The Board of Directors becomes a mere formality
• Other directors stop participating
• Burden and responsibility become concentrated on one person
problems like these are likely to occur.
The role of the auditor | The "third eye" that protects the corporation
The auditor is a "checker who does not participate in operations"
The "kanji" of an NPO corporation is not "kanji" (a person who acts as the center of an association or group to perform tasks), but "kanji" (auditor).
Unlike directors, auditors are not involved in the operation of the corporation itself.
(Auditors can become regular members, but they cannot concurrently serve as directors or employees (hired staff) of this corporation.)
Auditors have two major roles: checking money (accounting audit) and checking operations (business audit) .
• Whether accounting is processed appropriately
• Whether directors are following the articles of incorporation and laws
• Whether resolutions of the general meeting of members are executed correctly
They fulfill the role of checking whether the directors and the organization's operations are being carried out properly according to the rules .
In other words, the auditor is like a watchdog for the organization to continue its activities stably.
The significance of having an auditor is very great
NPO corporations are often thought of by outsiders as "organizations where the flow of money is difficult to see."
The auditor is a role that looks calmly from a slightly distant position to see if the organization is heading in the wrong direction or if there are signs of legal violations or misconduct, and points them out before the problem becomes large.
That is precisely why whether an auditor is properly fulfilling their role is directly linked to the credibility of the corporation.
The existence and function of the auditor are also important points in checks by the competent authority and in grant application situations.
Organizing the relationship between the general meeting of members, directors, and auditors
Summarizing what has been discussed so far, the division of roles is as follows:
• General meeting of members
Finally decides important matters as a corporation
• Directors (Board of Directors)
Advances operations based on decided policies
• Auditor
Checks whether operations are appropriate
These three parties are not in a hierarchical relationship, but are a team with different roles.
What I want to convey as an administrative scrivener
I think that many troubles and operational deadlocks in NPO corporations stem from the fact that roles within the organization have not been organized.
• The general meeting of members has become a mere formality
• Sufficient discussion is not taking place at the Board of Directors
• Communication between directors is lackluster
• The Board Chair is dictatorial
• The auditor does not understand their role and is only a name
These states can happen in any organization.
However, just by understanding the governance mechanism of the corporation and organizing what the current division of roles is, operations will become surprisingly easier.
The NPO corporation system is not meant to bind activities. I think it is a tool prepared to continue activities.
By having the general meeting of members, directors, and auditors understand their respective roles and utilize their strengths , I believe NPO corporations will be able to operate more stably and with greater peace of mind.