GFAS is currently finishing up an extensive primer on this topic. Please check back in November.  In the meantime, see our blog post, Sanctuary Startup Kit.

And here is an excerpt from the primer, which follows the discussion about the merits of an independent board:

Founder: Without family and friends and myself on the Board, how can I make sure the Board won’t fire me someday?

The short answer is you can’t, and that is true even with family and friends on the Board. Keeping that in mind, you should never invest more of yourself or your personal wealth in the nonprofit than you would be comfortable walking away from someday, as your gift. Keep in mind also that if the Executive Director is on the Board, an inherent conflict of interest has been set up, because one important function of the Board of Directors is to evaluate the Executive Director and determine his/her salary.

To provide some security against a capricious firing, you can set up the same kind of protection that is used in the corporate world, which is an employment contract. This contract should be reviewed by an attorney representing the nonprofit, not the Executive Director (who is free to have his/her own attorney review the contract), to make sure that it is fair to the nonprofit, and that there is a way to dismiss the executive director under certain circumstances (such as commitment of illegal activity) or to “buy out” the executive director for an amount that all agree now is fair.