When a nonprofit organization has a problem with its executive director and cannot resolve the problem in any other way, the board of directors does have the legal authority to fire the executive director by majority vote. Whether this is the best course of action depends on the details of the situation.
Reasons for Firing
Sometimes the executive director of a nonprofit loses the confidence of the board and has to be replaced. In cases of misconduct such as embezzlement, there is no ambiguity about the situation, and the executive director will either resign immediately or be fired by the board. In situations that are less clear-cut, the board would be ill-advised to act precipitately. For instance, bad morale among employees or a disagreement between the executive director and the board are situations that might be resolved in other ways.
According to a study by CompassPoint Nonprofit Services, approximately one-third of all nonprofit executive directors are eventually fired or asked to resign. However, many of them end up taking the nonprofit to court over the issue. To keep this from happening, the board must follow a clear and transparent process before firing the executive director. For instance, if an employee accuses the executive director of sexual harassment, the board can appoint someone to investigate the issue, talk to possible witnesses, document the complaint and get the executive director's side of the story. Whatever the problem with the executive director, documentation and due process reduce the risk of litigation.
Except in cases of clear misconduct, it's best for the board to give the executive director a chance to improve before holding a vote about firing him. For instance, if the board has received a number of complaints about the executive director from employees, it can give him a certain number of months to improve his relationship with staff before taking further action. The board can also hold a vote of no confidence to communicate its displeasure with the situation, without taking the final step of actually firing the executive director.
When the board feels that there is no other option and the executive director has to go, it may offer him the opportunity to save face by resigning. This also allows the nonprofit to resolve the issue without a public conflict that could hurt its reputation. If the board has to go ahead with a vote to fire the executive director, it can minimize damage to the nonprofit by releasing a brief statement explaining its decision. For instance, "The organization thanks Mr. Smith for his years of service but has decided that new leadership is needed at this time." If the executive director suddenly leaves the nonprofit without an explanation, rumors of a scandal are likely.