Legal Friction Points in Component Relations
Originally published in Associations Now Plus, an ASAE publication.
Even the best families have problems, and that reality extends to relationships between associations and their chapters. Although tensions can arise in a variety of areas, from governance to public policy, most can be cured with clear communication.
Associations and their components are often likened to families. Members of the boards of the association and components might say things like "we're all one family" to reinforce their common purpose. But even the most loving families can have problems, and the same is true for the relationship between associations and their components.
A variety of legal friction points can arise in parent-chapter relationships, including standards for affiliation; resistance to dues increases; views on the chapters' role in the parent's governance; competition for conference speakers, sponsorship dollars, and donors; and differing policy positions.
Governance
Chapter life cycle. Many association executives are familiar with the concept of the life cycle of an organization. Associations often begin as a startup, all-volunteer-run organization, later hiring a full- or part-time executive director. Typically, an association then expands with new staff and programs and eventually goes into decline as the organization becomes stagnant. The same sort of cycle can occur in component relationships.
It is an exciting time when an association decides to form chapters and the first chapter becomes a reality. Then the second, third, and fourth chapters are formed, and things begin to settle down as chapter qualifications and agreements are figured out, benefits to be provided to chapters are identified, and the recruitment of even more chapters begins.
Now consider that same organization 20, 50, or even 100 years later. The relationship between the parent organization and its chapters has likely evolved over the years. Some chapters may be doing well from a membership, programmatic, and financial perspective. But others may exist in name only. A handful of chapter members may try to salvage struggling chapters by recruiting new members or conducting fundraising activities, but it's unlikely that those chapters will ever be what they once were.
Affiliation requirements. Requirements for affiliation often come from the top down with little or no variation allowed. Early on, perhaps the only requirements for forming a chapter were individual membership in the association and a willingness to volunteer to organize it. As chapters proliferate, the association might adopt standards that a chapter must meet, not only to be recognized as an affiliated chapter of the parent organization, but also to maintain that relationship.
Times change, and as the association matures, the board might come to expect that the chapters mature too. This can lead to changes in the standards for affiliation. Outside forces, such as developments in governance and accounting best practices, might be incorporated into the standards. Chapters that do not keep up with these changes fall behind and risk being disaffiliated. As the parent organization increases chapter accountability and imposes more rigorous affiliation requirements, chapters might resist change.
Governance structure and participation. The delegate assembly model of governance was practical a half-century ago, when transportation was expensive and time-consuming and when there was no easy means for members to communicate directly with the organization or each other. It made sense for chapter representatives to gather annually at the parent organization's conference to vote and discuss common issues. This was a representational form of governance, where members who were active in the chapter elected a representative to the delegate assembly.
Attendance at the annual meeting has dropped for many associations since the introduction of the internet. Members no longer must attend the annual conference to find out what is going on in the association, receive professional education, network with their peers, or vote.
An association's governance structure and elections process could deter enforcement of affiliation requirements. In associations with a delegate assembly, it is possible that the assembly could oppose the association's board and staff on issues such as affiliation standards, dues increases, or benefits provided to components.
Membership
Competition for members. In an integrated membership model, members join both the association and one of its components at the same time with a single payment. But what happens when a potential member can choose to join either the parent or the component?
Competition for members can be fierce in that situation, with pricing and member benefits constantly changing to recruit more members than the other organization. While joining both the parent and the component could resolve the issue, a potential member might not be able to afford to join both organizations.
Effects of globalization. When a U.S.-based association with state or local components introduces international chapters, friction can arise over the roles, value, and benefits of domestic and international chapters. An affiliation agreement that was appropriate for a U.S. component no longer works well when applied to a non-U.S. chapter. U.S. members may be concerned that their influence in the association—or even the very focus and mission of the organization—is shifting away from them and their priorities.
Dues increases. If the parent association has the ability to increase dues and change member benefits on its own, doing so might result in some grumbling in its chapters, and a few members might even resign or decline to renew their membership. It is a different story, however, when members must approve any dues increases. When the association's governance structure is such that chapters send representatives to the annual meeting with voting rights in a delegate assembly or similar body, it can become impossible for the association to increase membership dues. The result can be that the cost to provide the benefits demanded by the chapters exceeds the amount of revenue collected in dues.
Competition
In addition to competing for members, an association and its components might compete for conference sites, speakers, even the dates on which they hold their events. When both the association and its chapters engage in fundraising activities, the competition can get downright ugly, and friction can arise over who has the right to seek funding from a particular foundation, corporate sponsor, or other potential major donor. The timing of fundraising appeals can be crucial when whoever is first in the door has the advantage. A state or local component might even challenge the association's right to engage in fundraising within what the component perceives to be its exclusive territory.
Policy Positions
Tip O'Neill, former Speaker of the House, once said that all politics is local. The same can be said for an organization's policy positions. A component might have a different legislative agenda or prioritize its issues differently than the parent. In rare situations, an association and its component might be on opposite sides of an issue. This can present challenges to the association's leadership as it seeks to find common ground with its components without abandoning its own priorities.
Tax Status
It is possible for a parent organization to be a tax-exempt public charity under Internal Revenue Code section 501(c)(3) and for some of its chapters to be professional associations under section 501(c)(6) (or vice versa). Such organizations could have similar programs and policy positions. The parent and the chapters can both engage in lobbying, although there are dollar limits on the amount of lobbying that the parent may conduct. Problems can arise, however, if chapters engage in political campaign activity—something the parent public charity is strictly prohibited from doing.
Solutions
The primary solution to the problem of friction between an association and its components is easy to identify but more challenging to implement: increased and better communications. Periodically engaging in open dialogue can help to identify sources of friction and encourage all parties to work creatively to identify solutions that are acceptable to all.