The case with the hostile takeover of the SMR has raised a lot of questions about protecting our organizations from this type of assault. We've discussed bylaws here in the past and some have posted links to theirs, but I think what we need here is to discuss ways that organizations can strengthen their bylaws and in so doing eliminate the possibility of a hostile takeover.

I am in favor of a vetting process for new members before allowing them to participate in the governance of the organization. Either through volunteer hours or some other service to the organization. Maybe a probationary period would suffice for organizations that don't have many volunteer opportunities.

Another provision may be to prohibit proxy voting, and to require that all votes must be cast only by members physically in attendance.

There are also other issues such as how to deal with individual members who are causing problems. Do your bylaws have sufficient and defensible language that spells out exactly how a member can be removed for cause?

Perhaps the ARM should set up a committee to address the bylaws issue and maybe issue a bylaws "template" that could form the basis of new bylaws for railway organizations. I realize that each organization and situation is different, but having a document that at least raises these issues would make directors and officers aware that there are situations out there that must be guarded against.

If the SMR must die, then let its death not be in vain. Let it be a rallying cry to all of us to update our bylaws and protect ourselves.

You raise an excellent point. We really don't know what any prospective member's motivations or character are when they join us, or how it might change in the future.

A few months ago I dealt with a military fraternal organization in the course of my professional duties. They had a new member join, wow them with energy and enthusiasm and then-once point in a position of responsibility; he defrauded them.

Similarly, the old Steamtown Volunteer Association was in need of a Secretary and on the basis of recommendations; contacted a volunteer, a local college professor.

A bit intolerant of people he thought to be lesser intellects (anybody w/o a Phd);
He levied scurrilous charges against other officers; and despite the fact that the then-president had announced his disinterest in seeking additional terms; initiated a thoroughly counterproductive and unnecessary impeachment (this action hastened the individuals departure from office by a couple of months, but the indecorousness of the action ended the President's volunteerism). Emboldened by this; he began a letter-writing campaign against the former Superintendent, as a result the organization was disbanded and replaced.

There's no easy answer to this dilemma and it's a bit like the Type I/Type II errors that you learned about in college statistics. Decrease one, increase the other-its a tradeoff. Another example: increased FDA thresholds (may) have prevented another Thalidomide, however efficacious drugs might not be getting through-and those are immeasurable.

Its going to be a hard sell to most organizations, worrying about aging and declining membership rosters to make memberships more restrictive in order to safeguard against what is probably a very unlikely scenario for most organizations- that they have some assets or position exploitable by an external commercial interest.

The real question is what can you do if you suspect that you are the target of a hostile takeover? I don't know if its allowable, but my first thought would be to restrict voting privileges for new members-assuming its allowable in your state.
Fortune 500's have a variety of "POISON PILLS", and state and federal "antitakeover" disclosures and restrictions (which generally protect entrenched executive teams)

I'd like to hear from one of the resident barristers on this matter.

Many large and successful museum organizations have a self perpetuating boards that have a nominating committee to fully vet potential candidates. Many here I am sure would argue why this isn't a good idea {insert your favorite reason here} but it is a system that serves many successful organizations very well.

--Richard

I was in a board meeting where an SMRS-style "mass membership drive" type of takeover was being discussed. One of the board members said "Well hey, that's easy to fix! Switch to a board-selected board and don't give the membership a chance to elect directors!"

The room got so quiet you could hear a pin drop. And it had carpet!

I can guess why. Volunteers give a lo. And in exchange for that, they really do want some say in how the organization is run. Which is to say, what they really DON'T want is a feeling of powerlessness in the governance of "their" railway museum. And I'm OK with that. After all, the original intent of the SMRS bylaws (and I expect many other places too) is to try to replicate the kind of "power of, by and for the people" that exists in an institution we all hold dear to our hearts - the United States of America.

Some bastard tries to come along and subvert that -- yeah, that's going to get people out of their chairs. Doesn't matter whether he's a real-estate developing lawyer, or a longtime board member of the organization looking to fireproof it.

There are plenty of ways to prevent this type of takeover while still protecting the core concept of volunteer-run governance.

As I said, there are always reasons cited why someone doesn't think a self perpetuating board is a good idea. Honestly, many people do not understand the difference between governance and management. What many volunteers who spend substantial hours at a railroad museum want is a say in day to day management. That is the subject of another thread at another time.

The issue you are identifying has been addressed at some institutions by requiring a certain number of the nominees to be selected from the "active" members, that is to say from those who volunteered a specified minimum number of hours in the previous fiscal year. (A simple majority is common.) It makes it really hard for new and unknown members to get on the board - that's by design - and it gives important representation of the museum operation on the board.

So why even allow non-volunteers on the board? Challenges like the SMRS faces do not occur overnight, they build over a period of time. With community and other outside representation, there is often a better and stronger relationship with the community. This also often translates into a stronger support base.

And so what is the advantage of a self-perpetuating board? It largely removes the "popularity contest" element, helps make the institution more resistant to hostile takeovers, and the board selects nominees based on the resources they can bring to the institution.

There is a blended option too: half elected, half self-perpetuating.

One final note: "taking over" a nonprofit is illegal in some states, however defining "taking over" can be tricky. Contacting the Secretary of State in your jusrisdiction could yield some good advice.

--Richard