Nonprofit Law/Non-profit budget
If a non-profit board of directors has approved a budget with specifically identified salaries for employes for a given year, can then the president or management use discretion to vary those approved salaries, and lower them in amount different than what the board approved. Thanks
I have in my profile that this free forum is only for general questions about IRS federal exemption issues of 501(c)(3) organizations. Your matter is controlled by state law and states may differ somewhat with how they would treat such issues. Even though this forum is not for such state law issues, I will give you some direction and information.
I am assuming that you are referring to a Texas Nonprofit Corporation. The Texas Code sections for "Nonprofit Corporations" are available at http://www.statutes.legis.state.tx.us/Docs/BO/htm/BO.22.htm
and, specifically, Sec. 22.201 provides, "Except as provided by Section 22.202 [if there are voting members who have limited the power of the board], the affairs of a corporation are managed by a board of directors."
However, the resolutions of the board are not in any way considered evidencing a contract with any employees. If an employee wants standing (in court) it would need to rely upon an employment contract. Officers act as a corporation's agents and can bind the corporation to contracts and agreements.
(which is from the West's Encyclopedia of American Law as to
Corporations). That is called "Apparent Authority". http://goo.gl/Qd7CHg
Professor Stephen Bainbridge has posted something from his now out-of-print book "Corporation Law and Economics"
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...Most of the case law on the apparent authority of corporate officers relates to the powers of presidents. Corporate presidents are regarded as general agents of the corporation vested with
considerable managerial powers.
--- End of Excerpt ---
(see footnote 11 for examples with court citations)
As to the authority of the CEO
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Policy Governance in itself doesn't give either more or less authority than traditional governance practices. But what it does give, it gives explicitly and traceably. It is common for boards
not using Policy Governance to give their CEO a great deal of authority implicitly. (As just one example, for the CEO to be the main source of a board's agenda conceals a great deal of unnoticed
authority.) Moreover, Policy Governance doesn't dictate how much authority a board should give or withhold. It sets out a framework in which each board makes unequivocal decisions about how much CEO
authority there is to be.
The CEO position is the board's guarantor of organizational performance. Once the board has defined desired performance, the real work begins. Boards that value performance desire and deserve
a powerful CEO. So it is to the board's advantage that the CEO has as much authority as the board can prudently grant him or her. And, of course, it is to the board's advantage that the CEO be successful. The amount of authority given to the CEO is only limited by the board's own need to be accountable to the ownership and before the law. But since it is the board deciding how much authority to give, setting the limits, and defining success, the CEO is always less powerful than the board.
---End of Excerpt--
Therefore, if the Board wants to correct the president who otherwise is contracting with employees for a lower amount than the Board budgeted, the Board may do so, but the employee does not have standing to complain in court. A similar relationship existing between the U.S. Congress and the President before the Congressional Budget and Impoundment Control Act of 1974 as to impoundment. http://legal-dictionary.thefreedictionary.com/impoundment
Traditionally, Congress could budget a certain amount for a particular project, but the President might decide not to spend the full amount.
As to nonprofit organizations and the CEO, see generally the article from Nonprofitquarterly.org at http://goo.gl/Jyrzhq
Attorney at Law
P.S. This response is intended to be a general statement of law, should not be relied upon as legal advice and does not create an attorney/client relationship. For me to consider your individual situation and how the law applies, I would need to gather more information.