Do I Need Bylaws For My Company?

Corporate bylaws are the rules that regulate and guide your decision making through the murky shores of uncertainty. They are the operational blueprint that ensure smooth functioning. Bylaws have no impact in the day to day operations of your corporation. However, when tough decisions need to be made, they provide the necessary procedures to keep you on the right track.

Every business leader needs to make tough decisions. Many of these decisions involve top level executives on his team. Becoming sidetracked by personal feelings can be easy in such moments. Bylaws are the guidelines that ensure his decisions are guided, by the correct intentions.

What do bylaws involve?

Bylaws involve a host of guidelines that influence the way human resources are managed and recruited in a company. Bylaws can be implemented to measure effectiveness of HR, removal and reinstatement of employees, terms of service, contracts, reimbursement procedures, duty of loyalty, audits and audit committee formation, document maintenance and destruction policies, privacy regulations, recruitment and conflict of interest policies.

What are the advantages?

Primarily Bylaws are the principle guide, a ‘rule book’ encompassing the values and structure of the company. They protect not only the company itself but also its employees. Above all, bylaws are neutral so there can be no doubt of their integrity. People can go wrong with gut instinct and emotion but bylaws embody the spirit that the company is built on. Bylaws never tell executives what decision to make only guide to make the correct decisions. There should be articles that allow for the amendment of bylaws, making them flexible.

What are the consequences or neglecting bylaws?

Scandals in public sector companies such as Enron, Worldcom, Tyco, Nortel, scream out the need for bylaws in a corporation. Steve Jobs’ oust from Apple may have been avoided by setting up of bylaws. Maverick CEOs of startups, whose decisions based on gut instinct negatively affect the company and its employees, could be avoided. Abuse of power by the Board of Directors and upper echelons of corporations can be put to a stop. Bylaws protect a company from itself and neglecting them would be akin to walking up stairs blindfolded. Business leaders may lose sight of their MO in the future but bylaws will bring them back on track.

Bylaws are a medium to strengthen public relations. Bylaws result in an unspoken contract with the public, promising them as to the values driving the company. This leads to the formation of trust. Public scandals may be resolved or avoided entirely, simply by following the precedents set by bylaws.

Today, as corporations are getting larger than ever, the need for bylaws has become more apparent. Without the solid foundation provided by bylaws, corporations may get sidetracked in the dynamics of business world. Small businesses also benefit from the structure and guidance provided by bylaws. Legal counsel may be useful to effectively embody the spirit of your company in your bylaws.