The Importance of Good Governance in Private Clubs and Communities

Let’s start from the beginning: Most clubs and communities are organized under a variety of tax and legal structures. Regardless, they occupy a unique space in society. These largely social clubs, ranging from golf and yacht clubs to dining and racquet clubs, exist to promote fellowship and recreational activities among members. While most are tax-exempt, their operations must meet legal and operational standards to retain their status. The business model for most club and community structures is fraught with conflict. Volunteer members (customers and owners in most cases) serve to make decisions about a business for which they have no professional experience, and their choices face scrutiny by their peers on the first tee and in the dining room. Therefore, at the heart of long-term sustainability for these clubs and communities is one critical factor: good governance.

Why Governance Matters in Private Clubs

Governance refers to the structures, policies, processes, and behaviors that guide decision-making, oversight, and strategic direction. For most clubs and communities, governance isn’t just a matter of administrative organization; it’s fundamental to their legal compliance, financial stability, management, and member trust.

Clubs that embrace good governance are more agile, transparent, and aligned with member interests. Those who don’t risk stagnation, conflict, legal missteps, and financial instability.

Key Challenges Unique to Private Clubs and Communities

Unlike for-profit businesses or even other types of non-profits, clubs face governance challenges specific to their nature:

• Volunteer leadership: Boards are often composed of well-meaning volunteers, many of whom may lack expertise in governance, finance, or non-profit law.
• Member-driven culture: Club members are both the customers and the owners, leading to blurred lines between operational input and strategic oversight.
• Legal requirements: Clubs must ensure that no portion of their net earnings benefits private individuals and that activities primarily serve members. Poor governance can lead to violations that jeopardize tax-exempt status or the integrity of good business practices as an employer.
• Legacy thinking: In older clubs, “the way we’ve always done it” can be a recipe for disaster. Some can become stuck in tradition rather than being forward-focused and data-informed. While it is essential to preserve some traditions, integrating innovation is critical to long-term success.

The Pillars of Good Club Governance

Clearly Defined Roles and Responsibilities

A high-functioning board understands the difference between governance and management. Boards set strategy, policy, and fiduciary oversight. The General Manager, COO, or CEO executes operations. Clarity here avoids micromanagement and enables leadership to focus on their respective strengths.

Strategic Thinking with a Strategic Plan

Governance is not day-to-day problem-solving; it’s forward-looking stewardship. Good boards prioritize long-term planning, risk management, and financial sustainability through capital planning, reserve studies, and member engagement strategies.

Transparency and Communication

Members deserve to understand how and why decisions are made. Open communication fosters trust, reduces speculation, and ensures alignment between board decisions and member expectations.

Board Education and Succession Planning

Effective governance starts with informed leaders. Clubs should invest in board orientation and ongoing education about fiduciary duties, club trends, and governance best practices. Equally important is building a strong pipeline of future board members through robust nominating and leadership development processes.

Compliance and Risk Management

Governance includes ensuring the club adheres to IRS regulations, employment law, safety requirements, and environmental standards. Clubs should regularly review bylaws, policies, and operational procedures with legal counsel and industry experts.

Good Governance Outcomes

Strong governance doesn’t just prevent problems, it creates value. Clubs with disciplined governance practices:

• Make better, faster, and more strategic decisions.
• Retain and attract quality staff by providing clarity and consistency.
• Improve member satisfaction by aligning operations with the club’s mission and vision.
• Protect their tax-exempt status by ensuring compliance with regulations.
• More likely to succeed in capital campaigns and long-term financial planning.

Private clubs and communities cannot afford to overlook the importance of good governance. Well-governed clubs are not only more sustainable and resilient but also more capable of delivering the experience their members expect. As private clubs and communities evolve to serve new generations, governance will be the foundation upon which tradition and innovation successfully meet.