Nonprofit Organizations: Your Duties as a Board Member
Have you been asked to sit on a nonprofit board? These are often unpaid positions. They provide the opportunity to be of service to the community. Board service can be a great experience. However, whether you are a director on a for-profit board or a nonprofit director, paid or volunteer, you have legal obligations to the organization on whose board you sit. These are called fiduciary duties.
What are these fiduciary duties? The primary duties are the duty of due care and the duty of loyalty.
The Duty of Due Care requires directors to make decisions in good faith and in a reasonably prudent manner after taking all available information into account, in a way that promotes the organization’s best interests. What does this mean for a nonprofit director? Do your due diligence about issues within the organization, ask questions, make decisions after careful consideration of this information and don’t defer decision-making to the organization’s employees, accountants, lawyers or other third parties without proper oversight!
The Duty of Loyalty is somewhat self-explanatory – you agree to be loyal to the organization at all times. That means you will keep discussions confidential and will not use information used in the course of your service to benefit yourself or third parties. It also means that you have the responsibility to avoid possible conflicts of interest that might create a conflict of interest or appearance of improper benefit.
Violation of these duties may expose the director to legal action of a kind usually carved out from any indemnity provided by the organization.
Bottom Line: Sit on that nonprofit board – it may be good for your soul and your career! But take your fiduciary duties seriously and understand that board service done properly requires some work on your end.