Now is a good time to review the roles and responsibilities of your nonprofit board. Interest in the governance practices of nonprofit organizations has grown in recent years by watchdog groups and lawmakers. Your nonprofit board members, compensated or not, have a fiduciary duty to your organization.
In general, a fiduciary has these three primary duties:
- Duty of care. Board members must exercise reasonable care in overseeing the organization’s financial and operational activities. Although disengaged from day-to-day affairs, they should understand its mission, programs and structure, make informed decisions, and consult others — including outside experts — when appropriate.
- Duty of loyalty. Board members must act solely in the best interests of the organization and its constituents, and not for personal gain.
- Duty of obedience. Board members must act in accordance with the organization’s mission, charter and bylaws, and any applicable state or federal laws.
Avoiding conflicts of interest can be one of the most challenging components of your board’s fiduciary duty. The key to dealing with conflicts of interesting is disclosure. The board member involved should disclose the relevant facts to the board and abstain from any discussion or vote on the issue – unless the board determines that he or she may participate.
Your board members can meet their obligations by acting in good faith, putting the organization first and by disclosing any potential conflicts of interested. For help on this contact our team!