All of us become involved with nonprofit organizations for one reason: we believe in the work the organization does. Something about the programming and mission of your organization keeps you involved and called you to be a board member, it’s as simple as that. Our organizations have a duty to the community in which they operate and, as board members, we too have duties to our organizations. All board members are legally required to perform three duties: duty of care, duty of loyalty and duty of obedience.
Duty of Care
The duty of care requires a board director to be familiar with the organization’s finances, activities and to participate in its governance. In other words, board members must make sure their organization is financially sound, the activities meet the mission, and the board has proper policies, deliberation and action.
Duty of care is embodied in a board meeting where the agenda reviews the budget and year-to-date spending, committees update the board on activities and actions, and the bylaws, policies and practices align with each other and the state’s regulations. Sometimes, performing the duty of care requires you to consult with outside experts – lawyers, accountants – for advice on a particular matter. All board members have a duty to investigate motions put before the board of directors and not defer to the recommendations of one person.
Duty of care also means that boards of directors have the responsibility to investigate any reports of workplace misconduct and report to the appropriate authorities. If necessary, board members must consult with independent advisors or auditors with the appropriate credentials and expertise.
Duty of Loyalty
Duty of loyalty means that all board members must act in the interest of the organization, forwarding its mission. The duty of loyalty works focuses on the sustainability and soundness of the nonprofit before any personal or financial gain. At its most basic level the duty of loyalty requires board members to make decisions that are in the best interest of the organization.
This duty requires that any conflict of interest (real or perceived) be disclosed in advance of joining a board and when the possible conflict of interest arises. Many states require that all nonprofits have a written Conflict of Interest policy.
Conflict of Interest policies should include:
- Statement of who you do (or may have) a conflict with
- A prohibition for board members from voting on any matter in which there is a conflict
Here’s the tricky part: Even when people have the best interest of the organization in mind, they may not be aware that a conflict of interest exists. Nonprofits need to educate their boards on what conflicts can look like, often it is a “duality of interest” rather than a financial gain. It is best that boards regularly take time at a board meeting to discuss possible situations in which conflict of interest may arise. Conflict of Interest policies should be updated on a yearly basis and kept with your main policy documents.
Finally, when conflicts arise the board meeting minutes need to reflect the board member who has the conflict of interest, how the conflict was managed (without that board member in the room), and a motion vote stating that the “interested” party (i.e. the person with the conflict) abstained.
Duty of Obedience
The Duty of Obedience is two-fold. First, board members are duty-bound to ensure that the organization complies with all applicable laws and regulations, the organization’s mission and its written governance documents and policies. Second, all board members must speak with one voice.
Every organization must refer on an annual basis to their Charities Bureau in order to ensure they are adhering to the laws and regulations of their state. For example, the New York State Charities Bureau (https://www.charitiesnys.com/RegistrySearch/search_charities.jsp) offers FAQs, guides, publications and online seminars for boards of directors to keep up-to-date. In addition, the federal government has laws and regulations for nonprofits.
This can be one of the toughest aspects of duty any board member will face because it means that no matter how difficult a board discussion and decision may be, every board member walks out of the room sticking to the final decision. One voice means that, no matter, what you do not bad-talk the decision or your fellow board members. The entire organization must stick together and move forward as one.