A Board of Directors is legally responsible for the operation of the nonprofit organization for which it serves. In fact, individual members can be held personally liable for improper conduct if they breach their duties. Paying careful attention to the law and director duties will help you ensure your organization is operating at its full potential.
Standards of Conduct
Legally, each board member must meet certain standards of conduct. These standards are typically described as duty of care, duty of loyalty and duty of obedience.
- Duty of Care – A board member must exercise “reasonable care” when he or she makes a decision for the organization. In this case, “reasonable” is what a prudent person in a similar situation might do.
- Duty of Loyalty – A board member must never use information gained through his or her position for personal gain. This means each member must always act in the best interests of the organization.
- Duty of Obedience – A board member must be faithful to the organization’s mission. This means he or she cannot act in a way that is inconsistent with the organization’s goals.
In addition to standards of conduct, as a governing body, the board has a responsibility to ensure operations run smoothly, decisions are made by majority vote of the Board, and are in accordance with established accounting policies set to be in accordance with the law.
Below is a list of the top ten most common responsibilities of nonprofit boards:
- Establish the mission and purpose.
- Set accounting policies and procedures and ensure compliance throughout the organization.
- Ensure effective planning and accountability.
- Monitor and strengthen programs and services.
- Ensure adequate financial resources.
- Protect assets and provide proper financial oversight.
- Build a competent board of individuals with diverse and relevant experience and expertise.
- Ensure legal and ethical integrity.
- Enhance the organization’s public standing.
- Ensure transparency to all interested parties, especially the public.
Board of Director Roles
While the structure of the Board may vary depending on the needs of the organization, below are common roles:
- Board chair
- General counsel
- Committee chairs
Being mindful of the standards of conduct and common board member responsibilities will minimize risk and help your organization be the best it can be. The level of involvement and structure of a Board may vary among organizations, due to the size of the nonprofit, size of the Board, or a number of other factors; however, it is important for the board members to pay attention to the law and duties to avoid being liable for improper conduct.
Please contact the Not-for-Profit Niche team at Gilliam Bell Moser LLP for further guidance.