The pandemic and ensuing economic downturn have put many nonprofits on shaky ground. In crises such as these, solid board leadership is more essential than ever — critical decisions affecting an organization’s long-term survival must be made. As board members attempt to stabilize the organization and build for a successful future, they should bear in mind their board member responsibilities and duties.
Three primary board member responsibilities
Board members are considered fiduciaries, or trustees, of their organizations. Their legal duties aren’t only important for the success of their nonprofits. Compliance also can preempt personal liability for board members’ actions, assuming the members are acting in good faith. Here are the three primary duties.
- Duty of care
As part of board member responsibilities, members must devote reasonable care and attention to provide the requisite oversight of the nonprofit. Among other things, they must ensure the prudent use of all assets including funds, facilities, staff and goodwill. This means that they need to be familiar with the organization’s financial status. It’s not enough to know whether the organization has a budget surplus or deficit — members should know how to read and interpret budgets, financial statements and other critical documents.
The duty of care also requires members to attend meetings (at least virtually) and read reports. And they must exercise sound judgment when making decisions, accounting for all relevant information rather than simply accepting staff recommendations.
- Duty of loyalty
Board member responsibilities include the obligation to act in the best interests of the nonprofit and its stakeholders. Members should see that all of the activities and financial transactions are designed solely to advance the organization’s mission, not their own interests.
The duty of loyalty requires board members to identify and disclose all conflicts of interest. Board members also should abstain from discussions or votes on matters that could benefit them or people close to them. For example, a member should disclose that he holds an ownership interest in a vendor business under consideration for a contract. Such a contract could constitute inappropriate self-dealing and provide an “excess benefit.” That could happen if a nonprofit paid more for the service than another customer would — or more than the organization would pay a different vendor for the same service.
- Duty of obedience
This duty relates to legal compliance. Board member responsibilities in this area means the member must confirm that the organization follows all applicable federal and state laws, rules and regulations, as well as its own bylaws and other governing documents.
Board members also should confirm that the nonprofit files all required federal and state information and tax returns. Members should ensure that the organization abides by the purpose of activities (or mission), identified in its applications for tax-exempt status, too, to avoid revocation of status.
Beyond the fiduciary
Of course, board member responsibilities also can be more granular. New members, for example, might not realize that they’re expected to evaluate and set the organization’s executive director’s salary. Or they might not know how actively they’re expected to participate in fundraising, which is particularly important during the COVID-19 era.
In contrast to members who might underestimate their responsibilities, some board members could believe their duties are far broader than they are or should be. Although they should contribute to fundraising, strategic planning and oversight, the board largely must stay out of the organization’s day-to-day operations. Board members frequently may work with paid staff, but it’s up to the executive director to manage these employees.
Help the board help the organization
Nonprofit board members often are recruited based on their passion for the cause. Unfortunately, passion alone doesn’t guarantee effective board performance. Be sure to understand board member responsibilities before making a commitment.
New members, for example, might undergo a comprehensive (but not overwhelming) orientation. In addition to learning the basic duties and board member responsibilities, members should be brought up to speed on specific issues facing the organization.
It also can be helpful to request written “job descriptions” for board members. Some organizations even ask their members to sign a written agreement that lays out their board member responsibilities in express terms.
Consider asking a veteran member to act as a mentor. Veterans can answer rookies’ questions about how best to fulfill the role and help apply their specific skills, experience and networks to further the organization’s mission.
The bottom line
Service on a nonprofit board can strike some as a cushy gig that looks good on a resume, but don’t forget board member responsibilities. The reality, as the turbulent COVID-19 environment has demonstrated, can prove much more demanding. When resources are threatened at the same time demand for services skyrockets, board members need to double down on the job and, perhaps, act creatively. However, their overriding duties always should guide their actions. Contact us for questions about joining a nonprofit board or board member responsibilities.