People who serve on a nonprofit board are held to the same legal standards as those who serve on a corporate board, which boils down to the Duty of Care, the Duty of Loyalty, and the Duty of Obedience.
The overarching idea is to hold board members accountable for acting in the best interest of the organization.
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The Duty of Care means making the right decisions for the organization. It is the board’s responsibility to make decisions that support the organization’s mission, ensure its sustainability, and make sure that all of the organization’s assets are used wisely.
To exercise their Duty of Care, members must use reasonable caution, good judgment, and the best information available to arrive at decisions. As such, members can be expected to:
- Understand the organization’s priorities, including its vision, mission, strategic goals, and working programs.
- Attend all board meetings and take part in all board votes.
- Attend certain organizational functions (e.g., fundraising events).
- Be familiar with the organization’s financial state.
- Establish systems for staying informed about the organization’s operations (e.g., through committees, regular reports from the ED and/or other leaders, etc.)
- Consult available information, seek further information where needed, and participate in rigorous discussions.
The Duty of Loyalty means fidelity to the mission and to the organization: Putting the organization first when in the board role. That includes avoiding all conflicts of interest while sitting in their board seat by declaring any potential conflicts, recusing oneself from votes in the case of a conflict, and signing an annual conflict of interest statement pledging to take those steps, as required by the IRS.
The Duty of Obedience means following the bylaws of the organization and any other legal documents, policies, and procedures approved or established by the board, IRS, and state nonprofit laws. As a legal document, bylaws are to be followed or they should be changed to reflect the practice of the board.
The most high-performing boards, as part of the Duty of Care, excel at board recruitment and new member onboarding, knowing that among their most important roles is to identify, recruit, and onboard those who can provide needed skills and passion for the mission. These boards do their own annual assessment (or survey) to review their performance and constantly improve their work. They also ensure that their approach to hiring, supervising, and annually assessing the chief executive avoids micromanaging or otherwise engaging in the daily work of the organization.
In addition, board members must make an annual contribution to the organization, and ensure the board has a donor policy for board giving and donations. Every board needs 100 percent participation from board members in donating to the organization. Today, board members must also actively participate in fundraising: through peer-to-peer campaigns using their own personal networks and contacts, as well as by identifying new resources, making introductions, and being ambassadors in their communities – complete with a ready elevator pitch.
Board members are responsible for governing the organization. The key commitments involved in effective governance are:
- Attending all meetings and participating fully in each, which includes completing any required reading or review prior to the meeting.
- Focusing on the mission to ensure that the work, programs, and services of the organization meet the aims of the organization, and to update or refresh the mission as needs and communities evolve.
- Supervising the chief executive, which includes everything from recruitment, hiring, and onboarding to overseeing, advising, and appraising performance annually using a clear and consistent process. The board is also responsible for terminating the chief executive when needed, as well as appointing interim leadership.
- Financial oversight, including approving an annual budget, reviewing and approving regular financial statements, and reviewing the annual audit or financial review as conducted by a CPA firm. The board is meant to ensure there are adequate resources to meet the budget and goals of the organization.
- Program oversight and support, ensuring that programs are meeting the mission, creating impact, and achieving results. By reviewing data – from staff presentations to outcomes dashboards – the board monitors programs to evaluate their success in meeting the organization’s goals.
- Participating in fundraising, a key responsibility for every board member, by making an annual contribution, mounting peer-to-peer campaigns through social media, and working with staff to make introductions, seek out funding, and/or volunteer for events.
- Evaluate board effectiveness through an annual or biannual assessment of the board covering its functionality and how it gets work done. This is often conducted through an annual survey, with a board retreat scheduled to share results and develop a workplan to address needed improvements.