Board of Directors – Basic Things to Know
March 29th, 2017
Board of Directors Basics
Serving as a volunteer director on the board of a nonprofit can be a very rewarding experience and a great way to give back to your community. If you are asked to join a board, or if you are a current board member wondering what your legal responsibilities are, these are some basic things you should know.
The role of the board of directors is to guide the organization to fulfill its stated mission and set strategic direction. It also provides legal, management and financial oversight. Small organizations that have few or even no employees may need a ‘hands on’ board that carries out all of the activities itself. Organizations with paid employees who perform the day to day activities will have a board of directors that takes a more supervisory role. Regardless of numbers of employees, individual directors are almost always expected to help with fundraising!
Each individual director owes a duty of care, a duty of loyalty and a duty of obedience to the organization:
- Duty of care: the director must act in good faith and exercise good judgment – doing what an ordinarily prudent person would do in the circumstances
- Duty of loyalty: the director must act in the best interests of the organization and put the nonprofit’s interests before the interests of the director or anyone else
- Duty of obedience: the director must follow the ‘laws’ of the nonprofit; the mission and purposes as set out in the Articles of Incorporation and the procedures set out in the bylaws. Directors must also ensure that the organization remains compliant with state and federal requirements of tax exempt organizations.
Every director should be familiar with:
- The organization’s Articles of Incorporation and any amendments
- The Bylaws
- Conflict of interest policies
- The most recent 990 or 990-EZ and audited accounts
- Minutes of most recent meetings
- Liability protection for directors and volunteers
- The organization’s programs
Practice Area(s): Non Profit and Tax Exempt