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The Legal Responsibilities of Board Members In addition to the standard roles and responsibilities of nonprofit board members, there are legal responsibilities. These are essentially the same for both nonprofit and for-profit boards. They also apply to most elected and appointed government officials. The legal responsibilities of board members fall into three categories:
Duty of Obedience This refers to the board’s responsibility to ensure that the organization operates according to state and federal laws, its own rules and regulations, and in a manner consistent with its purpose and mission. Board members should:
Duty of Care The duty of care is an even higher standard. Board members should conduct themselves and make decisions according to what an “ordinarily prudent” person would. For example, if a pre-school program has an electrical problem, the board should ensure that a qualified and certified electrician is called (rather than a director’s uncle who is “handy around the house"). The duty of care also includes conducting business “in good faith” and acting at all times “in the best interest of the corporation” (rather than personal or individual interests). Duty of Loyalty A higher standard than that of duty of care, it refers to the fiduciary responsibility to act with unequivocal allegiance to the corporation. This is the area that deals with the issue of conflict of interest and confidentiality. Most conflict of interest can be avoided when:
Conflict of interest issues that trigger IRS sanctions relate to the following:
Confidentiality is another important area.
Paying attention to legal responsibilities is an excellent way to keep your nonprofit “on track.”
Lynn Shelby Kickingbird in Growing Effective Boards |
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