Does Your Board Know Its Governance Duties?
There are three fundamental governance duties that all board members should follow. Commonly known as fiduciary duties, these must apply to everything that the board of directors does. Board members may be held liable for any negative consequences of their actions if these fiduciary duties are not followed.
- Duty of Care — defined as “the amount of care that an ordinarily prudent person would exercise in a like position and under similar circumstances.” In practical application, this means that board members must exercise reasonable care when they make decisions for the organization.
- Duty of Loyalty — requires that board members keep the best interests of the organization in mind at all times when making decisions (i.e., avoiding conflicts of interest).
- Duty of Obedience — requires that board members’ actions be consistent with the organization’s mission statement, articles of incorporation, bylaws and tax-exemption documentation. In other words, the nonprofit’s central goals must guide all board decisions and board members must comply with all applicable laws and regulations.
It is critical to provide thorough orientation training shortly after members are elected. Cover federal and state laws as they relate to the duties of board members, as well as laws and regulations affecting the organization. Existing board members should also attend as a refresher. Provide additional training to board members as needed to keep them up-to-date on the issues affecting your organization.