July 30, 2019

By Wesley E. Harrington, CAE  


A nonprofit organization is one that, as a matter of law, does not have shareholders, and the profits of the organization are not distributable to the corporation’s members, directors, or officers.  Nonprofit organization members, therefore, often take on great responsibility when they become directors and officers. Members who desire to lead shouldn’t be afraid to step into a leadership role—rather, they should educate themselves about how to govern their nonprofit in an ethical and legally sound way.

nonprofit association directors and officers must also be cognizant of their obligations and duties imposed by law: First and foremost, directors and officers are fiduciaries.

Generally, a director or officer is required to discharge their duties 1.) in good faith; 2.) with the care that an ordinarily prudent person in a similar position under similar circumstances would exercise; and 3.) in a manner the director reasonably believes to be in the best interests of the organization.

These enumerated duties can be broken down even further to two simple “rules of thumb”—directors have a duty of care, and a duty of loyalty. The specifics often vary among different jurisdictions, and anyone serving in a fiduciary position should review state law, the charter or policies of their organization, and court-established common law to determine their complete obligations under the law.

Here are a ten (10) tips for directors and officers of nonprofits to ensure they are fulfilling their fiduciary duties appropriately:

1.     Fully read, understand, and adhere to all the requirements, procedures, bylaws, and policies of         your organization;


2.     Attend as many board meetings as feasible, and be attentive to what is being discussed;


3.     Carefully review meeting minutes, committee reports, and other materials provided in advance of         meetings, and be prepared to discuss the topics on the agenda for all meetings;


4.     Carefully review all financial statements, Form 990s, audit reports, and/or materials from the         organization’s lawyers or accountants;


5.     Consider retaining experts for decisions that may fall outside of the expertise of board members,         directors, or chief executives;


6.     Always insist on compliance with all applicable laws and internal policy, even if compliance may         increase costs and/or result in difficulty;


7.     Promptly disclose all potential conflicts of interest and adhere to internal policies regarding         conflicts of interest;


8.     Keep sight of the governance role of the board—looking at the big picture for the organization—           and avoid becoming mired down in the day-to-day work of the organization;


9.     Establish appropriate committees and working groups that can carry out the board’s vision and         strategic plan for the organization. These committees and groups can assist in fulfilling the         oversight role of the board in specific areas, like finance, member recruitment, etc.;


10.  Focus on preparing the organization for long-term success, making decisions that will benefit         members and make the organization stronger for the future.