Serving on the board of directors of a nonprofit organization can be a rewarding experience that offers the chance to contribute to a meaningful cause and make a difference in the community where you live and work. However, to ensure the continuing success of the nonprofit, board members must understand the duties and responsibilities they owe to the organization. The following is a quick refresher on the fiduciary duties board members owe to their nonprofits, as well as some practical tips that can help board members meet those duties.
Board member fiduciary duties
Board members of Tennessee nonprofits owe fiduciary duties to the organization to act with reasonable care, good faith, and loyalty. Board members also have a duty to disclose to the rest of the board any information that is material to the discharge of the board’s decision-making or oversight functions.
The duty of care requires board members to act reasonably, as a prudent person in similar circumstances would. Put simply, this duty requires board members to pay attention and try to make good decisions for the organization.
Practical tips for meeting the duty of care:
• Attend board and committee meetings on a regular basis
• Be familiar with the nonprofit’s activities and financial condition
• Be informed! Review board materials prior to meetings
• Participate in discussions and ask questions
• Rely on the advice of qualified professionals
• Ensure complete and accurate minutes are taken
• Have a copy and follow the charter and bylaws of the nonprofit
The duty of good faith requires board members to act in good faith and to be fair in their dealings with the nonprofit.
Practical tips for meeting the duty to act in good faith:
• Be upfront and honest in dealings with the nonprofit
• Do not take advantage of the nonprofit or its resources
The duty of loyalty requires board members to act in the best interests of the nonprofit. Accordingly, board members must place the interests of the nonprofit before their own and take appropriate steps wherever there is a conflict of interest.
Practical tips for meeting the duty of loyalty:
• Avoid conflicts of interest
• Disclose conflicts of interest if one arises
• Refrain from sharing confidential information
• As a board, have board members and officers sign conflict of interest statements at the beginning of each year in order to document existing or potential conflicts
• As a board, adopt a conflict of interest policy and review it as least once a year
Serving on a nonprofit board of directors includes many responsibilities beyond just meeting these fiduciary duties. However, board members that are aware and mindful of their fiduciary duties owed to the nonprofit will have a strong and positive impact on the organization’s success.
