Duties of the Nonprofit Board: Summary of Fiduciary Duties

Whenever an individual or group is legally required to place the best interests of another before their own, they have a fiduciary obligation.? Lawyers, financial planners, legal guardians, executors, and others all have fiduciary responsibilities. Failure to carry out these obligations may result in personal liability.

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The Duties of Obedience, Due Care, and Loyalty are examples of fiduciary obligations, which require nonprofit boards to ensure the organizations they govern serve the common good and are well-managed. Donors, grantors, the government, and the public at large all place their trust in nonprofit boards. Members of the board are legally required to maintain this trust.? This is why a thorough understanding of these duties is so critical for members of nonprofit boards.

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While you may feel honored when approached to serve on a nonprofit board, do not take this opportunity lightly.? Saying yes is a legal commitment that will take time and resources you could be spending elsewhere. As you consider the offer, here are some questions you should ask yourself:

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• Are you prepared to challenge the status quo, ask probing questions, and hold others accountable? Do you have the patience to read legal documents and follow structured protocols? If so, you are ready to accept the Duty of Obedience.

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• Can you commit to preparing for another meeting? Are you willing to set aside time to read reports, plan for the future, attend events, examine financials, and learn new skills? Can you make difficult decisions that will impact others’ lives or livelihoods? Are you willing to champion the mission of this organization, publicize its accomplishments, ask others to support the cause financially, and commit your own personal resources? If so, you are ready to take on the Duty of Due Care.

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• Do you believe you can truly bring value to the board due to your knowledge, skills, or experience? Are you honest enough with yourself to evaluate your own performance? Are you able to keep information confidential and accept the decision of the group when you disagree? If so, you are ready to demonstrate the Duty of Loyalty.

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Be suspicious if you are told serving on a board will not take any of your time, require any work, or be simple. The person is either not being truthful, does not understand the true role, or is not interested in having a board that functions as it should. The fiduciary obligations of serving on a nonprofit board will require you to commit your time and take on additional responsibilities that will sometimes prove difficult. You are being entrusted with the mission of an organization whose primary purpose is to serve others. Nonprofit board service is an honor, but it is also a commitment and hard, yet meaningful, work when done well.

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Now that you know what you must do as a member of a nonprofit board of directors, it is time to explore how to carry out those duties well. Next week, I will begin a new series on the principles of Good Governance to do just that!