Many of our clients offer their time to be a volunteer board member for a non-profit or other community organization. They might be an elder on the board of a church, a board member of a community animal shelter, or a board member of a multi-million dollar community non-profit. Whatever the organization, if you choose to serve on the board, your participation brings you legal responsibility and liability.
This might come as a shock. You are volunteering your time and probably donating money to this organization, and now you carry personal liability as well? What kind of thanks is that?! Nevertheless, it is true. If you are on the board of directors of a corporation, you are responsible for making sure the corporation follows its own bylaws and the laws of the state in which it is incorporated. In the case of a non-profit, disgruntled stakeholders, such as donors, have the ability to sue you personally if they feel you have not correctly managed the non-profit’s dealings in its best interest.
Before you decide this is too much responsibility for a volunteer position and resign, here are a few tips on how to be a good board member.
- Interview other Board members. Find out how involved they are, what sort of time and resources they are able to give to the organization, their experience, and their other pursuits. These are the people who will be responsible, with you, for the organization’s leadership. You want to be sure the group is committed, well-resourced, and functional. Even if you are already on the board, take the time to meet with other members one on one in order to get to know them better. Doing so will help make it easier to work with one another.
- Read the by-laws. While corporate by-laws are dry reading, it is essential that you know the rules of this particular organization. You may find some outdated measures that need to be changed.
- Ensure a reputable CPA is involved. Be sure your organization is working with a CPA experienced with non-profits who will annually audit your financials and help prepare the correct reports.
- Keep careful notes of discussions. Any discussion of strategy or significant financial decision, such as purchasing real estate, should be carefully noted in meeting minutes. If you are not taking your own notes, be sure to review the minutes after each meeting to ensure the notes capture the discussion. This could be evidence that you properly considered and discussed an important issue.
- Always consult with unbiased professionals. Boards need the expertise of a variety of professionals, from attorneys to insurance agents and general contractors. While it seems easiest to ask someone who volunteers or is a donor, sometimes that person may not have the necessary expertise working with a non-profit. We frequently see established non-profits who have incomplete insurance and poor risk management programs because the vendors they use do not have the capacity or expertise to provide advice on the nuances of their risk.
- Have quality Directors & Officers (D&O) insurance. This insurance can provide a level of personal protection for board members. Since board members’ personal assets can be pursued because of their participation on a non-profit board, D&O insurance can protect provide funds to defend such a lawsuit.
Being a board member is a wonderful way to contribute to your community and help guide an organization to even greater levels of success. While the responsibility is significant and should not be taken lightly, it is possible to manage the risk so that you and your family are well-protected. Contact us today to learn more.
How to Be a Good Board Member
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