It starts at the top. This belief—that vision casting, strategy setting, and program planning require the buy-in and governance of a strong Board of Directors—is widely held among nonprofit leaders. Last month we outlined how boards can lead effectively at various stages of an organization’s development. Below we describe the three primary duties of a board.
According to the National Council of Nonprofits, “Board members are the fiduciaries who steer the organization towards a sustainable future by adopting sound, ethical, and legal governance and financial management policies, as well as by making sure the nonprofit has adequate resources to advance its mission.”
If you are a nonprofit leader, ensure your Board of Directors understands the three roles it is legally and ethically committed to executing.
Duty of care: A Board of Directors will take care of the nonprofit by ensuring prudent use of all assets, including facility, people, and good will.
The “owner” of a nonprofit is the community, and the board is the voice of the community. A board upholding duty of care must ensure it represents the community in the decisions it makes. For example, board members attend meetings regularly and review materials ahead of time, remain adequately informed about the organization, and exercise independent judgment when voting on important matters.
Are your board members aware of the care expectations set for them and acting in good faith?
Duty of loyalty: A Board of Directors exists to ensure that the nonprofit’s activities and transactions are advancing its mission above all else.
A board must represent the nonprofit through its decision-making capacity. A board acting with duty of loyalty understands that the organization’s needs come first and makes decisions that are in the best interest of the agency. It makes explicit this commitment to loyalty by signing conflict of interest and confidentiality agreements.
Are your board members exercising undivided allegiance by putting personal and professional interests aside for the good of the organization?
Duty of obedience: A Board of Directors will ensure that the nonprofit obeys applicable laws and regulations, follows its own bylaws, and adheres to its stated charter.
Board members bear the legal responsibility of compliance. A board acting with duty of obedience upholds the organization’s mission and purpose, is aware of the organization’s articles of incorporation and bylaws, completes appropriate legal paperwork, and observes applicable employment laws and tax withholdings.
Is your board following the law (external obedience) and following the intent of the organization (internal obedience)?
Each Board of Directors has a governance committee. An effective governance committee provides added assurance that a nonprofit is furthering its cause, which includes holding the board accountable to its three paramount promises. And ensuring board members are aligned around and committed to their duties and roles requires ongoing education, training, and performance assessment.
For more information about the primary roles a Board of Directors should be filling, check out the recent webinar I present, The Context of Innovative Board Leadership. If you need some extra support educating your board about these duties, we can help. Contact us today to learn more.