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Liabilities for the Board of Directors
Nonprofit organizations provide essential social services that benefit
communities and their members. These organizations cannot survive without a
solid volunteer board of directors assigned to elect officers, adopt policies and
make major financial decisions for the organization. Although the members of
the board are volunteers, there is a certain amount of risk involved in holding
one of these positions. Specifically, even when acting in good faith, board
members are subject to personal liability, which may affect their personal
financial status because of their business decisions.
Therefore, it is imperative that your organization and board of directors
understand the risks involved as volunteers, their responsibilities as board
members and the ways they can protect themselves from personal liability.
Therefore, it is imperative that your organization
Risks and Responsibilities
To combat the chance of affecting the personal
liability of board members, nonprofit organizations
involved as volunteers, their responsibilities as
should assess the risks involved with holding these
positions. Your organization should first develop a
board members and the ways they can protect
volunteer risk management committee to identify
themselves from personal liability.
all risks and pose solutions to minimize potential
harm. In addition, you need to ensure that the board
members understand their governance responsibilities. Your nonprofit should
educate its board on their legal duties, fiduciary duties and decision-making
roles. Furthermore, the risk committee should ensure the following:
• The organization is working within its stated mission;
• Funds are spent according to the mission and spending decisions are known
to donors;
• The organization does not accept donations with conditions;
• Individuals with personal agendas are not allowed to sit on the board; and
• Board members are not using professional contacts in dealings with the
nonprofit.
and board of directors understand the risks
Once the risks are assessed and the board of directors is aware of those risks,
they must also understand the responsibilities associated with the positions they
hold. Legally, board members have three main duties:
1. Duty of Care: The individual should act in the way that a reasonable
person would in a similar position and under similar circumstances. Acting
under good faith is an essential part of the functions of the board.
2. Duty of Loyalty: The individual should place the organization’s financial
interests as the primary responsibility. As a board member, one should not
use their position for personal gain, financially or otherwise. In addition,
individuals should remain honest about business ventures that pose a
conflict of interest when acting as a representative of the organization.
(See Liabilities for the Board on page 7)
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Adviser a publication of LeadingAge New York | Summer 2018