A contributing expert explains what you should be prepared to do, and not do, when you take a seat on a nonprofit’s board.
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Q: I’ve been asked to join a nonprofit board. I admire the organization and can see how being on the board could help my business. What is expected of a board member?
ACE advises: As a board member you must place the organization’s interests before your own. This is called your “fiduciary duty.” There are three duties.
1. Obedience: Board members must obey the organization’s governing documents and applicable laws. As you read, look for:
- Organization type. Usually found in the first paragraph of the bylaws. Once you know the type, go to Google. Search “charitable organization” “nonprofit membership organization” or “mutual benefit corporation.”
- Check these hits for references to the IRS code section governing the organization’s tax-exempt status. Google search on the section, such as 501(c)(3). One of the top 10 hits will tell you why the organization is exempt and how it stays that way.
- Organization structure and operations. Bylaws describe the organization’s purpose, the board, the officers, any standing committees, meeting requirements, and votes. If there’s a policy or procedure manual it will tell you how the organization operates.
2. Care: The organization should give you the information you need for financial oversight, including:
- A plan
- A budget
- Financial reports
- Progress reports related to the plan
- If the organization does not provide this information, your duty is to insist.
- Read the documents and ask questions.
3. Loyalty: While board membership is “good business,” the benefits are indirect and have more to do with reputation than dollars. When it comes to direct benefits, the organization’s interests come before yours. Prepare to:
- Give up business opportunities
- Recuse yourself from discussions
- Refrain from using insider information
- And, possibly, resign over a conflict of interest.
ACE Board Member Carrie Green Yardley founded Yardley Esq., a business law firm with offices in Portland, Biddeford and Yarmouth. If you have a question for ACE, contact Jim Milliken at jim@millikenproject.com
