Board members owe fiduciary obligations to the organization, to the donors, the staff, and to the organization’s key person founder.
Although it may appear to be self-evident to most non-profit board members that their primary job duties include upholding their organization’s mission and conferring loyalty upon their donors (whose charitable gifts permit the organization to grow and flourish), it’s also important to remind board members that they have legal and fiduciary obligations to loyally serve their organization’s key person founder, as well.
Unfortunately, and within the recent past few months, several notable national and international legal skirmishes have occurred within non-profit organizations between their board members and their organization’s respective founder. Oddly, the complaints made by board members coincidentally include overarchingly similar themes. For example, the board members complain their organization’s founder is too difficult to work for and (more seriously) that the key person founder is a thief who has stolen donors’ funds.
These parallel claims were initiated last fall by the Corona Investigative Committee’s board members against its founder Dr. Reiner Fuellmich, and by board members in Americas Frontline Doctors’ (AFLDS) against its founder Dr. Simone Gold. Most recently, Project Veritas’ board levelled similar accusations against its founder James O’Keefe. However, the board members at AFLDS and Project Veritas made the dubious choice to resolve internal differences by firing their founders, and in some cases including the entire staff, which appears to blatantly conflict with the general fiduciary responsibilities of non-profit board members discussed below.
Since similar board member complaints have been made at each of the aforementioned non-profit organizations (and around the same time), this paper will discuss board members’ job duties including duties of care, loyalty, and obedience to their non-profit organization. Duties of care, loyalty, and obedience to their organizations generally require board members to consider the best interests of their organization as paramount. Thus, false, or unfounded innuendo against staff members, against other board members, or against other key person founders should not be acted upon, absent conclusive proof of illegal conduct, or the organization could be damaged or destroyed in violation of the board members’ fiduciary responsibilities. These requirements are mandated pursuant to state and common law. Also see, “The Model Nonprofit Corporation Act (MNCA) .”
Alternatively, board members who are unwilling or unable to comply with this relatively benign legal requirement are free to resign since they are non-employees. If an exempt organization does pay its board members, then they are classified as independent contractors. However, most people recognize that the vast majority of board members of charitable non-profits are unpaid volunteers.
Regardless, a dissatisfied board member should contemplate a resignation, as it would ultimately be in the best interest of himself, the organization, and especially the donors. It would be a waste of donors’ money, destructive to the organization, and a breach of fiduciary duties to pursue unfounded allegations against board members, staffers, and founders.
Of course, not all board members are created equally. For example, some board members may possess prior experience, while less-experienced and first-time board members may require additional training and mentoring from senior-level members. Moreover, serving as a board member at a non-profit (or any organization) is never devoid of challenges or obstacles. However, every board member, regardless of his background, should be skillfully adept at working collaboratively and as part of a team, while remaining cognizant of his legal obligations to render independent judgment and critical thinking separate and apart from other board members (where occasional negative or deleterious effects of groupthink can and often do occur). To that end, set forth below is a broad and general overview of the primary legal and fiduciary responsibilities required of board members.
First and foremost, a board member must adhere to several fiduciary responsibilities. The word “fiduciary” is from the Latin word fiducia, meaning “trust.” A fiduciary, therefore, is a person or organization that acts on behalf of another person or persons, putting their clients’ interests ahead of their own, with a duty to preserve good faith and trust. Being a fiduciary thus requires being bound both legally and ethically to act in the other’s best interests.
What are the Fiduciary Responsibilities of Board Members?
It’s straightforward, and there are three equally important fiduciary responsibilities required of non-profit board members, including “duty of care,” “duty of loyalty,” and “duty of obedience.” The details describing each of these duties are as follows:
1. Duty of Care: Take care of the non-profit by ensuring prudent use of all assets, including facility, people, and good will.
2. Duty of Loyalty: Ensure that the non-profit’s activities and transactions are, first and foremost, advancing its mission; Recognize and disclose conflicts of interest; Make decisions that are in the best interest of the non-profit corporation; not in the best interest of the individual board member (or any other individual or for-profit entity).
3. Duty of Obedience: Ensure that the non-profit obeys applicable laws and regulations; follows its own bylaws; and that the non-profit adheres to its stated corporate purposes/mission.
Thus, the fiduciary responsibilities of board members are to the non-profit as a whole; even those who only serve on a particular committee or task force owe the fiduciary obligations to the entire non-profit. When board members fire the key person founder and the entire staff, such action is clearly a breach of fiduciary duties and, obviously, does not serve the non-profit as a whole.
Board members should be mindful that breaches of fiduciary duties can be enforced by the state Attorneys General of the non-profit’s state of incorporation. Also, donors providing funds to a non-profit may sue the directors and officers alleging misuse of funds or gifts. Moreover, current and former staff of the non-profit may bring suit against board members alleging wrongful termination, discrimination, or sexual harassment.
Most donors likely support a specific non-profit especially if its founder’s vision and goals align with theirs. They don’t donate their hard-earned funds to financially compensate board members, or to support a board’s sudden rewrite of the non-profit’s mission -- a mission that was originally created by (and successfully promoted by) its key person founder.
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 Who Sues Non-profit Organizations? (victorinsuranceus.com)