#12. Board members should gain a full understanding of their board roles and responsibilities to the organization and to the public by being provided with:
- a clear set of expectations and responsibilities,
- bylaws, articles and other key documents of the organization,
- an introduction to the work of the organization, and
- on-going opportunities to discuss and review
It is unusual, but not uncommon, for a paid staff member to serve on a nonprofit board. Often times newer nonprofits may choose to have a founding executive serve on the board to provide leadership and to help inform decisions as the organization grows. Nonprofit boards should approach this issue carefully, however, as there are several potential concerns in this area, including the potential for a conflict of interest if the chief executive has voting authority over matters that could cause that person to gain personally from board decisions (such as decisions regarding budget and salary). Often in this situation, the chief executive will serve on the board as a non-voting member, or will abstain from certain decisions. Boards also should be aware that providing clear lines of authority between paid staff and the governing body sends a strong message to the organization’s stakeholders regarding how the organization might avoid future conflicts of interest.
#13. Board members are responsible for fully understanding their legal and fiduciary responsibilities and carrying out their duties in the following areas:
- Strategic planning
- Policy approval and ongoing review
- Annual review of the executive director’s performance and compensation
- Succession planning
- Setting of compensation structure
- Annual budget and revenue plans
- Financial procedures
- Risk management
- Regulatory filings.
The duties listed fall under the Duty of Care under the fiduciary duties of board directors as spelled out by the Attorney General’s Office. Board members are entrusted to take care of the nonprofit and to ensure that resources are being allocated and utilized in the interest of its constituents.
#14. Board members are responsible for the ongoing financial health of the organization and should understand the content and significance of the organization’s financial statements and audit.
If there is any suspicion or actual misuse of funds or other resources, an organization’s board members are legally responsible and accountable for any repercussions of misappropriation of organizational resources. With such level of responsibility leadership, it is in the interest of individual board members as well as the entire board that everyone involved have a strong understanding of the organization’s financial statements and audit.
#15. Board members are responsible for keeping suitably informed in order to actively participate in decision-making.
Under the Duty of Care, there are expectations of board members, such as attending board meetings and assisting the organizations in getting the resources necessary for it to realize its mission. In order to fulfill these roles and expectations, a board member cannot be passive and under informed. Having an informed board is a critical component in an organization being able to thrive. However, board members are volunteers and not staff. As such, board members should also be cautious about walking that line between being an informed on matters pertinent to the board and matters pertaining to staff.
#16. Nonprofit board members are responsible to make decisions in the best interest of the organization and no other party, including themselves. Each board should have a conflict of interest policy that includes a disclosure form, which is signed by board members annually, and procedures for managing conflicts of interest and handling situations in which public and private interests intersect.
In cases of potential conflict of interest, directors must act to preserve and enhance public trust in the organization by putting the interests of the organization ahead of all other business and personal interests. When directors are confronted with an actual or apparent conflict of interest, there are reasonable steps that the organization can take to preserve its integrity. Directors need not be disqualified from boards simply due to conflicts of interest. Perhaps the most important step is for board members to disclose information related to the possibility of dual interests to others on the board. Minimally, the director needs to inform the board of the important facts and details and must abstain from voting on the transaction. These actions should be recorded in the minutes to document the disclosure.
- Conflict of interest described on page 13 — https://www.trla.org/www_texascbar/wp-content/uploads/2018/01/Nonprofit-tool-kit-2018-Revisions-1.24.18-FINAL.pdf
#17. Nonprofit board members are responsible for upholding the organization’s mission and using its resources wisely and in accordance with the law.
Board members are legally responsible for any misappropriation of organizational funds and legal missteps. Serving on a board is a significant role, and thus is in the interest of each board member to understand their legal responsibilities and fiduciary duties.
#18. Board members should be willing to publicly advocate for the organization, help widen the organization’s reach and develop connections with the community and its leaders.
While many of the activities of board members take place within the privacy of meetings, board members should be using their position to publicly advocate for the organization among their circles of influence. Whether in the business community, among elected officials, or with other nonprofit organizations, many board members have important networks that can be informed and engaged in the organization’s mission, purpose and good work in the community. The organization will benefit from additional community knowledge and goodwill as a result of individual board members’ active promotion of the organization in their own communities.
Note to Readers: Please be aware that certain words have particular meanings in this document.
- “Must” is used to describe practices required by stake or federal law, and is noted with a gavel symbol and highlighted in red.
- “Should” is used to describe highly recommended practices.
- “Constituents” describes people with a stake in the success of the organization and may include members, neighbors, clients, volunteers and contributors.