04/12/2007 | Fiduciary Duties of Board Members

Not-for-profit boards face many of the corporate governance issues which arise in for-profit companies. The Board and thus each Board Member are individually and collectively responsible for ensuring that the organisation is effectively managed, meets all legal requirements and remains accountable to its members and other stakeholders. To be an effective Board Member you must be aware of the legal (statutory, contractual and common law) duties and responsibilities. The nature of the legal relationship between a Board Member and his or her organisation is known as a fiduciary duty, which is built on the concept of trust and honesty. All Members of Boards and Management Committees have a fiduciary duty to act in good faith for the benefit of the organisation. This means that a Board Member should: · Not take advantage of the Board position to further his or her own interest, or those of family, close friends or associates. · Act honestly. · Not use information gained, by being a Board Member, for advantage of themselves or family or friends. · Act with due care and diligence. · Disclose any potential conflict of interest. As a Board Member you will discharge your fiduciary duty if you act honestly, in good faith, and to the best of your ability in the organisation’s interest. Most not-for-profit organisations are incorporated under state legislation. Although there are some variations from state to state, the following is a summary of the key statutory duties of Board Members (often referred to as officers). An Officer must; 1. Not exercise powers or duties of office for any fraudulent purpose. This is core to the fiduciary duty of acting honestly and not taking advantage of the position to further your own needs. 2. Not make improper use of position or information. Again, this is the key to the fiduciary duty and would include the requirement to disclose a conflict of interest. 3. Act with reasonable care and diligence. It is important that you understand the activities of your organisation and understand the Board’s core work. You are expected to ask questions and seek further information when you believe it is required. It is well recognised that the better performing organisations often have excellent governance practices in place. Being a Board Member can be very rewarding. By understanding and complying with your fiduciary duties, you can help your organisation to become one of those better performing organisations. Back to news archive