The Board of Directors and Fiduciary Duties

I don’t know about you, but when I hear about a “board of directors,” I get the mental image of a bunch of people in business suits sitting around a long conference table looking important.  They may be on a conference call too.  Probably one of those calls where it takes 10 minutes for the call to actually get started because you have to go through the usual “Who just joined us?” and “Can you hear me?” questions and the uncomfortable silence and shuffling of papers while waiting for everybody to finally get on the call.   I bet it’s even got that weird background noise that nobody ever cops to but forces the call organizer to ask “Can everyone please mute your phones when you’re not speaking?” multiple times.

Anyway, in the very first installment of Delegate Duties, I briefly wrote about what the board of directors does in a non-profit.  If this is all new to you, go back and read the overview.  But just to refresh your memory:

Generally, non-profits are governed by a board of directors. It is the duty of the board to make sure the organization fulfills its obligations and mission. In other words, the buck stops here. Many volunteers become upset when they find out that the board (typically) has the ultimate decision over the properties and affairs of the council, but that’s just the nature of the non-profit beast. Boards have other duties such as fundraising, and they normally split into committees to get work accomplished.

So how do you as a delegate fit into this picture and what is your relationship to the board?  Keep in mind that I’m speaking as a service unit delegate at this point and not necessarily a national council delegate although some of it may apply if you are one.  How this all works is dependent on your council’s governance structure – which should be found in your council’s bylaws.  Take it upon yourself to track down the bylaws.  Unfortunately, some councils make it hard on delegates to find what should be easily accessible to the public.  Just be persistent.  REALLY persistent.  Like OBNOXIOUSLY persistent if necessary.  But stay professional, of course.

Most likely it’s the case where delegates are the ones who elect the board of directors.  But let’s be real.  Most delegates rubberstamp the slate because they have no idea who these people are, what they do, what their intentions are, or anything else about them other than a brief blurb handed out somewhat in advance.  But, like it or not, delegates are the part of the checks and balances system that’s supposed to keep the board in line.

So are fiduciary responsibilities.  I mention them in my last blog post, but here they are again.  From Guidestar.com’s blog:

A fiduciary is someone acting on the behalf of another based on an expectation of trust. A nonprofit’s board is the central decision making body for the organization. It has ultimate responsibility and accountability for the organization’s actions.

According to the Midwest Center for Nonprofit Leadership, a nonprofit board and its members individually have three fundamental fiduciary duties: a duty of care, a duty of loyalty, and a duty of obedience.

The duty of care means that the board member actively participates, attends board meetings, is educated on the industry, provides strategic direction, and oversees management.

The duty of loyalty requires the board member to operate in the interest of the nonprofit and not to use the position to further personal agenda.

The duty of obedience requires the board to know the state and federal laws and regulations that apply. This includes the regulations and guidance issued by the IRS. Obedience to governing documents requires a deep understanding of the operating documents (by-laws, rules, board manuals) and a clear understanding of the difference between the terms ‘may’ and ‘must’ contained in those documents. Finally, obedience requires that the board not act outside the scope of the organization’s legal documents.

But what happens if you get a board that goes out of control or even one that falls asleep at the wheel?  Bad things.  Very bad things.  The absolutely worst case scenario would be one in which the council loses its non-profit status and a charter gets yanked.  Also note that the relationship between an organization and its board is a legal one.  When board members violate these responsibilities, whether it’s through carelessness or purposeful actions, they can be held legally responsible if a lawsuit is brought forward by its members.  However, the extent of this depends on both the state’s non-profit act and whether there’s an indemnity clause in the bylaws.

Now back to you as a delegate.  What if you want to get in touch with board members for whatever reason but you don’t have their contact information?  Again, this information should be easily accessible, but for whatever reason, it’s not in all councils, and you might get the run around if you ask directly.  Well, don’t let that stop you!  Go up to board members before and after annual/delegate meetings, introduce yourself, make small talk, and then ask for a business card.  Then email them afterwards thanking them for taking the time to speak with you.  Bam!  That’s called networking.  And be sure to wear your OFFICIAL scarf while doing so.  😉

Many delegates might feel a little intimidated by board members.  There’s no need to be, and it’s in your council’s best interests to attempt to keep some kind of door of communication open with them.  They should be working to make the council better for YOU as the delegate, the volunteers, and most importantly, the GIRLS (you know, the Go-Getters, Innovators, Risk-Takers, and Leaders).  But just remember that they are most likely coming from a very different perspective than you as a volunteer and therefore, it’s helpful and most likely going to be necessary to explain WHY you feel the way you do if you have an issue or something you want to share.  Be sure to use specific examples.  Don’t just stand up and complain.  That will get you nowhere – plus it’s unprofessional.

Keep in mind that the DELEGATES are the ones who vote in board members (in most cases), so if you aren’t happy with the board, then throw the bums out and figure out some way to get new ones in that will work for the volunteers and the Go-Getters, Innovators, Risk-Takers, and Leaders.  The delegates are the ones with the power when it comes to the board.

And now for Brown’s Final Thought:  There are some councils where it sounds as if the delegate body has been dissolved (or about to be dissolved) and the board of directors is the only authority.  In my opinion, this is extremely dangerous because it’s the fox watching the hen house.  There’s no checks and balances system in place.  If you are in one of these councils, I strongly encourage you to educate yourself and get a copy of your council’s bylaws before this takeover occurred to see if it was even valid in the first place.  This may be very insulting for some to hear, but we have a very naive, disengaged, and uneducated volunteer base when it comes to governance and business affairs.  Because of this, it’s easy to take advantage of us.  Unfortunately, I fully believe this has been the case in many councils – and I’m sorry to say, but our national leadership as well – all for the sake of speeding up decision making.  But bypassing established governance practices is not the way to do this and will only lead to the organization’s harm.  Not to mention, it puts board members at risk for being charged with a breach of fiduciary duties – specifically the duty of obedience.  I hope they keep these things in mind when they agree to take on the responsibility of overseeing one of the top non-profits in the country, if not the world.  But if they don’t, it’s up to delegates to take charge and set right which once went wrong (to quote Quantum Leap).  It takes a lot of patience and perseverance to see it through, but it’s worth it.