To serve on a board is a great honor, but it is more work than liberty. Board members are fiduciaries: they hold a position of trust and are obligated to look out for the best interests of the organization, its members, and the public.
Fiduciary responsibilities boil down to two primary duties:
1. The Duty of Care
The Duty of Care involves making decisions based on reasonable information. It is your obligation to "do your diligence." This includes:
- Actually attending meetings and participating. You cannot govern if you are not in the room.
- Being thoroughly acquainted with the documents that govern the organization, including monthly financial reports.
- Asking questions to get at information that is not always provided in staff-prepared materials. Asking questions is simply part of doing your homework.
- Keeping the organization true to its purpose and the law. Making sure the organization honors its charitable purpose and follows the law is part of exercising care. There are two fiduciary duties: care and loyalty.
2. The Duty of Loyalty
Loyalty means caring about the organization more than yourself when there are conflicts. You must put the interest of the organization above your personal, professional, or financial interest.
- Corporate Opportunities: If you discover a business opportunity (such as a discounted land purchase or donation) in your capacity as a director, that opportunity belongs first to the corporation. You cannot divert it to your private business.
- Conflict of Interest: Never participate in an action or vote by the board in which you or your family members have a personal financial interest.
You Do Not Have to Be Infallible
Directors are not expected to be perfect. If you act in good faith, do reasonable homework, and rely on people you reasonably believe to be competent, you have carried out your duty of care, even if a decision later turns out poorly. You are entitled to rely on others you reasonably trust: your executives, outside accountants, legal counsel, and committees of the board.