Nonprofit Director and Officer Responsibilities and Employment Matters Too!

Serving as a board member i.e., director of a nonprofit is no longer just about selling tables for the next fundraising event or simply listing your service on a resume.  As nonprofits continue to struggle with the vagaries of a dampened economy, expectations are increasing that directors are approaching their service with the same attentiveness they might bestow on their paid careers.  Of particular interest in the spectrum of due diligence are fiduciary and personnel responsibilities.  In last week's Nonprofit Spring Forum presented by Pacific Continental Bank held in Portland, Oregon, attendees heard from a distinguished panel including Dennis Doherty (DePaul Industries), Chrys Martin (Davis Wright Tremaine LLP), Michael Shrayer (Chubb Group of Insurance Companies, and our moderator Steve Miller (Beecher Carlson Insurance Agency LLC) just how important it is for board members to be well-informed and well-insured on both counts.


In the discussion of the board's role, we were reminded of three key duties:

1  Diligence: Act in good faith and make decisions in the best interest of the organization.

2. Loyalty: Avoid the appearance of conflicts of interest. Disclose and be open about potential conflicts of interest.

3. Obedience: Follow the charter of the organization and applicable laws.


We also discussed the "Business Judgement" rule.  Which - to my recollection - deals with using the context of your beliefs to support decisions that are made.

Chrys Martin stressed the importance of not rubber-stamping decisions. If your bylaws aren't serving you well, get engaged and get them changed especially with regard to indemnification.  She stressed the important of clear job descriptions for board members and paid staff. She also remarked about the importance of carrying Directors and Officers (D&O) insurance for board members. Homeowners Insurance is not a substitute! There is no "state coverage" or "immunity" for volunteers including board members. Ms. Martin also spoke a great deal regarding employment practices.

No, I'm not an attorney and don't play one on TV!  I am though a proud CFRE wanting to share this important information with you. I'm hopeful the recap of this lively conversation will encourage you to revisit your bylaws with a focus on how they can be improved to serve your organization and its board best.

Special thanks to Lisa Faust and the team at Pacific Continental Bank and the panelists for bringing this presentation to us!