Charitable and other not-for-profit organizations (“NFP”) provide great service to our community. NFPs meet crucial needs not met by the business world and the government. Those who serve as NFP board members are unsung heroes. However, board service is not without risk. After all, board members owe a fiduciary duty to the organizations that they serve. If you are asked to serve on a NFP board, what rules should you follow? How can you serve efficiently and effectively? How can you both volunteer and stay in the clear?
First, you should read the bylaws of the organization for which you are being asked to serve. The bylaws are the “rule book” for any NFP. What board decisions require a unanimous vote? How must notice be given for a special board meeting? How long is the board term of service? Is the NFP required to maintain an insurance policy that protects board members against claims? Answers to these important questions should be found in the bylaws of the NFP. You should read them before committing, and you should follow them during your service.
As a board member, you can provide value in the areas of strategic thinking, fundraising, and setting policy. However, a board member should not be involved in the day-to-day operations of the organization. In a typical NFP structure, the board has only one employee – the president. It is the president’s job to operate the NFP. As a board member, you should keep your hands off hiring and firing, employee compensation, and core business decisions. Practice saying, “I’m sorry, but that’s not my role as a board member.”
Conflicts of interest should be disclosed as soon as they arise. It is not unusual for a board member to have some business connection to the NFP, to another board member, or to a business partner of the NFP. In these circumstances, the board member should fully and completely disclose the conflict of interest in writing. Ideally, meeting minutes would reflect the disclosure of the conflict as well. Furthermore, the meeting minutes should reflect that the board member recused herself from voting on any matter in which the board member has a financial interest. Again, consult your organization’s bylaws and handle conflicts of interest accordingly. When in doubt, disclose the conflict and decline to vote.
Pay attention to the organization’s finances. One of a board member’s most important jobs is financial oversight. Make certain that you are being provided with regular, reliable financial reporting from the NFP. If you are not receiving it, make sure you request it again, and in writing. Consider asking the NFP’s president to include the chief financial officer in at least one board meeting per year. A board member should probe into the financial health of the organization whenever possible. If the organization can afford it, an annual audit from an outside accounting firm is a best practice. Remember, even though you’re not getting paid by the NFP, the organization and its stakeholders count on you for financial oversight.
Often times, charitable work helps those most in need. Many of us are called to serve as board members. However, charity requires clarity. Know the rules, stay in your lane, and make the world a better place.