Third Life – Board Accountability


Many directors of not-for-profit organizations have little idea what their legal responsibilities as a board member might be. Let’s follow the logic for just a minute:

First, we must remember who owns a not-for-profit organization. There are no shareholders, as in a for-profit corporation, no partners or sole proprietors as in a small or family business. In fact, in a legal sense, the public “owns” the organization.

And the public, through the state government and also through the Internal Revenue Service, hands over stewardship of that organization to a board of directors. The board members hold the organization as a public trust, and have three legal duties:

  • Duty of Care — they must make ordinarily prudent decisions that reflect reasonable care
  • Duty of Loyalty — they must never use information gained by their position for personal gain, and must always act in the best interest of the organization
  • Duty of Obedience — they must be faithful to the organization’s mission, and never act in a way that is inconsistent with the organization’s goals.

Some other duties arise from these three basic duties:

  • Ensure the organization follows the law
  • Approve all major contracts
  • Attend most board meetings
  • Hire and supervise the executive director
  • Support the organization with a financial gift

Board members must hold themselves accountable to these basic responsibilities. Spend some time as a board discussing basic expectations, especially attendance and giving. Create a system of accountability — perhaps the most effective is an annual self-assessment, asking the basic question, “Am I fulfilling my duties as a board member?”

We cannot built the “world that works for everyone” without strong, trustworthy and accountable boards. Make sure your board hits the mark.