The Legal Duties of Board Governance

Board governance is essential because it brings the knowledge, skills, and resources of a community together around a mission and its impact.

Readers of our columns know that the most important relationship in a nonprofit organization is that of the board and its chief executive. The second most important relationship is among the board members themselves.

Tending to those relationships, focusing time and energy on strategic discussions and decisions, engaging the community served, and providing both resources and oversight are all possible when the board and chief executive are working in constructive partnership.

When that happens, public trust is upheld. When there is a breakdown in that relationship, all sorts of challenges happen.

BoardSource explains the legal obligations of board members:

“State laws explicitly indicate that nonprofit corporations need a board to assume the fiduciary role for the organization’s well-being. These laws designate overall responsibility and liability to that board. In addition to the board’s responsibilities as a governing body, individual board members are bound by their legal obligations: the duties of care, loyalty, and obedience. As part of the case law, these duties serve in the courts as the test for compliance if a board member’s performance or decisions ever become a legal issue.”

Those three legal duties of nonprofit board governance are critical for organizations to understand:

  • Duty of Care: Exercise reasonable care as a steward
  • Duty of Loyalty: Faithful to organization, no self-gain
  • Duty of Obedience: Faithful to mission, ensure public trust

All nonprofits provide critical services to the community. Spending time ensuring the board has the knowledge and training needed to be effective in its roles is not only critical — it is required.

We hope that all boards learn the importance of their governance roles to maintain the public’s trust.

Article by: Kerri Laubenthal Mollard, Founder & CEO

2021-10-21T16:48:58+00:00October 21st, 2021|