Under well-established principles of nonprofit corporation law in the United States, a board member must meet certain standards of conduct and attention in carrying out his or her responsibilities to the organization. Several states have statutes adopting some variation of these duties which would be used in court to determine whether a board member acted improperly. These standards are usually described as the duty of care, the duty of loyalty and the duty of obedience.
1. Duty of Care
The duty of care describes the level of competence that is expected of a board member, and is commonly expressed as the duty of “care that an ordinarily prudent person would exercise in a like position and under similar circumstances.” This means that a board member owes the duty to exercise reasonable care when he or she makes a decision as a steward of the organization.
2. Duty of Loyalty
The duty of loyalty is a standard of faithfulness; a board member must give undivided allegiance when making decisions affecting the organization. This means that a board member can never use information obtained as a member for personal gain or for another organization, but must act in the best interests of the organization.
3. Duty of Obedience
The duty of obedience requires board members to be faithful to the organization’s mission. They are not permitted to act in a way that is inconsistent with the central goals of the organization. A basis for this rule lies in the public’s trust that the organization will manage donated funds to fulfill the organization’s mission.
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As an entrepreneur or corporate executive, are you prepared to serve on the AmCham Board of Governors?
Ten Basic Responsibilities of Not-for-profit Boards
Three Legal Responsibilities of Not-for-profit Boards
Individual Not-for-profit Board Member Responsibilities and Characteristics
Board Members Governance Documents
• Conflict of Interest Policy, Annual Statement
• Board Member Job Description
Source: BoardSource “Dedicated to increasing the effectiveness of nonprofit organizations and their boards of directors.”
BoardSource opened its doors in 1988 as the National Center for Nonprofit Boards with a staff of three and an operating budget of $385,000. Today, BoardSource has grown to a staff size of more than 30 and an annual operating budget of US$ 6.5 million.
The organization now has 7,000 members, and serves more than 75,000 nonprofit leaders.