What is your fiduciary responsibility? And what does fiduciary mean, anyway?
We recently had the opportunity to work with an organization that is ready to increase its impact. Current board members had recruited and approved new board members; there was work to be done and people to do it. Our role was to help orient all members to their roles and responsibilities.
We structured the workshop around content included in What Every Board Member Should Know: A Guidebook for Tennessee Nonprofits published by the Tennessee Attorney General, Tennessee Secretary of State, and Center for Nonprofit Management. The guidebook is free and available on line.
At the heart of all board responsibilities is “duty.” These include the duties of good faith, loyalty, and care. These are defined as a board member’s “fiduciary responsibilities.” The big question is this – what does fiduciary mean? It’s not a term people use every day. But it is at the core of nonprofit governance. It is the legal and moral obligation to act in the best interest of another. At its core, there is the expectation of trust. It is imperative for board members to place the interests of the nonprofit before their own, and to not seek personal benefit from board service.
Board members must know and understand the activities and financial condition of the organization. You cannot be fair to your nonprofit if you do not know what is going on. The following is a high-level summary of how individual board members fulfill their fiduciary duties:
- Attend board and committee meetings.
- Carefully read all material you receive, ask questions, and be active in board discussions.
- Use your own judgment in voting.
- Participate in strategic planning activities that assess and plan for the organization’s future.
- Inquire whether there is a director’s and officer’s liability policy.
- Review board and committee minutes to ensure proper recording.
- Sign a conflict of interest statement at the start of each year.
It is also important that the board as a whole fulfill their responsibilities. This collective responsibility is fulfilled through engagement. Examples of this include:
- Hold regular board and committee meetings.
- Encourage open discussion.
- Pursue the mission and the organization’s best interests with determination.
- Putting a conflict of interest policy in place, and ensuring it is reviewed annually.
- Responsibility to ensure the nonprofit:
- Operates in a fiscally sound manner.
- Has mechanisms in place to keep it fiscally sound.
- Is properly using any restricted funds it may have.
Here’s the good news and the bad news: You have to show up for board meetings. Having your name on a board list is not enough. And showing up is not enough. You have to be engaged. At times this can mean asking difficult questions. Don’t just “go along.” You have a fiduciary responsibility to those your organization serves. We know you care – that’s why you’re on the board. The next step is to ensure you – and your fellow board members – exercise care.
Copyright 2017 – Mel and Pearl Shaw
Mel and Pearl Shaw are authors of four books on fundraising available on Amazon.com. For help growing your fundraising visit http://www.saadandshaw.com or call (901) 522-8727.