The Role of the Board of Directors for a Charity
The board of directors refers to the governing body of an organization. The board and its directors are responsible for the management of the affairs of the organization.The board's main role is stewardship. Directors have fiduciary duties as established by nonprofit corporation law. These duties of trust include the duties of due care, loyalty to the organization and obedience to the law.
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Duty of Due Care
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The duty of due care means that the board must act with common sense and informed judgment. Directors are expected to exercise their power with competence and always in the best interest of the charity. In order to do this, active participation and reasonable inquiry must be practiced. Active participation includes remaining current on the dealings and performance of the organization by attending meetings and evaluating reports submitted by senior management. A director must be able to make informed judgments about matters that affect the charity and should make any inquiries necessary to do this.
Duty of Loyalty
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The directors of the board have a duty to give their undivided loyalty to, and act in the best interests of, the organization. A director may not benefit personally from information gained through his position. The IRS imposes penalties on directors who receive undue benefits. It is recommended that an organization have written policies for dealing with conflicts of interest.
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Duty of Obedience
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The board has a duty to follow the charity's Articles of Incorporation and its bylaws. Compliance with state and federal laws that relate to the charity and the way it conducts business is also a duty of the board of directors. This would include IRS regulations and income tax filing requirements, state charitable gaming laws and state registration regulations.
Other Duties
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Boards are responsible for the health and effectiveness of an organization. Key duties usually include establishing policies and objectives, approving the strategic plan, managing financial resources, selecting and evaluating senior staff, enhancing the organization's public image and evaluating its own performance.
One of the most important tasks of the board is the selection of an executive director or CEO to supervise the daily operations of the organization.
Corporate Records
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The board is responsible for maintaining corporate records. This includes making amendments to the charity's bylaws as necessary and keeping minutes of regularly scheduled meetings, as well as the organization's annual general meeting.
Liability
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The law protects volunteer board members with what is called qualified immunity. This means they cannot be sued for negligent acts. However, in most states, directors are only protected if the board has properly maintained the charity's legal status and complied with all legal requirements. In the event that a charitable organization violates federal tax law, the IRS may hold directors professionally liable.
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References
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