Successful individuals with business acumen and world experience have a lot in common. One of those commonalities is the desire to help their community and raise awareness for causes that matter to them. Many times a board member can be held personally liable for the actions of the nonprofit. Here are some things you should consider before joining a nonprofit board.
Do you agree with the Nonprofit’s mission?
Make sure the nonprofit’s mission is consistent with your values! Board members are considered stewards of an organization and make decisions in the best interest of its mission. In order to accomplish this, they engage in the following:
- Governance: Setting policies, overseeing the organization’s operations, and ensuring that the mission is being fulfilled.
- Financial Oversight: Reviewing financial reports, setting budgets, and ensuring that the organization’s finances are in order.
- Fundraising: Assisting in the development and implementation of fundraising strategies.
- Risk Management: Identifying and managing potential risks to the organization.
- Strategic Planning: Helping to develop and implement long-term plans for the organization’s growth and success.
Board members can be held responsible for the actions of the organization during day to day operations even if they’re not directly involved, good or bad.
Does the Nonprofit have D&O Liability Insurance?
Before joining a non-profit board, make sure that the organization provides Directors and Officers (D&O) Liability Insurance. As a board member your personal assets can be at risk if the nonprofit is sued by vendors, current or former employees, donors, beneficiaries or other parties. D&O Liability Insurance helps cover the defense costs, settlements and judgments arising out of lawsuits brought against a nonprofit. Without this coverage, if a board member is personally sued in a lawsuit involving the nonprofit she will have to personally pay the costs to defend the lawsuit and any settlement or judgment that may result.
Have you reviewed the Bylaws?
Even if the non-profit has D&O Liability Insurance, you still have to perform your own due diligence including a review of the nonprofit’s bylaws. Bylaws describe in detail how the nonprofit governance practices are conducted. Some of the most essential elements that should be included in bylaws are the roles and duties of board members, the handling of financial information and financial audit procedures. If a board does not have bylaws you should seriously consider not joining.
Conclusion
Every non-profit wants to do good for the communities they serve, and wanting to be part of that is a noble cause. However, before you say yes, make sure the above safeguards are in place.
Our law firm has extensive experience working with nonprofit organizations including drafting bylaws and representation in litigation that may arise. Schedule a consultation by calling our office at (202) 499-5160.