Serving on Volunteer Boards is Riskier than you may Realize

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Throughout America you’ll find organizations run by volunteer boards.  They’re usually unpaid and overworked, and expose themselves to personal liability as fiduciaries of the organizations.  They have to put their personal interests aside and look out for the best interests of the organization rather than their own self interest.  This is a lot to ask of a person who is donating their time, but this is what is required of a volunteer board member of any organization.

Before you take on this responsibility by becoming a board member, you should be sure that the organization is well run and financially sound. While that may seem intuitively obvious, many are genuinely surprised to learn that a volunteer board member can potentially face personal liability as well as reputational damage.

A board member’s fiduciary duty to the organization include a duty of care and a duty of loyalty. The role of a director includes thoughtful oversight of its finances and as well as reasonable efforts to assure the organization meets its commitments and fulfills its mission.

Before accepting a board position you should take a look at the organization’s governing documents and other historical records.  If the organization does not have those records readily available for you, you ought to pause and perhaps reconsider jumping in.  A lot of volunteer run organizations do not appreciate that they are businesses with significant obligations. If they are not being run like a business with readily available documents, how can you possibly oversee the organization once you become a board member.

Consider such things as,

  • Does the organization have audited financial statements? Who are the auditors?
  • Does the organization have a relationship with experienced professionals whose advice you can rely upon as a board member?
  • What information can be learned from the organization’s required tax and governmental filings?
  • What does the organization’s operational budget look like?  Does it even have one and has it historically been sufficient?
  • What resources does the organization have to help you do your board work?
  • How difficult is it going to be for you to prepare for board meetings and to do work in between those meetings?
  • Has the board adopted a clear statement of the organization’s mission, vision, and strategic goals and established policies and plans consistent with this statement?
  • Has the board taken affirmative steps to assure that the organization operates in compliance with applicable laws and regulations?
  • Does the board have policies such as code of ethics and conflict-of-interest policies that are reviewed, and signed by, individual board members annually? Who keeps track of all of that for the board?
  • Does the board have minutes of board, committee and other meetings and what do they say?  If the minutes and other official records are not readily available for you now, consider how risky your job as a board member will be going forward.

You really need to “look before you leap.”  Happy New Year.

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