Know duty of care requirements — and how to meet them
The legal duties of a nonprofit board of directors generally fall under three basic categories: care, loyalty and obedience. Here, we take a look at duty of care.
What is the scope of duty of care?
Duty of care relates to good faith, care, skill and diligence in daily operations. In a broad sense, duty of care means the board is responsible for everything required to keep the organization in business, from establishing committees and overseeing fundraising efforts to ensuring appropriate record keeping and investigating reports of staff or volunteer misconduct.
What are some ways to support duty of care?
Key among duty of care responsibilities is thoughtful decision making. Board members must dedicate time and energy to informing themselves of the facts and doing the appropriate analysis before making any decisions. This involves understanding the organization's mission and operational priorities as well as issues such as fundraising practices. In other words, duty of care requires board members to be active participants in making the decisions that steer the organization.
In the case of particularly momentous decisions — such as large transfers of property or assets — board members are required to seek independent expert advice, which helps them make the best-informed decisions on behalf of the nonprofit.
Remember, duty of care is individual. Board members may not simply rely on the expertise of a fellow member when voting on a particular issue. While the knowledge of another board member may be useful in making a reasonable decision, each board member must make independent, informed choices to comply with the duty of care.
Board members are also required to make sure that the organization remains conscientious in its transactions and bookkeeping. The board has final responsibility for ensuring adherence to best practices related to accounting, fundraising and day-to-day operations.
Also falling under the duty of care realm is investigation of any reports of workplace misconduct — and appropriate reporting to the relevant authorities. Should an investigation or audit require expertise beyond that of the board or staff, duty of care demands that the board recruit independent advisers or auditors with the necessary credentials and expertise.
This article draws on the expertise of Grace Davies, a Minneapolis-based attorney with special interest in product liability, medical malpractice and employment discrimination.
Trustee Magazine: Legal duties and avoiding liability: A nonprofit board member primer by Paul S. Davidson and Tera Rica Murdock (2013)
The Bridgespan Group: What are the legal responsibilities of nonprofit boards?
Lehmann Strobel: Fiduciary duties of directors of charitable organizations