Service on a nonprofit board can strike some as a cushy gig that looks good on a resume. The reality can prove much more demanding. Board members are considered fiduciaries, or trustees, and they’re legally bound to make decisions they believe will benefit their organizations.

Such legal duties aren’t only important for the success of nonprofits. Compliance also can protect board members from liability, assuming their decisions are made in good faith. Here’s how your board members can help ensure they’re fulfilling their obligations.

Duty of care

Board members must devote reasonable care and attention to provide the requisite oversight of your nonprofit. Among other things, they must ensure the prudent use of all assets including funds, facilities, staff and goodwill. This means that they need to be familiar with your organization’s financial status. It’s not enough to know whether your group has a budget surplus or deficit — members should know how to read and interpret budgets, financial statements and other critical documents.

Duty of care also requires members to attend most meetings (if not in person, then at least virtually) and read reports. And they must exercise sound judgment when making decisions, accounting for all relevant information rather than simply accepting staff recommendations.

Duty of loyalty

Members are obligated to act in the best interests of your nonprofit and its stakeholders. They should see to it that all of their activities and financial transactions are designed solely to advance your organization’s mission, not their own interests.

The duty of loyalty requires your board to identify and disclose all conflicts of interest. Board members also should abstain from discussions or votes on matters that could benefit them or people close to them.

For example, a member should disclose that he or she holds an ownership interest in a vendor business under consideration for a contract. Such a contract could constitute inappropriate self-dealing and provide an “excess benefit.” That could happen if your nonprofit paid more for the service than another customer would — or more than you’d pay a different vendor for the same service.

Duty of obedience

This duty relates to legal compliance. Board members must confirm that your organization follows all applicable federal and state laws, rules and regulations, as well as its own bylaws and other governing documents.

Board members also should confirm that your nonprofit files all required federal and state information and tax returns. And to avoid revocation of your organization’s status, they should ensure that it abides by its purpose of activities (or mission).

Other duties

Of course, board members also have more routine responsibilities. New members, for example, might not realize that they’re expected to evaluate and set your organization’s executive director’s salary. Or they might not know how actively they’re expected to participate in fundraising.

In contrast to members who might underestimate their responsibilities, some board members could believe their duties are far broader than they are or should be. Although they should contribute to fundraising, strategic planning and oversight, the board largely needs to stay out of your organization’s day-to-day operations. Board members may collaborate with paid staff, but it’s up to your executive director to manage these employees.

Getting it right

Solid board leadership is essential. Nonprofit board members often are recruited based on their passion for the cause. Unfortunately, passion alone doesn’t guarantee effective board performance. Help your members succeed by properly educating them on their roles and responsibilities.

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