when pigs fly … expect the unbelievable

I am suspending posting until November 1, 2009.

Traveling this week.  Return next week for the continuation of obligations of a board member.

Assume that your board’s actions are being investigated.  Your board is not “transparent” enough.  The details of your financial reporting are inadequate.  Someone believes that there is hanky-panky going on.  How do you prove that you have been exercising fiduciary duty?

1. Be able to demonstrate that you understand the charity’s mission.  Have a copy of the charity’s articles of incorporation, constitution, by-laws or other governing documents.  And have read them.
2. Be able to demonstrate that you have attended board meetings and committee meetings and prepared for those meetings by reading and reviewing minutes, reports and other matters distributed for consideration.  Caveat:  This requires the staff and the secretary and treasurer of the organization to be providing timely documents for consideration.  If they are not, then your board is not overseeing staff administration and function.
3. Be able to demonstrate that you have asked questions in order to obtain information that you believe to be material to making decisions and voting on issues.  Keep personal notes.  When you ask for additional information, make it in the form of a motion to require “X” to provide “Y” and to delay action on this matter until the information is received and you have the opportunity to digest it.
4. Be able to demonstrate that you regularly exercise independent judgment.  You may always acquiesce in staff requests because the staff of your charity may be AWESOME.  Lucky you.  But whether you always vote affirmatively on staff recommendations, or whether you always vote with the majority of the board members, you can demonstrate that you exercise independent judgment by making notes of why you determined to vote in a certain way on a certain motion.  It’s good business and it’s prudent.

Be able to prove that you behave as a fiduciary.  It won’t seem important until the investigation begins…

Board members who are regularly absent from meetings, are inactive, and fail to conduct adequate research (“due diligence”) before making decisions are abdicating their duty of care.

In fact, the fiduciary duty with which a board member is “saddled” is that of the diligence exercised by prudent people in handling their own affairs.  How many of us have agonized over the treasurer’s report as much as we have agonized over our own bank statements?  Get my drift?

So, consider the worst case scenario.  You serve on a board that gets into some trouble.  Someone is asking questions or — worse, actively investigating your board and its actions.  How do you demonstrate that you have actually exercised your duty of care?

Visit us tomorrow.

What is the legal obligation known as the “duty of care”?

In line with the “duty of care”, the board member understands that he is a trustee, a fiduciary.  As a result, he or she:

• must be active in the charity’s affairs by attending board meetings and appropriate committee meetings;
• must keep informed in order to determine if the board-established policies are being followed;
• must keep informed about how the charity is functioning day-to-do, at least at some level;

The duty of care must be executed with diligence and in good faith.  This means that a board member should act in keeping with the charitable mission after adequate deliberation. This includes establishing organizational policy and overseeing the enforcement of the policy by professional staff.

Here is where the duty of care often breaks down.  Professional staff are — just that — staff!  But many board members simply default to staff and staff recommendations.  No matter how wonderful, how competent, how educated, how experienced, how engaging, and how “on top of it” the charitable staff may be, the board member has a duty of oversight.  Defaulting to staff is a failure of oversight.  And a failure of oversight can lead to personal responsibility if things go south!