Your Fiduciary Responsibilities
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INTRODUCTION
In an ideal world, the board members of a nonprofit organization are altruistic individuals with a sincere commitment to their agencys mission. They are aware of what it means to serve on a board, and they fully understand their responsibilities. However, this utopian situation most often is not the reality for nonprofits. Therefore, it is vital that board members are made aware of their fiduciary responsibilities and that they strive to minimize the risk of liability for both themselves and for the organization.
This paper will serve as a review of the article, Your Fiduciary Responsibilities: Minimize the Risk of Liability by Becoming Familiar with Your Legal Duties by Robert M. Portman (2002). First, the articles key points will be addressed. Next, the articles application to nonprofit management will be discussed. Then, the article will be critiqued, and its main points will be compared with some of the related subjects from class readings. Finally, the paper will conclude with key findings and the significance of the article to the profession.
KEY POINTS OF THE ARTICLE
Portman (2002) begins his article by stating that despite the fact that nonprofit board members are volunteering their time as lay leaders, they still have certain legal obligations to the agency. This fiduciary responsibility that he refers to involves a duty of care, a duty of loyalty, and a duty of obedience. Portman then goes on to clarify the meaning of each of these duties.
First, the duty of care, as Portman explains, means that board members are obligated to demonstrate honesty and good faith when carrying out their various functions. Also included in this duty is the responsibility of volunteers to maintain a level of confidentiality with regard to sensitive information. Portman goes on to mention that “the obligation to maintain confidentiality continues indefinitely, not just until the volunteers position expires” (Portman, 2002: 105).
The second duty that Portman identifies is the duty of loyalty. This involves the responsibility of board members to always put the best interests of the agency before their own personal or financial interests. Inherent within this duty is the requirement of volunteers to avoid and/or disclose conflicts of interest (Portman, 2002: 105).
The third and final duty of lay leaders addressed by Portman is the duty of obedience. This relates to the requirement of board members always, whenever acting on behalf of the agency, to do so with the agencys mission and purposes in mind.
The next key point that Portman makes is with regard to the liability risk for a nonprofit organization. Any failure by a board member to abide by his/her fiduciary responsibilities as listed previously can ultimately lead to liability not only for the organization, but also potentially for the individual volunteer. “Nonprofit organizations can be held liable for the acts or omissions of their volunteer leaders even if they were not approved or authorized by the association, as long as the volunteer reasonably appears to be acting with the associations approval” (Portman, 2002: 105).
In addition, Portman addresses Congresss passage of the Volunteer Protection Act, which excuses volunteers from liability for acts or omissions on behalf of nonprofit organizations if he/she was acting within the scope of his/her responsibilities, and the act or omission was not willfully or consciously committed or criminal in nature (Portman, 2002: 106). Most nonprofits, when drafting their bylaws, also include legal coverage for volunteers to the fullest extent of the law.
Portman concludes his article by offering tips for board members to minimize their risk of liability. In addition to reiterating the importance of adhering to the duties of care, loyalty, and obedience, he also points out the importance of familiarizing oneself with the organizations articles of incorporation, bylaws, rules, and regulations. Other tips that Portman offers include attending all board meetings and carefully reviewing briefing materials provided in advance of or between meetings, and reviewing the agencys general liability insurance to ensure appropriate coverage for the type of activities that are most often performed by members of the board (Portman, 2002: 106).
QUALITY OF THE JOURNAL
This article appeared in Association Management Magazine in January 2002. This credible periodical is a publication of the American Society of Association Executives, an agency striving to serve as the advocate for the nonprofit sector. According to the organizations web site, “the society is dedicated to advancing the value of voluntary associations to society and supporting the professionalism of the individuals who lead them” (
QUALITY OF ARTICLE CONTENT
Portman (2002) presents a concise argument regarding the incredible importance of board members understanding and adhering to the fiduciary responsibilities of volunteer leaders. The article is extremely well-written, and can be easily understood by all who have ties to nonprofit organizations, regardless of whether they are novices, or they have decades of experience under their belts. In particular, the bulleted list of tips for minimizing risk is extremely helpful for nonprofit board members.
USEFULNESS TO PRACTITIONERS
This article is not only useful to volunteers, serving as a primer for board members, pointing out areas to be aware of and methods to drastically reduce the potential for entering into situations involving liability and risk. It is also a resource for nonprofit staff, as it can be helpful in determining how to best prepare volunteers for their work on behalf of the agency. In addition, some of the responsibilities of board members and tips for minimizing risk that Portman discusses can also be applied to members of the staff. For example, it is just as crucial to make staff aware of issues such as confidentiality or familiarity with policies and procedures when protecting an agency from concerns of liability.
CRITIQUE