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2/10/14&
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TIM&NORTHROP & & & & & & & &
& & && &&&&&&&
&BOB&KYTE&VICE&PRESIDENT & & & &
& & & & & & &
&&&&&&&&&&PRESIDENT&CHIEF&INSURANCE&OPERATIONS&OFFICER
& & & & &
&&&&&CHIEF&EXECUTIVE&OFFICER&
UNDERSTANDING+EXECUTIVE+RISK+D&O+LIABILITY+& & &
& && &&
WHAT+IS++DIRECTORS&AND&OFFICERS&COVERAGE?&
Provides&coverage&for&losses&for&individuals&(organizaMon)&that&lead&out&in&church&governance&either&as&ocers&of&the&organizaMon&or&members&of&commiTees&and&boards&are&legally&obligated&to&pay.&&
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WHO+IS+A&D&O&IN&THE&CHURCH&
&PAST,+PRESENT+AND+FUTURE+&Directors&Ocers&Managers&CommiTee&Members&Board&Members&
&
YOUR&PERSONAL&ASSETS&ARE&AT+RISK+
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2/10/14&
4&
NONPROFIT&ORGANIZATIONS&LEADING+LOSSES+
Donors& Failure&to&Disclose& DiscriminaMon&
Harassment/HumiliaMon& RetaliaMon/Whistle&blower&
Breach&of&Contract&
Failure&to&hire&or&promote&
Defense&Cost&&
THE&CHURCHES&&D&O+
&Master&Policy&&
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IMPORTANT&ITEMS&&
Limit&&$US25,000,000&per&claim/aggregate&&DeducMbles&&Individuals&US$0&OrganizaMon&US$25,000&&&
IMPORTANT&ITEMS&&ITEMS+NOT+COVERED+&
Insured&vs.&Insured& Dishonesty&
Professional&Liability& Medical&Services&
Professional&Services& Regulatory&Claims&
Sexual&Abuse/MolestaMon& AnM&Trust&
Bodily&Injury/Property&Damage&
Personal&Prot&
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2/10/14&
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SO&WHAT&IT&COVERED?&
Defense&Cost& UnintenMonal&Errors&
Breach&of&CondenMality&
Inaccurate&or&Inadequate&Disclosure&
Decisions&exceeding&the&authority&granted&to&a&company&ocer&
PREVENTING&LOSSES&
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2/10/14&
7&
OUR+CHALLENGE+
The&development&of&all&our&powers&is&the&rst&duty&we&owe&to&God&and&to&our&fellow&men.&&No&one&who&is¬&growing&daily&in&capability&and&usefulness&is&fullling&the&purpose&of&life.&
E.&G.&White.&Christs(Object(Lessons,&pp.&329k330&&
13&
OUR+CHALLENGE+
EecMve&governance&by&the&board&of&a&nonprot&organizaMon&is&a&rare&and&unnatural&act&
Taylor,+Chait+and+Holland+The&New&Work&of&Nonprot&Boards&
Harvard(Business(Review,&SeptkOct&1996&
14&
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2/10/14&
8&
++BOARD+EXCELLENCE:+ROLE+AND+FUNCTION+OF+DIRECTORS+
DUTIES+OF+BOARD+MEMBERS+&&
Care&
Loyalty& Obedience&
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2/10/14&
9&
THE+DUTY+OF+CARE+
Refers&to&the&level&of&competence&expected&
Common&standard:&&an&ordinary&prudent&person&
THE+DUTY+OF+CARE+
Duty&of&aMending&meeMngs&on&a®ular&basis&
Duty&of&exercising&independent&judgment+
Duty&of&being&adequately&informed&for&making&decisions&
Duty&of&being&acMvely&involved&in&the&oversight&of&the&organizaMondiligence&
Duty&of&risk&management&
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2/10/14&
10&
THE+DUTY+OF+LOYALTY+
Corporate&posiMon¬&for&personal&advantage&
Standard&of&faithfulness&to&the&organizaMon&
THE+DUTY+OF+LOYALTY+Contd&
Undivided+allegiance+when&making&decisions&Conict&of&interest&rules&
Awareness/disclosure/decision/documentaMon&
Duty&of&loyalty&breached&when&members&use&organizaTonal+property+or+resources+for&personal&purposes&
Maintaining&condenTality&of&privileged&informaMon&
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2/10/14&
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THE+DUTY+OF+LOYALTY+Contd& Loyalty&is&absolute&
Conict&of&interest&
Duty&of&fair&dealing&
Disclosure&of&material&facts&
No&AppropriaMon&of&corporate&opportunity&
DominaMng&directors&or&managers&
CondenMal&or&inside&informaMon&Cannot(talk(about(it(and(cannot(use(it(
No&Personal&advantage&
THE+DUTY+OF+LOYALTY&Contd+ Conicts+of+interest+
Corporate+opportunity+V+providing&the&organizaMon&to&
which&one&serves&as&a&Director&the&benet&of&opportuniMes&that&arise&that&would&enhance&the&organizaMon&as&opposed&to&assuming&these&for&personal&gain&or&for&the&benet&of&some&other&organizaMon&or&person&
CondenTality+V+it&is&inappropriate&for&a&Director&in&the®ular&course&of&business&to&disclose&informaMon&about&the&organizaMons&acMviMes&unless&they&are&already&known&by&the&public&or&are&of&public&record,&or&the&Director&has&been&requested&by&the&organizaMon&to&provide&the&informaMon&to&others&
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2/10/14&
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CONFLICTS+OF+INTERESTS+
WHAT+IS+CONFLICT+OF+INTEREST?+
General+Conference+Working+Policy+E+85V05+DenedConict+of+interest+shall&mean&any&circumstance&under&which&an&employee&or&volunteer&by&virtue&of&nancial+or+other+personal+interest,&present&or&potenMal,&directly&or&indirectly,&may&be&inuenced&or&appear&to&be&inuenced&by&any&moMve&or&desire&for&personal&advantage,&tangible&or&intangible,&other&than&the&success&and&wellkbeing&of&the&denominaMon.&
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2/10/14&
13&
BLACKS+LAW+DICTIONARY+DEFINES+CONFLICT+OF+INTEREST+
A&real&or&seeming&incompaMbility&between&ones&private&interests&and&
ones&public&or&duciary&duMes&
CONFLICT+OF+INTEREST+
Three&basic&rules:&&
&1.&&Declare&&
&2.&&Decide&&
&3.&&Document&
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2/10/14&
14&
CONFLICT+OF+INTEREST+
Cases&fall&into&three&categories:&!Require(disclosure((inconsequen=al)(!Require(prior(approval-!Prohibited-"Illegal("unethical(
WHO+CAN+HAVE+A+CONFLICT+OF+INTEREST?+
A. Board&Members&B. Ocers&C. Employees&D.
All&of&the&Above&E.
None&of&the&Above&
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2/10/14&
15&
INDEPENDENT+DIRECTOR+/+CONFLICT+OF+INTEREST+
Independent+Director+ A&structural&maTer&
Directors&posiMonal&relaMonship&to&the&organizaMon&
Conict+of+Interest+ An&episodic&maTer&
Directors&potenMal&for&bias&in&a&specic&decision&
SERVING+ON+MULTIPLE+BOARDS+
You&can&sit&on&two&corporate&boards&so&long&as&faithful&in&performance&of&duMes&
GCkWP:&&Because&of&common&objecMves&membership&held&concurrently&on&more&than&one&denominaMonal&commiTee&does¬&of&itself&consMtute&a&conict&of&interest&provided&that&all&the&other&requirements&of&the&policy&are&met.&
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2/10/14&
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CONFLICT+OF+INTEREST+REQUIRING+DISCLOSURE+
Serving&on&2&corporate&bodies&at&the&same&Mme&which&are&involved&in&the&same&transacMon&
Involvement&with&company&that&does&business&with&the&organizaMon&or&church&
Making&referrals&or&direcMng&purchasing&opportuniMes&to&business&in&which&you&or&family&have&an&interest&
FavoriMsm&in&employment&
Hiring,&salary,&work&responsibiliMes,&evaluaMons,&promoMons,&terminaMon&&
CONFLICT+OF+INTEREST+REQUIRING+PRIOR+APPROVAL+
Processing&signicant&nancial&interest&in&business&involved&with&the&organizaMon&
Lending&or&borrowing&funds&to/from&third&parMes&involved&with&the&organizaMon&or&the&organizaMon&itself&
Using&condenMal&informaMon&obtained&from&your&posiMon&on&the&board&
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2/10/14&
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CONFLICT+OF+INTEREST+PROHIBITED+Contd&
Cannot&derive&any&personal&prot&by&reason&of&posiMon&
Immaterial&whether&organizaMon&was&damaged&
Duty&of&good&faith&to&disclose&
TransacMon&may&be&authorized&
DiverMng&opportunity&away&from&organizaMon&to&self&
Buying&or&leasing&property&with&knowledge&that&
organizaMon&has&acMve&or&potenMal&interest&in&it&
Making&use&of&or&disseminaMng&informaMon&acquired&
through&organizaMonal&service&for&personal&prot&
CONFLICT+OF+INTEREST+
Is¬&an&accusaMon&
Does¬&imply&judgment&has&been&compromised&
Is¬&inherently&wrongissue&is&how&it&is&handled&
Is&a&potenMal&breach&of&obligaMon&to&organizaMon&
PotenMally&advances&ones&interests&in&a&way&that&is&harmful&to&the&organizaMons&integrity&or&mission&
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2/10/14&
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WHY+DISCLOSE+POTENTIAL+CONFLICTS?+
Allow&prevenMve&measures&for&actual&conict&of&interest&
Protect&individuals&in&cases&of&apparent&conict&of&interest&
Permits&systemaMc&way&of&managing&conict&
Increases&transparency&and&condence&for&consMtuency&
WHERE+CAN+WE+FIND+GUIDANCE?+
Statutory&provisions& Corporate&bylaws&
Corporate&policies&
CondiMons&imposed&by&third&parMes&Government,&banks,&funding&agencies,&etc.&
Church&Working(Policy(
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2/10/14&
19&
WHAT+TO+DO+WHEN+CONFLICTS+ARISE+
Disclose+in+wriTng+If&approved,&conMnue&acMvity&
Withdraw+from+the+decisionVmaking+process&No&voMng&No&parMcipaMon&in&consideraMon&No&discussion&No&presence&No&inuence&
CONFLICT+OF+INTEREST+
Possible+consequences&Unfavorable&press&coverage&Financial&loss&Criminal&prosecuMon&Civil&legal&acMon&Disciplinary&acMon&Loss&of&reputaMon&
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2/10/14&
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THE+DIRECTORS+DUTY+OF+OBEDIENCE&
THE+DUTY+OF+OBEDIENCE+
Making&sure&the&organizaMon&remains&obedient+to+its+purpose+and+role+(i.e.,&faithful&to&SDA&mission,&beliefs,&culture&pracMces)&
Duty&of&compliance&with&laws&
Obedience&to&the&Charter&and&Bylaws+
Fullling&commitments,&including&previous&ones&
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2/10/14&
21&
DIRECTOR+KNOWLEDGE+
Must&know&cornerstones&of&CorporaMon&Charter,&LeTers,&Patent,&Act,&ArMcles&of&IncorporaMon&Bylaws&
Understand&how&to&put&purpose&into&pracMceMission,&Vision&and&Values&
Constant&review&
DIRECTOR+DILIGENCE+ Exercise&care& Common&law&
Statutory&
Reliance&on&counsel&or&experts&
Reliance&on&ocers&and&employees&
Supervision&of&ocers&and&employees&
Duty&to&monitor&
Misuse&of&corporate&funds& Waste&
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2/10/14&
22&
DIRECTOR+DILIGENCE&Contd+
Act&in&best&interests&of&CorporaMon&
AcMve&involvement&
ATend&the&meeMngs&and&commiTees&
Review&the&documents&
Be&fully&informed&
Thoroughly&acquainted&with&purpose&and&policies&of&organizaMon&
Review&agenda&and&material&
Prepared&to&discuss&business&
Vote&on&all&maTers&
HOW+TO+FILE&A&CLAIM&EVMAIL:[email protected]&&PHONE:&301k680k6808&&FAX:+(301)&680k6878&&MAIL:+AdvenMst&Risk&Management&ATenMon:&Victor&Elliot&&12501&Old&Columbia&Pike&Silver&Spring,&MD&20904k6600&
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???+QUESTIONS+???+
THIS&POWER&POINT&PRESENTATION&AND&ANY&MATERIALS&DISTRIBUTED&ARE&FACT&BASED&GENERAL&INFORMATION&AND&
SHOULD& NOT,& UNDER& ANY& CIRCUMSTANCES,&
BE& CONSIDERED& SPECIFIC& LEGAL& ADVICE&
REGARDING&
A&PARTICULAR&MATTER&OR&SUBJECT.&PLEASE&CONSULT&YOUR&LOCAL&ATTORNEY&OR&RISK&MANAGER&IF&YOU&WOULD&LIKE&TO&DISCUSS&HOW&A&LOCAL&JURISDICTION&DEALS&WITH&ANY&SPECIFIC&CIRCUMSTANCES&YOU&MAY&BE&FACING.&
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