Transcript
Page 1: Board of Director’s Training

Board of Director’s Training

December 5, 2012

Page 2: Board of Director’s Training

Board’s Ultimate Responsibility

To ensure that the agency achievesits mission!

Page 3: Board of Director’s Training

How is this accomplished?

Page 4: Board of Director’s Training

Basic Responsibilities

1. Organization’s Mission & Purpose2. Hiring the Executive Director3. Financial Oversight4. Resources5. Legal & Ethical Integrity/Accountability6. Organizational Planning7. Recruit Board Members/Assess Board

Performance8. Enhance Organization’s Public Standing9. Determine, Monitor, & Strengthen the

Organization’s Programs & Services10.Support the Executive Director & Assess

Performance

Page 5: Board of Director’s Training

Legal Responsibilities

• Ensure the organization functions within the framework of – and in furtherance of - its mission

• Resources are adequate and appropriately protected

• Sufficient oversight

Page 6: Board of Director’s Training

Questions to ask?• What kind of oversight am I expected to

provide?• Fiduciary Responsibility

• When and how can I be found personally liable?

• Inactive in overseeing their charge AND consequently may have failed to adhere to the standards of fiduciary responsibilities.

• How can I avoid, or at least minimize, personal liability?

• Abiding by the 3-D’s AND not acting as a solo but a collective body.

Page 7: Board of Director’s Training

Legal Responsibilities and it’s RelationshipTo the 3-D’s

Duty of Care

Requires the Board and individual board members to pay attention to the organization’s activities and operations

Duty of Loyalty

Requires board members to exercise their power in the interest of the organization and not their own interest or interest of another entity.

Page 8: Board of Director’s Training

Duty of Obedience

Requires board members to comply with applicable federal, state, and local laws, adhere to organization’s bylaws, and remain the guardians of the mission.

Legal Responsibilities and it’s RelationshipTo the 3-D’s (Continued)

Page 9: Board of Director’s Training

Questions to ask?

1. Do we have a copy of our state laws, and are we operating in accordance with the statutes?

2. Are the clauses in our articles of incorporation and bylaws consistent?

3. Have we amended our legal documents if we have changed our mission, scope of activities, or major structures in any way?

4. Who in our organization is responsible for keeping the legal documents? Is it easy to have access to them if we need them?

Page 10: Board of Director’s Training

Managing Legal Liability

Liability is closely tied to accountability.

Most common reasons why Nonprofits get sued are:• Employment claims (hiring, firing, benefits)• Discrimination claims (employment,

programs, volunteers)• Torts/negligence (injuries, theft)• Discrimination claims (employment,

volunteers, programs)• Release of records (availability of agency’s

records)• Defamation

Page 11: Board of Director’s Training

If the board has NOT carried out its oversight duties adequately, it may get implicated in a lawsuit due to

negligence of its duty of care obligation.

The KEY to protection is a proactive, positive action.

INDEMNIFICATION

One party promised to protect another party from losses resulting from risks while carrying out specified duties.

Page 12: Board of Director’s Training

InsuranceInsurance coverage transfers the risk of liability to an independent third party – an insurance company.General Liability policy – cover negligent acts that result in property, personal, or bodily injury.Errors and Omissions policy – cover harm resulting from executive decision making.

Bonding policy – protects from wrongful financial actions.

Page 13: Board of Director’s Training

Director’s and Officer’s (D&O) policy – is an extension to other insurances. This is NOT a “one-size-fits-all” programs.

Entity Coverage – ensures the coverage available extends to the nonprofit as well as to directors, officers, and others.

A broad definition of “insured” – traditional D&O policies contain narrow definition of “insured” – limiting coverage to current directors and officers. A policy that is tailored to meet the needs of a nonprofit will contain a “broad” definition of “insured”. The definition “may” ensure coverage for the nonprofit, as well as current and former directors, officers, staff, volunteers, etc.

Page 14: Board of Director’s Training

Broad definition of “claim” and “wrongful act”

In addition to defining who is covered, a policy also defines what types of claims will be covered. Some D&O policies provide broad coverage for a wide range of claims….some policies restrict coverage to only “claims for money damages”…some policies provide coverage for defense of “administrative proceedings” (i.e. complaints filed with EEO or human rights commissions. A definition of “claims” should be spelled-out on the policy (i.e. civil, criminal, administrative, etc.)

Director’s and Officer’s (D&O) policy (Continued)

Page 15: Board of Director’s Training

Coverage for a wide range of employment practices

First, it may be available under a commercial general liability policy.Traditional commercial general liability policies specifically exclude coverage for employment-related events, but this is not universal.It may be purchased as a stand-alone employment practice liability policy OR it may be included under a D&O as an endorsement to a D&O Policy.

Director’s and Officer’s (D&O) policy (Continued)

Page 16: Board of Director’s Training

RISKS

Micro Manage Refers to a board member who is paying too much attention to details AND is not focusing on the agency’s BIG picture.

Examples

Approving “individual” staff salaries Verifying receipts and invoices Participating in hiring and defining job

descriptions (besides ED)

Page 17: Board of Director’s Training

KEY AREAS OF BOARD SERVICE

• Commitment

• Teamwork

• Ethics and Conduct

• Willingness to Learn the Board Member’s Role

Page 18: Board of Director’s Training

Risk Management Begins with…

ACCOUNTABILITY

IDENTIFYING RISKS

MINIMIZING THE LIKELIHOOD OF HARM

Page 19: Board of Director’s Training

Board Members are expected to…

Conduct themselves in accordance with time-honored legal principles emphasizing good-faith and the ever-governing term “reasonable” in relation to judgment and decisions.

Page 20: Board of Director’s Training

Recommended