does a lawyer have a higher standard of care when serving on a not for profit board?

Are lawyers who sit on nonprofit boards at greater risk than other board members? My answer is a qualified yes. While current law provides varying degrees of protection to members of nonprofit boards, this is subject to a case-by-case analysis and potential legislative or regulatory change.

Full Answer

Do nonprofit boards owe fiduciary duties to nonprofits?

The recent high-profile ouster of Southern Poverty Law Center CEO and Founder Morris Dees, and the resignation of Board Chair Richard Cohen, show how things can go awry when a board does not provide appropriate oversight. The board collectively, and directors/trustees individually, owe fiduciary duties to the nonprofit organization they serve.

Are non-profit board members liable for personal liability?

Although there are multiple types of potential liability for a non-profit corporation, board members are generally protected from individual liability by the business judgment rule discussed above and non-profit shield laws.

What is the business judgment rule for nonprofit board members?

If an organizational decision of a nonprofit corporation’s board turns out to be, in hindsight, a bad or even disastrous one, a board member that properly exercised his or her fiduciary duties will be able to use this fact as a defense against personal liability in the event of a lawsuit. This is known as the business judgment rule.

What are the duties of a non-profit board?

Board members have both a legal and ethical responsibility to oversee non-profit management and provide accountability. There are three categories of fiduciary duties. They are the duty of care, the duty of loyalty, and in some states the duty to act in good faith and in others the duty of obedience.

What are the 7 functional responsibilities of a non profit board?

Nonprofit Boards: 7 Key Responsibilities for Good GovernanceEnsure Effective Organizational Planning.Provide Sufficient Resources.Make Sure the Organization Fulfills Legal Obligations.Provide Proper Financial Oversight.Select and Evaluate the Executive Director.Improve the Organization's Public Standing.More items...•

What are an attorney's basic obligations to a client?

These principles include the lawyer's obligation zealously to protect and pursue a client's legitimate interests, within the bounds of the law, while maintaining a professional, courteous and civil attitude toward all persons involved in the legal system.

What does it mean to serve on the board of a nonprofit?

Board members are the fiduciaries who steer the organization towards a sustainable future by adopting sound, ethical, and legal governance and financial management policies, as well as by making sure the nonprofit has adequate resources to advance its mission.

Do lawyers get paid if their client loses?

If you lose your case, the lawyer does not receive any payment from you. However, whether you win or lose your case, you will have to pay some or all of the court costs and other expenses, which can be quite high.

What is the most common complaint against lawyers?

Perhaps the most common kinds of complaints against lawyers involve delay or neglect. This doesn't mean that occasionally you've had to wait for a phone call to be returned. It means there has been a pattern of the lawyer's failing to respond or to take action over a period of months.

What are the four responsibilities of lawyers?

It describes the sources and broad definitions of lawyers' four responsibilities: duties to clients and stakeholders; duties to the legal system; duties to one's own institution; and duties to the broader society.

What is the fiduciary responsibility of a nonprofit board?

Fiduciary duty requires board members to stay objective, unselfish, responsible, honest, trustworthy, and efficient. Board members, as stewards of public trust, must always act for the good of the organization, rather than for the benefit of themselves.

What is the benefit of being a board member?

Strengthen your professional credibility. This affiliation is one you can communicate and promote, and it can raise your professional profile among your peers, within your organization and across your industry. Your board affiliation can also enhance the brand and reputation of the organization for which you work.

How do you serve on a nonprofit board?

Steps in becoming a board memberIdentify an organization you're interested in serving. If you are already a volunteer in an organization, you might investigate the possibility of joining its board. ... Contact the organization. ... Exchange information. ... Understand the expectations. ... Moving forward.

What is a true retainer fee?

In a “true” retainer fee arrangement, in exchange for the client's payment of an agreed-upon amount, the attorneys commit themselves to take on future legal work for the hiring client, regardless of inconvenience, other client relations, or workload constraints.

How much do lawyers charge per hour?

What are Typical Attorney Fees. Throughout the United States, typical attorney fees usually range from about $100 an hour to $400 an hour. These hourly rates will increase with experience and practice area specialization.

How long is a lawyer retainer good for?

A lawyer cannot claim the retainer fee until they have completed work and provided an invoice to the client. The retainer is still the possession of the client until used for legitimate expenses as detailed in the retainer agreement. The amount in the trust account will not expire.

Why do lawyers serve on boards?

For every year a lawyer serves on a board they should be prepared to make a significant financial contribution and participate in the nonprofit’s fundraising activities. An attorney can best fulfill their board fiduciary responsibilities if they treat their organization and board service like one of their clients.

Why do lawyers help nonprofits?

Lawyers often have the experience and understanding to help a nonprofit think through risk-related issues. Conflict on a board will arise especially when challenging core assumptions (“sacred cows”). A board’s social nature seeks to limit, if not eliminate, conflict engendered when members assert fundamental differences.

How many hours do lawyers spend on board?

Lawyers on average should spend several hours per week on board business.

Can a lawyer be covered by malpractice insurance?

If they engage in practicing law on behalf of the organization while serving on the board and a lawsuit is filed, they may not be covered by either their malpractice or the nonprofit’s insurance. Throughout their service lawyers remain bound by their code of ethics and professional responsibility for which they may be accountable for their actions.

Should a board member receive an audit report?

Every board member should monitor financial reports on a monthly basis and review them thoroughly before board meetings. The board should receive an audit report without the executive director or senior managers present and make certain actionable recommendations are implemented.

Can a board ignore dissenting members?

Boards may ignore or, worse, affirmatively shut down or eliminate dissenting members, thereby creating a perilous “group think” phenomenon. A lawyer’s experience in addressing conflict, especially through mediation skills, can be invaluable to make certain all sides of an issue are heard and considered.

Why You Should Attend

Resourceful non-profit organizations frequently ask lawyers to join their boards, hoping to obtain free legal advice or a “lawyer’s perspective” on various aspects of running and governing the organization.

What You Will Learn

Questions to ask an organization (and yourself) before committing to board service (checklists provided)

Who Should Attend

Attorneys who serve or are interested in serving on a non-profit board and want to understand related obligations and ethical issues would benefit by attending this accredited continuing legal education program from ALI CLE.

What is the liability of a non profit board member?

Although there are multiple types of potential liability for a non-profit corporation, board members are generally protected from individual liability by the business judgment rule discussed above and non-profit shield laws. However, individual board members can be held personally liable for actions of the non-profit corporation on whose board they sit. Thus, in order to provide board members with peace of mind, and to minimize risk, non-profits should carry Director and Officers (D&O) insurance, and educate board members and the CEO regarding areas of potential liability. A non-profit board member may be liable if he/she personally causes injury to someone; if he/she personally guarantees an organization bank loan or business debt; if he/she fails to ensure that the non-profit pays taxes due or files tax returns; if he/she does something intentionally fraudulent or illegal that causes injury or harm; or if he/she holds or combines his/her personal funds with organizational funds.

What are the duties of a board member?

There are three categories of fiduciary duties. They are the duty of care, the duty of loyalty, and in some states the duty to act in good faith and in others the duty of obedience.

What is the business judgment rule?

Business Judgment Rule. When an organizational decision of a nonprofit corporation’s board turns out to be, in hindsight, a bad or even disastrous one, a board member that properly exercised his or her fiduciary duties will be able to use this fact as a defense against personal liability in the event of a lawsuit.

What is the fiduciary duty of obedience?

The fiduciary duty of obedience means that the board has a responsibility to ensure the non-profit is abiding by the purpose of its activities as stated in its application for IRS tax-exempt status and is complying with all state and federal laws. For example, board members must have knowledge of, and ensure that they are paying all required taxes in a timely manner and timely filing all required annual state and federal tax returns. Although non-profits are exempt from income tax, they must pay all applicable state and federal employment taxes, tax on unrelated business income, property taxes, etc. Most importantly, a failure to file the IRS 990 return three years in a row may result in revocation of tax-exempt status. Moreover, boards must follow the dictates of the Uniform Prudent Management of Institutional Funds Act when deciding upon investment decisions and managing endowment funds.

What is fiduciary duty?

In essence, exercising fiduciary duties means that board members have a duty to act with care and in the best interest of the organization and remain loyal to its mission, as opposed to acting in their own interest or the interest of the CEO/Executive Director they supervise.

What is good faith in a corporation?

The concept of good faith generally requires that directors act honestly, with faithfulness to their duties and obligations, and not attempt to take advantage of the corporation. A director or officer is not acting in good faith if the director or officer has knowledge concerning the matter in question that makes reliance on another person unwarranted.

What is the duty of loyalty?

The fiduciary duty of loyalty of board members is the responsibility to act in the interests of the non-profit, those it serves, and those donating funds for operations, as opposed to their own self-interest. Again, the presence of written controls that are routinely practiced are very important to minimize risk.

What is the role of the chair of the board of directors?

At the core of the chair’s duties, he or she generally presides over meetings of the board, collaborating with the chief executive to create a purposeful agenda and to set priorities, and helping to ensure sound ...

What is a good chair?

A good chair understands the importance of creating a fruitful and supportive partnership with the organization’s CEO, who is separately charged with managing the organization and effectuating the board’s direction. (For more information about the differences between the chair, the president or executive director, and who serves as CEO, ...

Do nonprofits require a chair to vote?

Some nonprofits require that the chair not vote on matters before the board except to break a tie. While this may take into account the chair’s role as a facilitator, in order for the chair to meet his or her fiduciary duties as a director, he or she should vote on all matters before the board.

Can a chair of a board of directors second guess a decision?

It’s also unclear whether a chair would get the benefit of the business judgment rule, which generally provides that a court will not second guess the decisions of a board member as long as they are made in good faith, with reasonable care, and with reasonable belief that the board member is acting in the best interests of the corporation.

Do officers and directors align?

Commonly, the term of an officer and the term of a director do not align. For example, if a director with a 3-year term is elected as chair in her third year as a director, and the chair position has a 2-year term, the director will have to be re-elected as a director the following year (assuming there aren’t consecutive term limits ...

Can a board chair be a director?

Board Chair as a Director. While the law may not require that the chair also be a board member, the bylaws of an organization should make clear that the chair must be a board member. This is necessary for the chair to preside over board meetings, including when the board enters into executive session. Some nonprofits require that the chair not vote ...