Duty Of Loyalty In Nonprofit Organizations

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Many members of the business community are involved in the not-for-profit sector, either as Executive Director of a charity or as a Board member or volunteer for a nonprofit organization. Generally speaking, most people get involved with charities because they believe in the mission of the organization and want to find a way to share their intellectual, spiritual, physical and/or monetary gifts with the community. This week’s post looks specifically at members of Boards of Directors. Although most people get into nonprofit Board service with nothing but good intentions, it is important for Directors as well as the organizations themselves to remember the legal obligations of Board members, which assume that the Director is always going to act in the discretion of the …show more content…

Whether it is an attorney, an accountant or an investment advisor, getting insight from an unrelated party will help an organization’s Directors fulfill their obligations. Duty of Loyalty: This precept declares that the members of the Board must act in the best interest of the organization ahead of themselves. Some professional firms have requirements of staff that they sit on a nonprofit Board; these constraints put employees in a bad position because they may be in danger of breaching the loyalty duty by joining the Board as a means to appease their employer and/or advance in their particular field. One organization that I ran into years ago had been the victim of a fraud by their former Treasurer. Years after that defalcation, they still had a trustee who owned a business that engaged in significant transactions with the nonprofit organization. The interaction between the organization and the trustee’s company appeared to be legitimate, but the appearance of the relationship was not ideal given the history of the organization. The duty of loyalty reminds me of a particular Calvin and Hobbes comic

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