Page 52 - Washington Nonprofit Handbook 2018 Edition

Directors are expected to use common sense and practical judgment; they
are not expected to be experts in every matter the board considers. In performing
his or her duties, a director may rely on information, opinions, reports, or
statements—including financial statements and other financial data—prepared or
presented by an officer or employee of the corporation whom the director believes
to be competent and reliable in the matter presented; professionals such as
attorneys, accountants, or others, if the matter is within that person’s expertise; or
a committee on which the director does not serve, if the matters are within the
committee’s designated authority. However, if a board member has a particular
expertise (e.g., accounting), he or she is expected to utilize this deeper knowledge.

Because the board is typically comprised of outsiders who do not participate
in the daily management and operation of the corporation, directors often rely on
staff or volunteers to provide them with information about the corporation’s
operations. Directors must carefully evaluate this information to ensure that
problems or potential risks or liabilities are not being withheld from or misrepre-
sented to the board.

b. Duty of Loyalty

A director must act with the best interest of the corporation in mind, and not
for his or her own personal benefit or the benefit of another person or
organization. Conflicts of interest, or potential conflicts of interest, should be
avoided. In the event that a conflict of interest is unavoidable, the conflict should
be disclosed to the board and the director with the conflict should abstain from the
discussion and the vote.

It is useful and is widely considered to be a “best practice” for a nonprofit
corporation to have a written conflict of interest policy. See Chapter 9. In addition
to providing a procedure for disclosing and resolving conflicts of interest, the policy
should require that each officer, director and key employee submit an annual
disclosure statement specifying such individual’s (and his or her family members’):

y Business relationships with any entity that contracts with the
corporation;

y Investments in companies from which the corporation obtains goods
or services, to which the corporation sells goods or services, or that
provides goods or services in competition with the corporation;

WASHINGTON NONPROFIT HANDBOOK -41- 2018