Page 8 - C&A's Nonprofit Board Guide

THREE LEGAL DUTIES OF THE
BOARD OF DIRECTORS

DUTY OF LOYALTY

T he Board of Directors should always act with the best interests of the
organization in mind and must not use organizational assets or information
towards personal gain. Members of the Board of Directors are also
responsible for hiring officers of the organization. It is the Board’s duty to ensure
that those in charge, particularly the CEO, are competent and able to oversee the
day-to-day operations of the organization. The CEO must also share the same
principles as the Board of Directors and be expected to act within the best interests
EACH BOARD MEMBER, IN ACCEPTING A POSITION
ON THE BOARD, AGREES TO CERTAIN DUTIES: of the organization. Pursuant to the duty of loyalty, Board members are required
to place the interests of the organization before their own. As such, all conflicts
THE DUTY OF CARE, THE DUTY OF LOYALTY, AND of interest should be properly disclosed and only entered into if they are in the
THE DUTY OF OBEDIENCE. best interests of the organization. Finally, it is the Board’s responsibility to evaluate
the effectiveness of the CEO, and where appropriate, other key members of the
DUTY OF (DUE) CARE organization’s management.

T his is the responsibility of Board members to ensure that the organization’s DUTY OF OBEDIENCE
assets are properly used and to supervise the organization’s actions
diligently. Members of the Board of Directors are responsible for setting he actions of the Board members should also reflect adherence to applicable
the foundation for the organization, and hence, to enable the organization to T laws and regulations as well as faithfulness towards the organization. This is
move towards greater sustainability. The duty of due care also covers the Board’s accomplished through the adaptation of policies which emphasize a strong,
responsibility to ensure that all activities undertaken by the organization are those ethical “tone at the top.” It is also closely related to the other two duties of the Board,
which help the organization move towards those future goals. The members of the whereby the ethical policies and the motion towards future sustainability also aid the
Board should also make themselves aware of the affairs of the organization to be organization to act in accordance with its mission as well as any laws and regulations.
able to identify any instances of misappropriation or fraud. Under the duty of care, Duty of obedience requires Board members to establish appropriate policies and
Board members are responsible to ensure a proper control environment exists; provide appropriate governance in running the organization. Board members should
to take the time to understand the operations, funding streams, and underlying have regular communication with the organization’s Corporate Compliance Officer
regulations; and to provide proper fiscal oversight. to ensure they understand risks and exposure within the organization.
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