Blog

« Blog home

Volunteer Board Member

My younger brother, a writing professor at Columbia University, called me in a panic earlier this week. He serves on the board of his building’s homeowners’ association on a volunteer basis. He told me that someone did not like a decision the board had made, and had threatened to sue the board members personally.
I have handled several lawsuits on behalf of officers and directors of nonprofit organizations, and I wished that I had given him advice to help my brother (and others) decide whether they would like to volunteer as an officer or director for a non-profit organization. Here is my top 4 list of considerations:
1. Determine if the non-profit organization is incorporated.
The organization that you serve should have completed its incorporation. Many states, including Texas, provide special protections for incorporated non-profit directors. For example, a plaintiff suing a non-profit director in Texas must show gross negligence – that is that the director almost intentionally acted – before that plaintiff can recover against the director.
2. Request and review the non-profit organization’s bylaws.
A well-organized and formed non-profit should have adequate bylaws that the organization follows, and should have a copy handy to provide a potential director. The bylaws should provide that the organization shall indemnify its directors- “indemnify” means the organization will cover any attorneys’ fees or resulting judgment or settlement – in the event that the directors are personally involved in a lawsuit by reason of their service on the board.
3. Determine if the non-profit has obtained insurance coverage for its directors
Insurance carriers offer special insurance coverage for directors and officers of corporations – including non-profit corporations. This insurance usually covers legal fees and ultimate settlements or judgments for the non-profit’s directors and officers. It is also prudent to review the scope of the coverage of that insurance policy.
As an aside, if you are serving as a non-profit director and someone has threatened suit, notify your insurer immediately.
4. Determine if you have the time to take your role as a director very seriously.
Many people believe that the role of a non-profit director is passive; however, that can cause legal difficulties.
Non-profit directors owe the corporation duties of care, loyalty, and obedience.
The duty of care requires that the director oversee the operation of the non-profit and to actively disagree with the management of the organization when appropriate. The directors must inform themselves of enough information to make good decisions, and cannot operate like an ostrich with their heads in the sand. This is sometimes difficult, especially when the director was nominated or appointed by that same management.
The duty of loyalty means that directors act only in the best interest of the organization, and not their own, and cannot benefit themselves.
The duty of obedience requires directors to know the organization’s mission and to carefully work toward that mission while following the law.