When does a nonprofit director or officer owe loyalty to the organization, and just how much loyalty? The general answer is that by serving a nonprofit, directors and officers put on their “hat” (or role) to serve the nonprofit with faithful allegiance, continually, steadfastly, and without interruption except in the event of occasional conflicts that may arise. This article continues our series on the three fiduciary duties of directors and officers of a nonprofit corporation, focuses on the duty of loyalty.
You’ve been asked to serve as a nonprofit director or officer, or perhaps you are already doing so. What legal responsibilities do you take on as a director or officer? In legal terminology, these responsibilities are known as “fiduciary” duties, the first of which is the duty of care. Additional fiduciary duties of loyalty and obedience will be addressed in subsequent articles.
How does a nonprofit organization act? Why through its leaders, of course. But they do not – or at least should not – act without the board’s official approval on major decisions. In other words, the directors collectively “resolve” through their board – as the governing body – that the nonprofit shall take certain action. What do such resolutions look like, and where can they be found?