BOARD MEMBER'S DUTY OF TRUST

BOARD MEMBER'S DUTY OF TRUST

Now that the COMPLAINTS regarding the current principal is largely over,(am I right?) some are starting to wonder if the board of directors can learn from past mistakes and some concern that if the board will end up having too much power and abusive it. For everyone to have better understanding of not profit board member's duties discussed on the original post, I am copying a direct quote from Oregon Dept of Justice's "GUIDE TO NO PROFIT BOARD SERVICE" here; and concerned parents and teachers may use it as a good reference to see and judge if our board is acting ethically and legally in the future. Among others,

"---Understanding Your Responsibilities:
In carrying out board responsibilities,, the law generally imposes three duties of trust. They are regularly described as the duties of due care, loyalty to the corporation and obedience to the law.

1.DUTY OF DUE CARE
This responsibility generally requires that a director must discharge the duties with the care an ordinary prudent person in a like position would exercise under similar circumstances. --- Directors need not always be right, but they must act with common sense and informed judgment. To exercise this duty properly, boards must pay particular attention to the following:
-Active participation.
A director must actively participate in the management of the organization including attending periodic meetings of the board, evaluating reports, reading minutes and reviewing the performance of the executive director.
-Reasonable inquiry.
Directors should request and receive sufficient information so that they may carry out their responsibilities as directors. When a problem exists or a report on its face does not make sense, a director has a duty to inquire into the surrounding facts and circumstances. The director also has a duty to investigate warnings or reports of officer or employee theft or mismanagement.

2.DUTY OF LOYALTY.
Directors have a duty to give their undivided loyalty to the charitable corporation. Decisions regarding the organization's funds and activities must promote the organization's public purpose rather than private interest. Any potential conflict transactions should be scrutinized closely by the board with the realization that the public will predictably be skeptical of such arrangements. There are some general principles which will serve to guide boards faced with conflict of interest situations.
-Conflicts in general.
While transactions between the charitable corporation and individual board members, their families and businesses they own or operate should be avoided, they are not absolutely prohibited. Under certain circumstances, a contract or transaction between a nonprofit corporation and its director or an organization in which the director has a material or financial interest is acceptable. However, if the transaction is challenged, the director will have the burden of establishing that the contract or transaction is fair and reasonable, that there was full disclosure of the conflict and that the contract or transaction was approved by members or other directors in good faith... The board should only approve the transaction if it is clearly in the best interest of the charity.
-Written policy.
The board should establish a written policy for dealing with conflicts of interest. The policy should address disclosure of financial interest and withdrawal from discussion and voting by interested directors. Due to the sensitivity of conflicts of interest, the board may want to require that transactions benefiting a director may be approved only by a greater than majority vote. Also, requiring an annual disclosure by all board members of their business involvement with the nonprofit organization is recommended.
Loans. In general, a charitable corporation may not lend money to an officer or director. There is one statutory exception. The law allows loans for executive relocation expenses under certain circumstances...

3.DUTY OF OBEDIENCE.
Directors have a duty to follow the organization's governing documents (Articles of Incorporation and Bylaws), to carry out the organization's mission and to ensure that funds are used for lawful purposes. Also, directors must comply with other state and federal laws that relate to the organization and the way in which it conducts its business. For example, directors should be familiar with:
-Federal law.
Charitable corporations usually apply to the Internal Revenue Service for exemption as a tax-exempt organization. Corporations which fail to do so may have their income taxed at normal rates, and contributors to the corporate charity may not be able to deduct their contributions on their income tax returns.
-State law.
In general, charities must register and file an annual financial report with the Attorney General's office... A nonprofit corporation must also file an annual renewal with the Corporation Division of the Secretary of State's office.
-Mission and procedures.
Directors should be familiar with the organization's governing documents and should follow the provisions of those documents. Directors should be sure proper notice is given for meetings, that regular meetings are held, that directors are properly appointed and that the organization's mission is being accomplished.
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I am sure all the directors run for and serve in the Board 是真诚的,认真做事的. it is also critically important that all of them are fully aware of his or her rights and obligations, individually and as a team. So that unnecessary mistakes can be prevented while serving the NWSC.

June 15, 2007 3:35 AM