Q: As a sitting board member of an organization, can I be personally liable for the actions of the entity?
In a word, yes.
As a member of the board of directors, you assume certain fiduciary responsibilities.Failure to uphold the fiduciary responsibilities to the organization can cause the members of the board to be individually liable for the actions of the organization. Incorporated non-profits have similar benefits of limited liabilities that a corporation does, which means that the board members and officers cannot be held liable for the actions of the organization, unless they breach their fiduciary responsibilities.
Every state has its own definition of fiduciary responsibility, but generally they consist of:
- Duty of care – The Duty of Care means that board members and officers act with diligence and in good faith. In other words, they do what any ordinary, prudent person would do.
- Duty of loyalty – Loyalty means that board members must act in good faith and in the best interests of the organization, and placing the organization’s interests above their own; avoiding conflicts of interest and with full transparency.
- Duty of obedience – Board members and officers must work consistently towards the goals and mission of the organization, fully complying with the law at all times.
Have questions about your position as a board member or officer and your role and responsibilities? Contact a Zinner audit and assurance professional.