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Gut Check: Should You Resign from the Board? Part 1

Having made a career for over three decades cleaning up the legal messes of nonprofits whose board members didn’t take even fifteen minutes to understand their rights and duties, I could not resist the invitation of NBGR Editor Mary Hiland to write about this topic.

So, here are fifteen minutes worth of shock treatment. I’ll assume that you’re serving on a nonprofit board, because, in my experience, nonprofit practitioners often do. Even if not, chances are you advise boards, or at least know someone who serves on one.

A word of warning: I’m not going to pull punches. Better send the kids out of the room.

Gut Check

Ready for a gut check? Let’s start with your role. You are a board member. Think about that. A board member! Do you feel the weight of that? The responsibility?

You should. In the eyes of the law, the assets of the organization are held in trust, and you are a trustee. Have you ever heard the term “board of trustees”? It’s not just another way of saying “board of directors.” It’s literally true. Board members are trustees, whether the board is called “board of directors,” “board of trustees,” or “board of aardvarks.”

Let me reiterate, because it’s a critical point. Even if your organization calls your board the “board of directors,” and refers to you as a “director,” you are in the eyes of the law a trustee, with all of obligations of a trustee of a trust. Now do you feel the weight of your responsibilities? If not, there’s something wrong with you. Resign now. Join the golf or gala committee.

As a trustee, you are a steward. You and those who take up space next to you at the board table are ultimately responsible for the management of the affairs of the organization. That means that if you are, literally or figuratively, taking dictation from the chief executive rather than exercising your own judgment, you don’t understand your role. Resign. Or, if most or all of the board members sitting next to you are taking dictation, resign.

I’m not kidding about resigning. If you do not fully understand and take seriously your legal responsibilities as a board member—a trustee of the trust—you have no business serving on a nonprofit board. And if the majority of other members don’t understand their responsibilities, bad things can and will happen—and you do not want to be there when they do.

Still on the board? Okay, let’s continue.

You and the other board members, though ultimately responsible for the governance of the organization, are not expected, under normal circumstances, to manage the day-to-day activities of the organization. If you’re on a board that dictates the day-to-day affairs to the chief executive, or, worse, simply bypasses the chief executive in managing daily activities, you are quite possibly on a board that is failing to understand anything at all about healthy governance. Yep, you guessed it: resign. (Note: I’m not talking about teeny tiny new nonprofits that don’t have sufficient resources even to hire a chief executive; I’m talking about organizations that can and do have chief executives but simply fail, out of ignorance or design, to allow the board to function correctly.)

Since you are a trustee, you have a duty to at least understand the charitable purpose of the trust—the charitable trust, actually—that you oversee. Okay then, what, exactly, do the articles of incorporation say about the purpose? If you can’t pretty much quote it from memory, you’d better get a copy and take a look. If this is too much trouble, you’re not fit to serve on the board. Resign.

Still there, on the board? Okay then. Now that you have a firm handle on the organization’s charitable purpose, another gut check: Is your organization operating for the charitable or public purpose for which it was created? Or is it essentially operating as somebody’s business? Some of the most troublesome cases I’ve handled have been de facto family businesses organized as exempt organizations. If you are on a board that’s dominated by family members, resign.

Still there, on the board? Okay, let’s keep going.

Do you know how much your chief executive and other senior management staff members are being paid in total compensation—salary, bonuses, and benefits? If not, find out. As a trustee, it is your job to be a full participant in setting the CEOs compensation. You must ensure that it is reasonable in the context of the demands on the person, and that it is comparable to other similarly situated executives. If you encounter ANY insurmountable resistance to obtaining this information, resign.

Your Rights as a Board Member

As a trustee, to do your job, you have certain rights. The chief among them is access to information you need in order to make informed judgments about the organization and its operations. You may reasonably rely on information provided by the organization staff, board committees, and advisers such as its lawyer, accountant, investment advisers, and so on.

You have the right to be able to contact senior management and to review the organization’s books and records. You also have the right to contact and discuss organizational affairs with the organization’s principal advisers, including its lawyers, accountants, and auditors. The board on which you serve has a right, at the nonprofit’s expense, to engage the services of outside advisers when needed.

If you find yourself encountering resistance in your requests for information along these lines, and your reasonable attempts to explain why you are seeking it don’t resolve the issue, you are being prevented from doing your job. Resign.

In Part 2, I will look at the other side of the coin: your duties as a board member.

And please forgive me for having to state the obvious, but neither I, the editors, the staff or volunteers, nor CharityChannel LLC are rendering legal advice in this article, and no attorney-client relationship being formed. I have written in generalities, and I will tell you that there are plenty of exceptions to some of what I’ve written as facts and circumstances vary widely. You should consult with an attorney competent in the law of tax-exempt organizations on any important questions of law as they pertain to you or the organization you serve.

Stephen Nill

About the Contributor: Stephen Nill

Stephen Nill founded CharityChannel in 1992 as a means of connecting his nonprofit hospital chain’s fund development staff over the Internet to their colleagues at other organizations. That first discussion community grew into what is today the oldest and largest community of third-sector professionals in the world, comprised of well over 100,000 participants worldwide. He has been working in the US and international third sector for more than 30 years. He has served as the Chief Development Officer at a major Southern California university, the CEO of a large health care foundation, a vice-president of fund development of a U.S. west-coast nonprofit hospital chain, as a founder and acting director of development of a parochial school in his community, and as a founder of an organization dedicated to providing food and clothing for homeless persons in Southern California.

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9 Responses to Gut Check: Should You Resign from the Board? Part 1

  1. Norron Lee November 24, 2014 at 10:26 am #

    I have provided notice of my resignization as a board member to a 501 (c) 3 .

    In Massachusetts , notice must be sent to both the Secretary of State and the Attorney General offices and to the IRS.

    My question is: do I have to pay fee (s)? If so, how much and to whom?

    • CharityChannel Editors
      CharityChannel Editors December 1, 2014 at 4:22 pm #

      Norron, you are asking for legal advice, rather than discussing the article itself. We recommend seeking the advice of a qualified attorney.

  2. Nancy July 14, 2015 at 9:59 pm #

    Thank you for this insightful and valuable article. I have made referral to it several times over the last few months.

  3. Mitch August 27, 2015 at 12:23 pm #

    WOW after reading this I think I should really RESIGN from my position as a board member.. too many red flags.. problem is, I’m also hired by this organization and I don’t want to loose my job.

  4. Emma January 20, 2016 at 11:28 am #

    I have a question. What if you are a board member and you know that the founder of your organization who is also the CEO is known for having affairs inside and outside the organization? What do you do as a board member when you find out that although he has been spoken to, he may be doing it again? Btw, he is married. I am asking for a paper I am writing. I’d like to know your opinion on this and what is usually done in these types of scenarios.

    Liz

  5. Stephen Nill
    Stephen Nill January 20, 2016 at 2:46 pm #

    Great question, Liz.

    Conducting affairs with partners outside the organization does not seem to me to be anything that the organization’s board should address–unless the organization is one where it is particularly vulnerable to such conduct becoming known (for example, profamily Christian ministries).

    However, affairs with staff (if that is the case) can easily blow up, because an employee might feel pressured by fear of reprisal if things don’t work out (and usually they don’t, eventually). An employee can sue for sexual harassment, hostile work environment, and so on. In such a case, the board should make certain that it enacts a well-thought-out employee manual that sets out the ground rules for dating between managers and lower-level staff. If the founder resists the creation of such a policy manual, and prevails in resisting, then, were I a board member, I’d resign.

    If, on the other hand, the affair is with another board member, at least the two are of equal footing in the organization. A civil action such as that described above would not lie. However, such an affair can skew the dynamics of the governing board and lead to bad decision making–not to mention serious discord among board members. In such a case, it’s pretty unlikely that one can sit down with the two board members–especially where one is the founder/CEO–and get them to voluntarily break it off. In my case, I’d probably resign.

    I hope this is helpful. Please keep in mind that I’m speaking globally here and not, of course, rendering legal advice or attempting to address any particular real-world situation.

    • Stephen Nill
      Stephen Nill January 20, 2016 at 2:55 pm #

      Let me add that with this kind of scenario, the board should seek the advice of an attorney competent in the law of tax-exempt organizations or, perhaps, an attorney competent in labor law. The problem is that the founder/CEO might effectively prevent such a consultation, or interfere with it in some way. If that happens, I would resign from the board.

  6. mel November 16, 2017 at 1:34 pm #

    Thanks, I’ve recently joined a pretty dysfunctional board and this article confirmed every one of my reasons for drafting a letter of resignation today. Sigh.

  7. Stephen Nill
    Stephen Nill November 16, 2017 at 2:02 pm #

    Though I’m sorry to hear about the dysfunctional board, it can be dangerous to remain part of such a board if the board is not going to address its issues in a forthright manner. In case it’s helpful, a new book is out called The Intentional Board: Why Your Board Doesn’t Work … and How to Fix It, by M. Kent Stroman that is excellent. (To be transparent, I’m the publisher.) We also have a number of other books that can help boards get their act together. But first the lightbulb has got to want to be changed!

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