Board of Director’s Training

1. Board of Director’s Training December 5, 2012

2. Board’s Ultimate Responsibility To ensure that the agency achieves its mission!

3. How is this accomplished?

4. Basic Responsibilities Organization’s Mission & Purpose Hiring the Executive Director Financial Oversight Resources Legal & Ethical Integrity/Accountability Organizational Planning Recruit Board Members/Assess Board Performance Enhance Organization’s Public Standing Determine, Monitor, & Strengthen the Organization’s Programs & Services Support the Executive Director & Assess Performance

5. Legal Responsibilities • Ensure the organization functions within the framework of – and in furtherance of - its mission • Resources are adequate and appropriately protected • Sufficient oversight

6. Questions to ask? • What kind of oversight am I expected to provide? • Fiduciary Responsibility • When and how can I be found personally liable? • Inactive in overseeing their charge AND consequently may have failed to adhere to the standards of fiduciary responsibilities. • How can I avoid, or at least minimize, personal liability? • Abiding by the 3-D’s AND not acting as a solo but a collective body.

7. Legal Responsibilities and it’s Relationship To the 3-D’s Duty of Care Requires the Board and individual board members to pay attention to the organization’s activities and operations Duty of Loyalty Requires board members to exercise their power in the interest of the organization and not their own interest or interest of another entity.

8. Legal Responsibilities and it’s Relationship To the 3-D’s (Continued) Duty of Obedience Requires board members to comply with applicable federal, state, and local laws, adhere to organization’s bylaws, and remain the guardians of the mission.

9. Questions to ask? Do we have a copy of our state laws, and are we operating in accordance with the statutes? Are the clauses in our articles of incorporation and bylaws consistent? Have we amended our legal documents if we have changed our mission, scope of activities, or major structures in any way? Who in our organization is responsible for keeping the legal documents? Is it easy to have access to them if we need them?

10. Managing Legal Liability Liability is closely tied to accountability. Most common reasons why Nonprofits get sued are: • Employment claims (hiring, firing, benefits) • Discrimination claims (employment, programs, volunteers) • Torts/negligence (injuries, theft) • Discrimination claims (employment, volunteers, programs) • Release of records (availability of agency’s records) • Defamation

11. If the board has NOT carried out its oversight duties adequately, it may get implicated in a lawsuit due to negligence of its duty of care obligation. The KEY to protection is a proactive, positive action. INDEMNIFICATION One party promised to protect another party from losses resulting from risks while carrying out specified duties.

12. Insurance Insurance coverage transfers the risk of liability to an independent third party – an insurance company. General Liability policy – cover negligent acts that result in property, personal, or bodily injury. Errors and Omissions policy – cover harm resulting from executive decision making. Bonding policy – protects from wrongful financial actions.

13. Director’s and Officer’s (D&O) policy – is an extension to other insurances. This is NOT a “one-size-fits-all” programs. • Entity Coverage – ensures the coverage available extends to the nonprofit as well as to directors, officers, and others. • A broad definition of “insured” – traditional D&O policies contain narrow definition of “insured” – limiting coverage to current directors and officers. A policy that is tailored to meet the needs of a nonprofit will contain a “broad” definition of “insured”. The definition “may” ensure coverage for the nonprofit, as well as current and former directors, officers, staff, volunteers, etc.

14. Director’s and Officer’s (D&O) policy (Continued) • Broad definition of “claim” and “wrongful act” • In addition to defining who is covered, a policy also defines what types of claims will be covered. Some D&O policies provide broad coverage for a wide range of claims….some policies restrict coverage to only “claims for money damages”…some policies provide coverage for defense of “administrative proceedings” (i.e. complaints filed with EEO or human rights commissions. A definition of “claims” should be spelled-out on the policy (i.e. civil, criminal, administrative, etc.)

15. Director’s and Officer’s (D&O) policy (Continued) • Coverage for a wide range of employment practices • First, it may be available under a commercial general liability policy. • Traditional commercial general liability policies specifically exclude coverage for employment-related events, but this is not universal. • It may be purchased as a stand-alone employment practice liability policy OR it may be included under a D&O as an endorsement to a D&O Policy.

16. Risks • Micro Manage • Refers to a board member who is paying too much attention to details AND is not focusing on the agency’s BIG picture. • Examples • Approving “individual” staff salaries • Verifying receipts and invoices • Participating in hiring and defining job descriptions (besides ED)

17. Key Areas of Board Service • Commitment • Teamwork • Ethics and Conduct • Willingness to Learn the Board Member’s Role

18. Risk Management Beginswith… ACCOUNTABILITY IDENTIFYING RISKS MINIMIZING THE LIKELIHOOD OF HARM

19. Board Members are expected to… Conduct themselves in accordance with time-honored legal principles emphasizing good-faith and the ever-governing term “reasonable” in relation to judgment and decisions.