Eileen Morgan Johnson Partner

1. Eileen Morgan JohnsonPartner Protecting Directors & NASSPNASSP Board of Directors OrientationJune 21, 2016

2. Role of the Board Attorney • Overview • Who is the client? • Attorney’s responsibilities • Working effectively with the NASSP attorney • Protecting the attorney-client privilege

3. Who is the Client? • Attorney represents NASSP • Board and ED/CEO can each be the client • In conflict between Board and ED/CEO, the Board is the client • In rare instances, when neither Board nor ED/CEO is acting in best interest of the corporation, the members or D.C. Attorney General could be the client • Who is the attorney? • All partners, associates and counsel of firm

4. Association/Attorney Relationship • Relationship defined by Board and ED/CEO • Attorney typically works with President, ED/CEO and Deputy EDs • ED/CEO and Deputy EDs establish procedure for authorizing other staff to communicate with counsel • Individual directors usually contact attorney directly under these circumstances: • Malfeasance • Fraud • Violation of articles, bylaws or policies • Otherwise, the director contacts the attorney through the ED/CEO

5. Responsibilities of the Attorney Attorney reports to the Board through the President and ED/CEO on any issues that should be brought to the Board’s attention Provides advice on governance and maintaining tax exempt status Provides counsel based on experiences with other clients Alerts Board to any potential claims or significant liabilities of NASSP

6. Attorney/Client Privilege • Communications between attorney and client are privileged • May not be disclosed in litigation unless • Privileged waived by NASSP; or • Privilege broken by disclosure outside of “control group” • Control group is: • Board of Directors • ED/CEO and Deputy ED • Select senior staff with “need to know”

7. Maintaining the Privilege • WARNING: Any disclosure outside the control group breaks the privilege • Do not forward emails or share documents marked: • “Confidential Attorney/Client Communication” • “Attorney Work Product” • Do not reveal substance of board discussions with attorney • Board discussions with attorney usually in executive session • Minutes reflect a discussion occurred but not substance

8. What Laws Apply to NASSP? Federal District of Columbia Virginia Other states where registered European Union (if sending emails to EU residents)

9. Order of Precedence State law – DC and VA Articles of Incorporation Bylaws Policies & procedures Parliamentary authority - Robert’s Rules of Order

10. Legal Compliance • Compliance with state and federal tax laws • Compliance with other laws • Fundraising • Licensing • Employment • Lobbying • Sales and use tax • Periodic reviews – regulatory and liability issues

11. Things to Avoid • “Excess benefit transactions” • Paying more than fair market value for goods and services • Penalties on those who receive excess benefit and everyone who approved it • Recipient – pay back excess + excise tax 25-200% • Directors who approve – 5% excise tax up to $20,000/person

12. Board’s Financial Responsibilities • Board (all) • Read financial material before board or committee meetings – note questions • Meet with auditor in executive session • Finance Committee • Approve and monitor budget • Regular reviews of financial statements • Audit Committee • Review the IRS Tax Form 990 and 990-T before they are filed • Engage an auditor • Finance & Audit • Address issues raised in management letter

13. Staying Out of Trouble • Meet duties of care, loyalty and obedience • Know the association’s business • Prepare and attend meetings • Know the governing documents • Oversight, not management • Protection in federal and DC laws • Protection in articles and bylaws (indemnification) • Insurance

14. Limited Liability • Limited liability means directors & officers are not personally responsible for all board decisions • Volunteers have limited liability under federal law • DC law provides greater limited liability but: • Volunteers must not receive compensation other than reimbursement for expenses • NASSP must maintain liability insurance • NASSP remains liable to the extent of its insurance

15. Indemnification What is indemnification? • Providing reimbursement for expenses of defending against a claim • Examples: employment claim, defamation • May also include the advancement of expenses • Must meet standard of care in DC law • Often covered by directors and officers insurance

16. Why Is Insurance Important? • Federal and DC volunteer immunity laws don’t cover • Gross negligence • Willful, reckless, flagrant, intentional or criminal conduct • Some employee claims, motor vehicle accidents • You may still get sued – covers defense costs • Insurance exclusions: • Defamation • Discrimination (other than employment) • Illegal acts

17. Insurance Requirements • Periodically review insurance coverage • Activities • Financial situation • General liability • Directors & officers liability • Board should document decision not to get coverage

18. Contact Information Eileen Morgan Johnson Partner Whiteford, Taylor & Preston, L.L.P. 3190 Fairview Park Drive, Suite 300 Falls Church, VA 22042 emjohnson@wtplaw.com 703-280-9271