Introduction
The second fiduciary duty is duty of loyalty. As a board member, it is expected that your loyalty will be to the organization you represent. This lesson outlines the duty of loyalty and offers expectations for navigating conflicts.
Definition & Meaning
“Duty of loyalty means board members are expected to put the interest of the organization before their own personal and professional interests. It is a conflict of interest policy embedded in the nonprofit law regarding charitable board members. This duty is intended to make sure that the organization is foremost in decision-making by board members. That includes an expectation that board members recuse themselves if a vote could benefit them or their family or with which they have a conflict. The law expects loyalty to the organization first and foremost.
It is leading practice for organizations to have a formal conflict of interest policy. Board members complete a form each year disclosing conflicts, and a committee or subcommittee of the board reviews those forms and makes a recommendation of how the board should move forward.” https://boardsource.org/resources/legal-duties-nonprofit-board-members/
Board members are expected to:
- Vote in the best interest of the organization
- When voting, it is expected that the organization’s interest takes precedence over personal interest.
- Avoid conflicts of interest
- Transparency and objectivity when there is a conflict of interest
- Abstain when unable to resolve conflicts of loyalty
- Not request/receive money from the organization
- This does not apply to reimbursements.