Board Membership is Fun, and Dangerous

I’m past the grab-everything-you-can-to-keep-the-lights-on stage in my career (still working very, very hard, just not running around with my hair on fire) so there is a little more time in my schedule (not enough, but time). I’ve decided to use some of that time to give back to the community in the form of Not-for-Profit service.

This Picture Was Too Good To Not Use

After working on a few committees and speaking with some trusted advisers I have highlighted several organizations that have missions which really create a spark inside me.

So What…

So in my Not-for-Profit due diligence I have come across several other professionals with similar aspirations of joining a Not-for-Profit Board. After speaking with these individuals I realized what little understanding there is about the personal responsibility and liability that comes hand-in-hand with Board Membership.

Whoa… Liability?!

Yes, as an unpaid Not-for-Profit Board Member you are taking on an enormous personal liability.  You are liable for the decisions that you and your fellow Board Members make in regards to the welfare of the organization.  Ever vote, ever appropriation of funds you as Board Member can be held personally responsible for.

Claim Example (this is an extremely watered down version of what really happened)

A hospital was given a large donation for the creation of a specific program within the hospital.  There was an understanding when the donation was given between the donor and the Board that it would take a matter of years, approximately 5 to 10, before the program would be created.  The Board decided, without the approval of the donor, that they could invest the endowment and use the proceeds to fund other projects.  Other the course of time, like all things, the Board Members changed and the program promised to the donor of the endowment was never created.  30 years later, the donor now deceased, the donor’s son contacts the Board about his father’s endowment. The large sum is still officially listed in the organization’s financials but no one, not staff, not Board Members, no one is sure where the money really is.  BOOM LAWSUIT!

So How Do You Protect Yourself?

First, don’t join a board unless there is Director’s and Officers Insurance or (D&O as its known in the biz) in place.  D&O is going to be your first line of defense as a Board Member in this type of lawsuit.

Second, buy a Personal Umbrella Policy (I haven’t written an article on Personal Umbrella yet which means that is happening later this week). A personal umbrella policy is going to provide with at least $1 million in additional personal liability coverage above and what is provided on your Homeowners/Renter Policy.

These are the policies that are going to protect you from the decisions you make as a Board Member.  If your on a Board and don’t have this protection… Well, let’s just say that is Not a smart decision.

Disclaimer:

This article is for informational purposely only. There is no legal advice being suggested or proffered and the author assumes no responsibility or liability for the actions take or not taken by the readers based upon such information.

Thank you,

Ryan H.

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