5 Critical Steps Before Joining a Nonprofit Board of Directors

Joining a board of directors of a nonprofit organization can be an exciting and rewarding way to give back to your community, offering your time, talent and expertise to a cause you care about. But board membership shouldn’t be taken lightly. You will be looked on as a governing part of the company – and that comes with great responsibility. As a board member, you can be sued personally for any decisions the board makes, and your personal assets could be at risk as well.

Whether you’re new to board membership or a seasoned volunteer, it’s important to recognize the responsibilities and potential personal risks involved. Before accepting a board position, here are five essential steps to ensure you’re well-prepared.

#1: Understand Your Responsibilities

Board membership comes with significant responsibility. As a board member, you’ll be seen as a governing figure, which includes a fiduciary duty to the organization. You could be held personally liable for decisions made by the board, and in some cases, your personal assets may be at risk. Before joining, it’s crucial to understand the full scope of your role and responsibilities.

#2: Ask the Right Questions

Many people join nonprofit boards out of a passion for the cause, but it’s vital to approach board membership with a clear understanding of how the organization operates. Spend time with the current leadership and ask key questions such as:

• How are finances managed, and what checks and balances are in place?
• What is the organization’s long-term vision?
• How are fundraising efforts and donations handled?
• What is the organizational culture like? Are employees satisfied, or is there high turnover?
• Is this a working board, or is it more focused on strategic oversight?

These questions will help you determine if the organization is operating in a legal and ethical manner, which is part of your fiduciary duty as a board member.

#3: Know Your Expertise and Limitations

It’s important to fully grasp the scope of your responsibilities and ensure you have the skills to contribute effectively. For example, if you’re expected to evaluate financial strategies or investments, yet lack a finance background, this could lead to mistakes with serious consequences. Stick to areas where you can provide value and help protect both yourself and the organization from potential risks.

#4: Ensure Adequate Insurance Protection

Even the most diligent board members can face lawsuits. When you join a nonprofit board, you should receive details on the organization’s “Directors & Officers” (D&O) Insurance. This insurance is designed to protect individuals from personal financial loss if they are sued in their capacity as board members. It typically covers legal fees and damages, except in cases of fraud or criminal activity.

Make sure to review the D&O policy carefully to ensure it provides sufficient coverage for your needs.

#5: Consider a Personal Umbrella Policy

If the nonprofit’s D&O insurance is insufficient or unavailable, it’s essential to evaluate your personal risk tolerance. Consider speaking to your insurance broker about adding a Personal Umbrella policy to your coverage. This can provide an additional layer of protection in case you’re sued while serving on the board of a nonprofit. Personal umbrella policies often include coverage for volunteer activities, ensuring your assets are protected.

Final Thoughts

Before joining a nonprofit board, take the time to research the organization, clarify your responsibilities, and ensure you’re protected with proper insurance coverage. By doing your due diligence, you’ll not only safeguard yourself but also contribute more confidently to the organization’s success.

If you’re uncertain whether you’re fully protected while serving on a nonprofit board, set up a meeting with our nonprofit team. We are happy to do an assessment of your current coverages and help guide you through the process of ensuring you are protecting what you value most.