A3.2 Summary of the Legal Duties of a Board of Directors
The integrity of the board of an organization makes for effective and ethical governance. A board member’s failure to conduct herself in a responsible and legal manner could result in legal action against both the organization and the individual director. When a board member is acting in the interests of the organization, he is said to have a fiduciary relationship. The fiduciary obligations of board members include:
1) The duty to be loyal is a standard of faithfulness. A board member must give undivided allegiance when making decisions affecting the organization. This means that a board member can never use information obtained as a member for personal gain, but must always act in the best interests of the organization. Board members are accountable to the public.
2) The duty to ensure that all decisions of the board are lawful.
3) The duty to act honestly and in the utmost good faith.
4) The duty to act only in ways that are consistent with the central goals of the organization. Board members must ensure that board decisions are within the mandate set out in the constitution and by-laws, and work to exercise their authority fully, by attending meetings, carefully considering information, and taking seriously their decisions.
5) The duty to act with diligence and competence is commonly expressed as the duty of care that an ordinary prudent person would exercise in a like position and under similar circumstances. This means that a board member owes the duty to exercise reasonable care when he or she makes a decision as a steward of the organization.
6) The duty to respect confidentiality.
7) The duty to acknowledge any conflict of interest. Board members must not participate in matters where they may directly or indirectly benefit.