When Nonprofit Boards Come Calling

Look, I get it. An opportunity to sit on the board of a local nonprofit is finally yours for the taking. Better yet, it’s a charitable cause you strongly believe in, the opportunity will allow you to get you name out there, and one would expect that the new contacts made will lead to new clients down the road. Your desire is to accept because the bottom-line is you will be able to give back to the community in a meaningful way in exchange for the marketing and business benefits of your donated time. Works for me as long as you remember our ethical rules are in play and, as a director of a nonprofit, so too are certain duties.

Before discussing the consequences of accepting this opportunity, let me share one thought which can make life so much easier. Sitting on a nonprofit board starts to get messy when the attorney board member wears two hats. In a number of situations, the nonprofit is seeking attorney board members because the board hopes to have the attorney handle a little legal work on a pro bono basis. There is an obvious solution here that allows you to avoid so many of the issues I’m about to discuss.  Keep it clean. Say no to sitting on the board and offer to serve as outside counsel on a pro bono basis instead. The opportunity to give back to the community remains and you have not lost the marketing and business benefits of being involved with the nonprofit.

That said, the title of board member is enticing so let’s talk about the issues and we’ll start with your duties. The duties of an attorney-director are codified in some states and arise from common law obligations in others.  There are duties of care, loyalty, and obedience and be aware that the attorney-director will often be held to a higher standard than non-attorney directors due to the fact that he or she is an attorney. At its most basic level, the attorney-director must be willing and able to devote sufficient time and attention to the matters of the nonprofit in order to ensure that all duties and responsibilities are discharged in good faith. In addition, the director must always act in the best interests of the nonprofit as well as be obedient to the organization’s founding principles. Stated another way, directors of nonprofits can be sued by donors for failing to hold true to the nonprofit’s mission. I share all this because the decision to sit on a nonprofit board is one not to be taken lightly.

As a risk management and ethics guy, however, I’m more concerned about our rules of professional conduct and how they play out in this setting. At the outset, many of the concerns I’m about to discuss can be easily avoided if you limit your participation to serving solely as a director and commit to never giving the nonprofit any legal advice, other than perhaps identifying situations where legal advice should be obtained. While not completely risk free, this approach will help minimize the concerns.

Regardless, the reality is many attorney-directors will wear two hats by agreeing to serve as a board member and to provide legal advice and/or services to the nonprofit. The consequence of making this decision is that the issues of independence, conflicts of interest, and attorney-client privilege must now be addressed. We’ll start with a few questions. What if you are asked to put your attorney hat on for the purpose of taking an action on the nonprofit’s behalf related to an issue that you opposed while wearing your director hat? In short, how can you as an attorney-director maintain professional independence and responsibly voice objections while serving on the board of a client?  Navigating these waters can be problematic to say the least; but let’s cut to the chase. Never allow yourself to become a rubber stamp for the decisions of the board because sometimes what’s good for business doesn’t jibe with what the law requires.

Now let’s add conflicts into the mix. Can you vote as a director on your own legal advice? I would encourage you not to; but wouldn’t abstaining from voting as a director be a disservice to the nonprofit, particularly if this were to occur on a regular basis?  What if the board decides to sue another client of your firm? What if you make charitable donations to the nonprofit and shortly thereafter you are hired by the board? While having some type of conflict of interest policy in place with the board can help, and I would strongly encourage you to see this is done, it will be an imperfect solution.

And finally, the attorney-client privilege problem. As an attorney-director many of your conversations will include business and legal advice. How will others know when are you wearing your attorney hat and when are you wearing your director hat? While you may try to address the problem by specifically noting in board minutes that your advice is strictly legal advice, if non-privileged business advice is also part of the discussion, you haven’t accomplished much. Making matters worse, there can be confidentiality problems because outside donors may have certain rights to review the board minutes and/or non-attorney directors may disclose the communication for business reasons. Either way privilege is lost. This is why it is so important for the attorney-director to fully inform the client and the board of the potential risks relating to loss of privilege and this should always be done in writing.

Please understand that my intent in sharing this cursory overview of the risks associated with sitting on nonprofit boards is not about trying to talk you out of agreeing to do so. It’s quite the opposite actually. I would encourage you to participate if and when these kinds of opportunities arise. Speaking personally, I do believe that giving back to the community in this fashion is a wonderful gift for an attorney to give. All I am trying to do is to see that you are informed in order to help you make decisions about how to give back in a way that will hopefully garner the greatest rewards for all involved. Now that you know what you need to think about, go for it. Go out and make the world a better place. It really can be a fun gig.