With the increasing demands of billable hours and outside commitments, it is tougher and tougher for young lawyers to find time to join nonprofit organizations as board members and take on board leadership positions. However, nonprofit corporations are searching for new and enthusiastic board members to bring energy and knowledge to their organizations.
As you develop your practice, you will come into contact with individuals who are members of nonprofit organizations’ boards or officers of nonprofit organizations. As discussed below, there are many great reasons to join nonprofit boards and several issues that you should address before deciding whether to join a particular nonprofit board.
Five Reasons to Join Nonprofit Boards
The first reason to join a nonprofit board is to use your talent and legal training to help a nonprofit organization. A board member of a nonprofit organization is an individual who is responsible for the overall governance of the nonprofit organization and ensuring that the mission and policies are followed. There are so many nonprofit organizations that need your legal expertise and ability to spot existing and potential issues. There are certain issues that may arise within the nonprofit organization that you will recognize as issues that need legal solutions. Your ability to spot these issues and address them in the manner that serves the best interests of the nonprofit organization is invaluable.
The second reason to join is the opportunity to meet potential clients. Not only will you be helping the nonprofit organization but you will also be working with other individuals who work for various companies. Being active on a nonprofit board provides you with the opportunity to demonstrate your talent and commitment to the nonprofit organization. In seeing your ability to help the nonprofit organization, other board members will provide your name when asked for legal representation — not only for the companies they work for but also to their friends and family members. A personal reference is always important in developing your practice.
The third reason to join is to develop experience in managing an organization. In addition, the most effective nonprofit organizations have a solid leadership team on the board. As you become more involved with the nonprofit organization, you will be presented with opportunities to be a board leader. These are great opportunities for you to work with the other board members to grow the nonprofit organization.
For example, I was recently elected president of a nonprofit organization. As president, I have been able to work with board members and community leaders on ways in which to build the nonprofit organization and to plan a signature fundraising event. Not only has this experience taught me the necessary steps to plan and prepare for a large event, it has also given me the opportunity to meet so many great people who are committed to helping our nonprofit organization.
The fourth reason to join is to increase your understanding of corporate concerns. The appreciation of the intricacies of corporations is helpful to both transactional attorneys and litigation attorneys in practice. In being a board member, you will see first-hand the issues that nonprofit — and for-profit — organizations face. Your knowledge on how to react and respond to these situations will prove to be very helpful when counseling your clients on similar issues. You will also have a new appreciation for the importance of good record-keeping and decision-making. Because a nonprofit organization cannot speak for itself, the board meeting minutes and resolutions must be clear, concise and reflect all actions approved by the board.
The fifth, but by no means last, reason to join is to allow you to expand your network of professional resources. You will come into contact with other individuals working with a nonprofit organization such as accountants, auditors, attorneys in different practice areas, doctors, consultants and bankers. When your clients ask for referrals, they will be appreciative of your ability to provide them with great resources. In turn, these professional resources will also be able to see the great work you do for the nonprofit organization for which you are a board member and will be able to recommend you to their clients.
Now that you understand the top five reasons why you should join a nonprofit board, it is also important to address the top five concerns before committing to joining the nonprofit board.
Five Concerns Before Joining a Nonprofit Board
First and foremost, before joining any board — for-profit or nonprofit — be sure that you are passionate about the mission of the organization. The mission of a nonprofit organization is the purpose for which the nonprofit organization exists. There are many nonprofit organizations looking for talented board members. You need to decide what causes you are passionate about helping and then join those boards. If you are enthusiastic about the mission, then you will be able to set aside time and resources to help the nonprofit organization.
The second concern that you should raise is whether the nonprofit organization has directors and officers insurance, commonly referred to as D&O insurance. D&O insurance is purchased by nonprofit organizations as liability insurance that is payable to the organization in the event of a lawsuit brought against the directors and/or officers of the nonprofit organization for actions taken in their capacities as directors and/or officers. You should ask for a copy of the D&O insurance policy statement. D&O insurance is needed for the personal liability protection of the board members and officers. When a lawsuit is brought against directors and officers, there can be significant costs associated with defending a lawsuit even if all actions taken by the directors and officers have been correct.
The third concern that you should raise with any board member or officer of a nonprofit organization looking for you to join that organization is to ensure that the nonprofit organization is in good status with the IRS and the state in which it was incorporated. In order to check on the nonprofit organization’s status with the IRS, you can view the IRS Publication 78 online (http://apps.irs.gov/app/eos/) to search for that particular nonprofit organization. You should also ask the board member or officer for a copy of the nonprofit organization’s IRS Determination Letter, Articles of Incorporation and any amendments and bylaws so that you can become more familiar with the organization.
The bylaws will help to provide you with additional information on how the organization is run. Also, check that the bylaws allow for the indemnification of a director by the organization. As previously mentioned, this is important in the event the organization is sued and you, as a director, are sued. The next step is to check with the Department of State website to ensure that the organization is active and in good standing. Most states have a searchable database for corporations formed within that state.
The fourth concern is to ensure that the nonprofit organization is fiscally sound. You can ask the board member or officer for copies of current financial statements and, depending on the size of the organization, the recent IRS Form 990s. The IRS Form 990s will have additional detail about the organization such as the types of spending that the organization has done on its various programs and the costs that it has incurred. This information will help you to decide if the majority of the money brought in by the organization is being spent on the programs that support its mission. Another excellent resource for helping you to evaluate an organization is GuideStar (www.guidestar.org). As long as the nonprofit organization provides it, GuideStar’s website contains revenue and expense information about the organization.
The fifth concern is whether the nonprofit organization has good governance policies and ensures that those polices are followed. Certain documents that are critical for any nonprofit organization to have are a conflict of interest statement, a document destruction and retention policy and a board manual.
The IRS requires that nonprofit organizations have and abide by a conflict of interest statement. The conflict of interest statement requires a director or officer of a nonprofit organization to report to the board any actual or potential conflicts of interest that would involve that officer or director. It is then the board’s duty to evaluate the actual or potential conflict and determine what is in the best of interest of the organization moving forward.
The second policy is a document destruction and retention policy. This policy is extremely important, especially if the nonprofit organization is collecting personal and health-related information about individuals whom it helps. There are numerous state and federal requirements regarding the length of time that documents need to be retained and also the manner in which documents collected need to be destroyed. As a board member, you need to ensure that this policy is followed very carefully by the nonprofit organization.
Finally, it is essential to have a board manual so that each board member has a copy of the organization’s articles of incorporation, IRS Determination Letter, mission statement, conflict of interest statement, document destruction and retention policy, and any additional policies and procedures in effect for the organization. By having a board manual, either electronically accessible by board members or in printed form, each board member will have a key resource to help in effectively governing the organization.
In understanding the reasons to join a nonprofit board, you will be able to appreciate the benefits that come along with board membership and the impact that you can make on worthy nonprofit organizations. In addressing the top five concerns before joining the nonprofit board, you can be sure that you will have a great experience as a board member of that nonprofit organization. •
Martha ‘Frannie’ Reilly is a part of the nonprofit organizations practice at Fox Rothschild and is based out of the firm’s Philadelphia office. She can be reached at 215-299-2784 or email@example.com.