Every director on the Board is there because you have elected them to be your representatives, your voice, to bring your concerns to the association, and to work on your behalf to put forward programs, initiatives and services that improve your professional lives.
To do their jobs, directors have group authority and a legal obligation to exercise that authority responsibly and effectively.
To that end, directors are subject to fiduciary duties imposed on them during their jobs as directors.
Fiduciary duties have existed and evolved throughout hundreds of years of the common law. They arise whenever you are acting on behalf of someone else in a professional capacity. You are likely familiar with the notion of these duties because real estate professionals are also subject to fiduciary duties when acting for clients. By the same token, directors are subject to the same fiduciary obligations because they are stewarding the organization's assets on someone else’s behalf—i.e. you.
The fiduciary duties
There are three fundamental fiduciary duties with which directors are expected to comply: the duty of Care, the duty of Loyalty, and the duty of Obedience.
Duty of care
Directors must exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Directors must exercise due diligence in making decisions, which means they have to pay attention and do their homework. They have to prepare properly, they have to have enough information that allows them to make an informed decision, they have to access experts when needed, and they have to actively participate at the board table.
Duty of loyalty
Directors must always place the interests of the organization and its members first and never use their position to further their own interests. That obligation boils down to 3 things—always act in the best interests of CREB® and its membership, avoid conflict of interest and respect confidentiality.
Always act only in the best interests of CREB® and the membership
Every action a director takes must be informed by nothing other than what is in the best interests of CREB® and the members as a whole. While effective directors listen to all affected groups, at the end of the day, the decision must be based on the best interests of the membership as a whole, not any special interest group.
And when a decision is made, loyal directors recognize that the authority of the Board is a group authority. Only the Board as a whole can make decisions. Individual directors have no such power. Directors should express their individual position in a debate, but when the Board has made a decision, each individual director is required to support that decision fully. They do not speak in opposition to the Board and do not take public positions that conflict with the organization's positions or policies.
Avoid conflicts of interest
A conflict of interest arises when the director’s personal interests and the organization’s interests are not aligned. Therefore, a director must never take part in or influence a vote where they have some form of personal or business interest.
Maintain confidentiality
Great directors recognize that everything said at the directors’ table is confidential. For boards to function effectively, directors must feel comfortable expressing their views on corporate matters honestly and freely, without concern that their conversations will be made public. Candor and honesty are critical to high-level decision-making. And you cannot have that if there is an ongoing fear that your discussions will be made public. It’s hard to imagine how a group can have a candid conversation if everyone worries that a group member will leak parts of the discussion.
Duty of obedience
This duty requires directors to be familiar with bylaws, policies and other governing documents, comply with their requirements, ensure that everyone else in the organization is also complying, and ensure that those documents are always kept current.
The bottom line is that those directors who are exceptional are the ones who understand fiduciary obligations and take active steps to always be compliant.
When members are looking at candidates to decide whom to support in an election, ask yourselves which people are more likely to embrace their fiduciary obligations in their work on the Board. Those are the ones that will excel on your behalf.
Written by Bill Harrington Governance Expert with tng Leaders
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