By Josephine Victoria Yam, J.D., LLM.
2017 May 2
Last week, B3 Canada and the Canadian Bar Association (CBA) jointly hosted the webinar “Lawyers On Board: What You Need To Know Before Serving on a Non-Profit Board”. I was thrilled to have governance legal experts, Angela Weaver and Patricia McLeod, join me as fellow panelists. We were so pleased to have more than 300 lawyers from across Canada participate in our webinar.
It is without doubt a very important question. After all, every board director has a fiduciary duty to avoid a conflict of interest. A conflict of interest arises when a board director stands to gain personally from a decision the nonprofit board is making. It arises for example when a person serves as a nonprofit board director while simultaneously providing professional services to that nonprofit - even if she is charging below-market rates. Or when a nonprofit is moving to a new office location and a board director recommends that the nonprofit move to a rental property that her family owns.
It is important to note that having a lawyer on a nonprofit board is not the same as having a lawyer on retainer with the nonprofit. A lawyer who serves on a nonprofit board may provide her opinion as a lawyer on the board. However, she should not provide her independent legal opinion as a legal counsel to the board. If the board requires independent legal advice on a matter, such as providing a legal opinion on a contract, the lawyer-board director should recommend that the board formally engage outside legal counsel for that purpose. To be prudent, the lawyer-board director should also have her recommendation recorded in the board minutes as well.
Here are several tips to avoid a conflict of interest when serving on a nonprofit board:*
Indeed, serving on a nonprofit board requires that each board director fulfills her paramount legal duty to “act honestly and in good faith, with a view to the best interests of the organization”.** This legal duty is crucial to good board governance that every nonprofit deserves from its board of directors.
Sources: * Boardsource, The Handbook of Nonprofit Governance), ** The Canada Not-for-Profit Corporations Act (CNCA), s. 148 (1)