|  September 18, 2014  |  
Light Rain   50.0F  |  Forecast »

PHILANTHROPY IN ALASKA: Philanthropy through Board Service

Understanding what it means to be a board member of a charitable nonprofit

Renea I. Saade

Renea I. Saade

PHOTO: Stoel Rives LLP

Anthropologist Margaret Mead is well known for her statement, “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.” The board of directors for a nonprofit organization epitomizes this kind of group commitment to effect change. Donating one’s time to serve on a nonprofit board is a rewarding way to make a significant contribution to your community. While board members are often asked to make a financial commitment to (and help raise funds for) the nonprofit they are volunteering with, their non-monetary contributions can result in a greater impact.

 

Nonprofit Obligations

Nonprofits receive tax-exempt status and other similar benefits because they exist to serve the public. Nonprofits are created under state law and can remain in existence only if they comply with the requirements of the state law under which they were created as well as any applicable federal law. Every nonprofit must fulfill three preliminary obligations in order to be incorporated.

First, it must create “Articles of Incorporation” that spell out the purpose of the nonprofit and other preliminary information about the organization.

Second, the nonprofit must adopt “bylaws” that set out the detailed rules of how it will be governed.

Third, the nonprofit must create and maintain a board of directors. A board of directors is also referred to as a board of trustees. A board of directors is composed of individuals referred to as “members” or “directors” of the board.

The specific number of individuals on a board of directors will vary depending on the size and kind of the nonprofit involved, but most states require at least three individual members on the board, and many states have a cap on the number (the limit ranges from 15 to 21 members). Alaska Statutes § 10.20.086 confirms that Alaska follows the three-member minimum but does not place any restrictions on how many members can serve other than to require the size to be consistent with the rule set by the organization’s bylaws.

 

Board Responsibilities

While each board member usually has an equal voice and vote, the board is led by a chairperson or president. Other officer or executive committee member positions may also be required by law and/or the organization’s bylaws. Staff members of the nonprofit rarely serve on the board, and many states prohibit such a dual role because of the risk of a conflict of interest. Under Alaska law, an out-of-state resident may serve on the board of an Alaska nonprofit unless the nonprofit’s bylaws specifically require state residency.

Board members are usually community members who believe in the nonprofit’s purpose or mission and want to show their support by getting involved. As Stephanie Berglund, the CEO of thread (a nonprofit that connects Alaskans with information and training related to early childhood care and education), explains, “When a community member commits to board service, one shares his or her passion and engagement to carry out an organization’s mission.”

The responsibility for the day-to-day affairs of the nonprofit rests with the nonprofit staff members, but the board of directors manages and directs the organization’s affairs. This generally means the board of directors is required to ensure that the nonprofit’s mission remains consistent with the organization’s inherent purpose. A board of directors also clarifies the nonprofit’s specific mission, prioritizes its goals, develops strategies for achieving those goals and helps ensure that its programs are implemented and managed responsibly.

In order to work together, a board will meet on average once a month and discuss and/or vote on issues. In an effort to enable the board to address discrete issues efficiently, smaller committees are often created within the board to research, evaluate, analyze or work on a particular issue and report their findings, recommendations and/or activities back to the entire board. For instance, a committee may be created to recruit a chief executive officer or executive director for the nonprofit, or there may be a committee that is solely focused on fundraising for a particular need.

 

Fiduciary Duties

Many people refrain from serving on a board of directors for fear that service will expose them to personal legal liability. It is true that there are legal obligations referred to as “fiduciary” duties associated with board service. But the legal obligations are not that daunting and are consistent with what one would reasonably expect.

In general, a board member’s legal obligations or duties boil down to a requirement that the member exercise reasonable care and act in good faith when acting on behalf of or serving as a representative of the nonprofit. A board member also has duties of loyalty and confidentiality and must refrain from self-dealing. A board member must be willing to ask questions, review the information provided to the board by the nonprofit’s staff; be prepared to discuss, evaluate and decide issues when they arise; and ensure that the board is making educated, prudent and thoughtful decisions.

For example, not all board members need be certified public accountants, but all board members are expected to carefully review the financial data provided to them and speak up if the staff’s plans for future operations are not financially sound. To be effective and to fulfill one’s legal obligations, a member must be willing to actively serve on the board, not just passively sit on it.

 

Rewarding Experience

Board service is an incredibly rewarding experience. The time, energy and resources that a board member donates to an organization have an instant impact and often start a domino effect as others learn more about the organization through the board member. A board member is in an ideal position to expand the network of individuals, corporations, foundations and other groups that know about the organization.

A board member’s passion and support for the organization can inspire others to get involved. A board member acts as a steward for the organization, helping expand its reach and, hopefully, increasing its donor base.

As Ms. Berglund says, “Board members, as leaders in the organization, set the stage for other people to join the cause. Board member giving, at any level, is a true sign of a successful organization.”

 

Getting Involved

There is no shortage of nonprofits operating here in Alaska. Their missions are as diverse as the people who live here. Boards thrive when there is diversity among the members. If you have an interest in getting involved in board service, there is likely a nonprofit that addresses a cause or issue you are passionate about. There is no requirement that board members be working professionals or at a certain stage in life (although minors are usually unable to serve). There is likely an Alaska nonprofit that would welcome the skills, background and experience you have to offer. If you need help identifying a nonprofit that speaks to your interests, the United Way of Anchorage and The Foraker Group are great places to start, as both entities partner with a large number of Alaska nonprofits. A directory of various nonprofits is also available at www.nonprofitlist.org. So, do not hesitate. Get involved today. Together, we can effect change.

 

Renea I. Saade is an attorney with the Anchorage office of Stoel Rives LLP. She regularly assists nonprofit and for-profit corporations with their contract disputes and employment law needs. She is also a board member of YWCA Alaska (www.ywcaak.org). Renea may be reached at risaade@stoel.com. The foregoing is provided for educational purposes only. It does not serve as an adequate substitute for legal advice.

 

This article is a web exclusive to the December 2012 edition of Alaska Business Monthly.

Add your comment:
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement