In the nonprofit world, success often leads to growth, which in turn makes running an organization more complex. Few directors have unlimited time to dedicate to running a nonprofit. Instead, as complexity grows, the board inevitably will need to delegate tasks to staff. Done correctly, delegation can help the board become more efficient while still handling its obligations.
To delegate responsibly it is helpful to understand what a director’s legal duties are with respect to the nonprofit, its constituents, and each other. Any delegation needs to take into consideration the ways it will allow directors to continue to meet these minimum requirements:
- The duty of loyalty requires directors to place the good of the nonprofit above any personal or professional benefit they might receive in a transaction. Among other things, that means taking care to treat self-dealing transactions with care. Any delegation of authority needs to protect the organization against an indirect breach of the duty of loyalty, for example by granting an executive officer authority to enter into contracts that could create self-dealing problems.
- The duty of obedience puts directors on the hook for ensuring compliance with laws and regulations that apply to the nonprofit, as well as the nonprofit’s governing documents. When delegating authority to a non-director, the board must retain close oversight over compliance matters.
- The duty of care is probably the most important component of any delegation process. It requires directors to use independent judgment and analysis when they make decisions. Directors are obligated to do what is necessary to become informed about the issues surrounding decisions, which might include consulting with outside experts. Directors can breach the duty of care by not ensuring that adequate information flows to them from other parts of the organization, especially if the organization lacks adequate procedures for identifying and handling legal risk.
Given these obligations, the core elements of a delegation process become clear. Of course, every board and every organization will have its own goals for delegating board responsibilities. But these principles should apply in every case:
- Put the delegation in writing. An individual acting on the board’s behalf needs to be provided with explicit guidelines about the responsibilities involved and the limitations of the person’s authority.
- Practice continuous oversight. Just because a process has been delegated does not mean that the board no longer has responsibility for it. A delegation process needs to include formal reporting requirements that allow the board to have unimpeded insight into what is being done on its behalf.
The Church Law Center of California counsels religious and secular nonprofits on governance and risk management. Call us today if your organization has questions about how to responsibly devolve responsibilities below the board level. We can be reached at (949) 689-0437 or through our contact page.