Prospective board members take note! Joining a new board derserves careful consideration. Here are five essential questions any new board member should ask before joining a not-for-profit board.
1. Is your organisation incorporated/unincorporated?
This question is essential for any new board member as it will determine their level of legal liability if something goes wrong. Unincorporated organisations have no formal legal structure. As such, legal liability is held solely by the individuals that make up the organisation. By contrast, the incorporation of an organisation confers a separate legal status on the group which means that individual liability is therefore limited. Whilst both structures hold benefits and drawbacks it is essential that new board members are familiar with the organisation’s legal structure.
2. Can I have a copy of your Articles of Association and Memorandum?
Becoming familiar with the governing document of the organisation will give the new board member a firm understanding of the mission, objectives and governing methods of the organisation. It is essential that the prospective board member is knowledgeable and approves of its terms as it is they who are ultimately responsible for ensuring that it is followed at all times. As the document is legally binding, the pressure on the board to ensure that this happens is indeed significant. On this basis, the importance of becoming acquainted with the governing document of the organisation should not be underestimated.
3. Can I see the accounts?
It is the responsibility of the board to ensure that the organisation is always solvent and that its financial affairs are conducted properly. [ref]Velthuis, Sandra. (2008) Getting To Grips With Governance. The Wheel. p.36 [/ref] It is essential therefore that the prospective board member is clear on the financial situation of the organisation before joining. The current economic downturn and the subsequent tightening of funding means the board must ensure that finances are used wisely. Whilst the treasurer may be the one most adept at dealing with finances, it is more important than ever that every board member has a firm understanding of the organisation’s financial situation.
4. Do you have office holder and director insurance?
Director and Officer (D&O) Insurance protects against a breach of ‘duty’ by the directors and the officers. There is no standard D&O insurance that is applied across all boards in the not-for-profit sector; policies and level of coverage vary so it is essential that prospective board members are aware of their level of cover before joining the board. Be aware that D&O insurance is a claims-made policy which means that the insurance company provides remuneration for a claim filed during the policy period, even if the claim is based on an incident that occurred years before. [ref] Guidestar.co.uk ‘Nonprofit directors and officers insurance: the good, the bad the ugly’ [/ref]
5. How often do you meet?
Finally, the new board member must ensure they know exactly what is expected of them in terms of time commitment. A board will have a set amount of meetings per year and it is important that the amount of time the board member is willing to commit is compatible with the board’s schedule. As most board members have limited availability, scheduled meetings provide the only forum for the board to discuss issues and make decisions. As such, a board member who misses meetings will quickly fall behind on the latest developments within the organisation.
Written by Sophie O’Brien
Communications Officer, Boardmatch Ireland