Virtually every board with which I’ve consulted — and believe me, that’s a lot of boards — is proud to count a lawyer or two (sometimes more) among its membership. In these litigious times, there’s tremendous benefit in having legal eagles at the board table.
But is board service as good for attorneys-turned-board-members as it is for the organizations they serve? It all depends, says Dan Pennington, a blogger for Slaw, Canada’s online legal magazine.
Board work, although wonderfully rewarding, is also remarkably risky and especially so for “directors with specialized knowledge and expertise, such as lawyers, who are held to a higher standard of care.”
Pennington has jotted down a list of questions for attorneys to ask before signing on for a term of service with a nonprofit board. Bracket out the couple of queries that are specific to persons with a law degree, and this is a great list for any and all board recruits.
- How well do I know this organization? Does it engage in activities that have an especially high risk of attracting legal liability?
- What are my motivations for joining this board – business, personal, community service, etc.?
- Will I be able to devote my time and energy to ensure that I fully meet my obligations in this role?
- Do I understand the risks and responsibilities that come with directorship? Am I aware of the statutory and common law liabilities that I may be exposed to?
- Does my firm have a policy regarding its lawyers serving on the boards of charities and not-for-profits?
- Is the charity or not-for-profit organization a client of my firm? If so, does my firm have a policy regarding its lawyers serving on the boards of charities and not-for-profits that are clients of the firm?
- Will the charity or not-for-profit organization agree to indemnify me for liability arising out of my role as director?
- Does the charity or not-for-profit organization maintain directors and officers (D&O) insurance to protect me from personal liability arising out of my role as director?
- If so, what are the details of this D&O insurance? What policy terms, conditions and exclusions are likely to apply? What are the limits of liability per claim and in the aggregate?
- Is there an outside director liability (ODL) insurance policy in place that may respond to claims against me arising out of my directorship? If not, should I purchase such insurance, whether from the Canadian Bar Insurance Association (CBIA) or through my insurance broker?
- Is there any other insurance in place or optional coverage that may be purchased that may cover my activities as director? Have I consulted my insurance broker?
I join Pennington in commending these questions to anyone considering an invitation to board service — with or without a law degree. And don’t let the faith-based nature of an organization lull you into complacency. It’s wise to look at the risks before leaping into doing good.
Questions: Does worry about personal liability take the joy out of board work for you? Is God with you adequate coverage for the board or should faith-based nonprofits provide D&O insurance?