Fiduciary Responsibility of a Presidential Officer for a Nonprofit

By Melanie Jo Triebel

The president of a nonprofit, like the president of a for-profit business, is legally required to act with special care towards the nonprofit. The president is a "fiduciary" of the nonprofit: an individual in a special position of trust who must not abuse that position. She functions as an employee and must act with a heightened standard of care known as a "fiduciary duty."

The president of a nonprofit, like the president of a for-profit business, is legally required to act with special care towards the nonprofit. The president is a "fiduciary" of the nonprofit: an individual in a special position of trust who must not abuse that position. She functions as an employee and must act with a heightened standard of care known as a "fiduciary duty."

Variations in State Law

The fiduciary duties of the president of a nonprofit are determined according to state law. Nonprofit presidents in different states may have slightly different duties; thus, it is important these individuals understand the specific requirements of their own state. There are three basic duties which are similar across most state lines: the duty of care, duty of loyalty and special charitable duties.

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Duty of Care

The duty of care is perhaps the most commonly known of a nonprofit president's fiduciary duties. A nonprofit president's duty of care means he must use reasonable care in doing his job on behalf of the nonprofit. He may rely upon information and opinion provided to him by experts, officers and others if he acts in good faith while doing so. He may also rely upon his own business judgment when he acts on behalf of the nonprofit, as long as there is a rational basis for his actions.

Duty of Loyalty

The president of a nonprofit also has a fiduciary duty of loyalty, which means he has a duty not to put his own interests (or any others) above those of the nonprofit. The president of a nonprofit cannot engage in self-dealing (transactions between himself and the nonprofit) or other conduct in which a conflict of interest exists without meeting strict standards of disclosure and fairness to the nonprofit. He also may not take for himself an opportunity that could be of use to the nonprofit, and he may not use information he learns in the course of his duties for his own personal benefit.

Special Charitable Duties

In addition to the duties of care and loyalty, which are shared with the officers of for-profit corporations, the president of a nonprofit may have a special duty to advance the nonprofit's charitable purposes. Referred to in some states as a "duty of obedience," this duty requires officers and board members of a nonprofit to strictly adhere to and advance the charitable purposes of the organization.

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Rules & Regulations for Non-Profit Associations in Pennsylvania

References

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