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."

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.

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.

Ready to form a nonprofit? Get Started Now

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.

Ready to form a nonprofit? Get Started Now
Liability of the Directors of a Nonprofit Corporation


Related articles

Can a 501(c)(3) Make a Profit?

A 501(c)(3) organization is a nonprofit that has made a special election with the Internal Revenue Service to be treated as exempt from federal income taxes. The formation and operation of these organizations is governed by both state and federal laws, which require that the business further a specific charitable, scientific, educational or religious purpose. This sets 501(c)(3) organizations apart from for-profit ventures, which are formed for the purpose of generating profits for their owners. Although nonprofits are not prohibited from generating profit from business activities, state and federal laws limit how these profits may be used.

California Law Regarding Nonprofit Board of Directors

In general, a nonprofit may adopt a set of written bylaws that govern the number, selection, management duties and grounds for removal of its directors, so long as the bylaws do not conflict with California law or the nonprofit's articles of incorporation. A nonprofit must have a board of directors, and all of the activities of the nonprofit are performed at the direction of the board.

The Responsibilities of the Board of a C Corp

A "C" Corporation is the standard form of a corporate entity; it is a separate legally taxable organization, which generally protects the shareholders from being personally responsible for the business’s liabilities. The board of directors is elected by the corporation’s shareholders to oversee the business. While the board does not manage the day-to-day operations, it is responsible for establishing the overall strategy for the business. The directors are fiduciaries of the shareholders, which mean that any actions they are authorized to take are subject to certain standards.

Doing the right thing has never been easier.

Related articles

The Right to Sue a Board Director

Although the board of directors of a corporation wields considerable authority over corporate affairs, shareholders are ...

The Role of an Executive Director of a Non-Profit Organization

The executive director of a nonprofit has numerous duties, the most important of which is carrying out the mission of ...

Nonprofit Articles of Incorporation in Florida

The Florida Not for Profit Corporations statute controls the formation of nonprofits operating in the state. A new ...

Can a Nonprofit Board Fire the Executive Director?

A nonprofit's success is often tied to the zeal of its primary representative: the executive director. The ED is ...

Browse by category
Ready to Begin? GET STARTED