Download presentation
Presentation is loading. Please wait.
Published byJacob Longsworth Modified over 9 years ago
1
Presenter Fern N. Zappala currently serves as Special Counsel to the CEO for the American Society of Health-System Pharmacists, and handles selected legal projects for the organization. Prior to this position Ms. Zappala was the full time General Counsel/Vice President for ASHP for over 14 years, and has represented ASHP in various positions for a total of 28 years. Ms. Zappala holds a Juris Doctor from Catholic University, and a Master of Public Health and Bachelor of Science from the University of Minnesota.
2
To Ask a Question and Collapse Control Panel Type your question here Expand or Collapse
3
Board of Directors Roles and Responsibilities: Some Legal Fundamentals February 23, 2015 Fern N. Zappala, M.P.H., JD Special Counsel
4
Think Spring and Summer!
5
Disclaimer Any views or comments offered today are those of the presenter and should not be construed as the position of the ASHP. This presentation is designed to provide accurate information in regard to the topic covered. It is provided with the understanding that I am not providing legal services or advice. If legal services or other assistance is required the services of a professional person in your area should be sought. 5
6
Initial Thoughts Board service is voluntary, but……. Board members are accountable for their decisions Unknown ? 6
7
Objectives Recent Trends Related to Board Conduct Legal Overview of “Fiduciary Duties” Selected Areas that can give rise to liability for Directors Strategies for Avoiding liability 7
8
I. Recent Legal Trends for Board Conduct Know what your governing document say Document deliberations and decisions Active engagement of Board members Demand for greater level of accountability and transparency about governance and management practices by the IRS, DOL and Congress Active oversight and resolution of conflicts of interest “Google audits” 8
9
II. Legal Obligations Board members must meet certain legal and ethical standards of conduct in carrying out his or her responsibilities to the organization (grounded in state law) Legal Duties include : Duty of Care Duty of Loyalty Duty of Obedience 9
10
Duty of Care The Duty of Care - “Prudent Person” standard. What would an ordinary person in a like position do? A board member exercises reasonable and ordinary care when making decisions as a steward of the institution. Protect the assets/resources/proprietary information of the corporation through sound decision making. 10
11
Duty of Care (con’t) You fulfill the Duty of Care by: Attending all board meetings, committee meetings, etc Reading background materials and minutes Participating in the process of approval of major objectives of the Society - set the direction Overseeing the Society’s finances/resources, exercising good business judgment at all times Recruiting/hiring the CEO Reliance on Experts Ask questions 11
12
Case Study 1—Duty of Care Frank, an engineer, is highly regarded and well liked among his peers. Last year, Frank was elected to serve on the Board of the Society of Engineers. Frank shows up to all of the Board meetings, and is an all-around good natured guy. During Board meetings Frank spends the majority his time looking at his social media sites, and answering work e-mails. Frank rarely speaks up or asks a question, but always votes when the question is called on a given Board action. Is Frank fulfilling his duties as a Board member? Yes / No 12
13
Duty of Loyalty Duty of loyalty - be faithful to the organization and pursue the “organization’s best interests”. Put the interests and mission of the organization above self-interest or other external interests. Undivided allegiance to the organization. Minimizing and managing conflicts of interest. Maintain confidentiality of information. 13
14
Duty of Loyalty (con’t) You fulfill the Duty of Loyalty by: Compliance with policy and process on Conflict of Interest Participation in disclosures, and resolving perceived or actual conflicts of interest Assessment of activities involving board members to ensure there is no potential or perceived conflict of interest Maintaining the confidentiality of information discussed by the Board 14
15
Duty of Loyalty : Conflict of Interest Activities that may give rise to Conflict of Interest questions Participation in educational activities/programs Publishing opportunities Gifts, gratuities, and remunerations Requests to become board member of competing organizations or an organization in same class of trade Consulting arrangements within the same industry Participation in external focus groups and advisory boards Use of Social Media! 15
16
Case Study 2—Duty of Loyalty John was recently elected to the Board of Directors of a the American Society of Hair-Transplant Specialists (ASHS) specialty society that represents hair transplant specialists. After serving on the Board for a year John called the CEO of ASHS to tell her that that he had been invited to serve on the board of ACME Hair, Inc. The CEO informed John that per Board policy this would be considered a conflict of interest. John strongly disagreed noting that his service would help to strengthen ties within the industry. Is this a potential conflict of interest? Yes / No 16
17
Duty of Obedience Duty of Obedience : compliance with state and federal laws, and regulations Act only in accordance with organization’s articles of incorporation and bylaws, board policies Avoid negligence and fraud 17
18
Duty of Obedience You fulfill the Duty of Obedience by: Decisions or actions of the Board are consistent and lawful with the purpose and goals of the Society Ensure that policies and procedures are in place to meet legal requirements for organization’s operations (i.e. IRS, DOL reports, ERISA, etc) Provide copies of tax-exempt forms, federal reports and financial reports as necessary when requested or required. 18
19
Case Study 3—Duty of Obedience The Board of the American Bar Association, which is the largest membership organization representing bartenders, approved a one time “special assessment” for all active members in order to fund an advocacy program to enact a piece of legislation that could impact the work carried out by bartenders. A group of members objected to the assessment and filed suit against the Board for violation of the bylaws of the organization. Does this raise concerns ? Yes / No What steps should the board consider in this situation? What if the bylaws are unclear or silent about this type of assessment? 19
20
III. Areas of Legal Exposure for Nonprofits Apparent Authority Who speaks on behalf of the organization? Use of Technology and Electronic Communications Social Media Antitrust liability Contractual matters Maintaining Tax Exemption 20
21
IV. Minimizing Liability for Directors Education on roles and responsibilities as Directors Compliance with laws and governing documents Indemnification of Directors Providing Directors and Officers Insurance 21
22
Why is this important? Ensure the proper governance and direction of the organization Compliance with mission/exempt purpose Minimize risk of liability and claims against Boards for breach of fiduciary duties Shield members of the Board from personal liability for actions of the Board 22
23
23 Questions?
24
Other Resources ASHP website. www.ashp.org/stateaffiliateswww.ashp.org/stateaffiliates BoardSource. www.boardsource.orgwww.boardsource.org American Society of Association Executives (ASAE). www.asaecenter.orgwww.asaecenter.org Association of Corporate Counsel. www.acc.com www.acc.com Association Management Tips. www.rchcae.com/management-tips-templates www.rchcae.com/management-tips-templates24
Similar presentations
© 2024 SlidePlayer.com. Inc.
All rights reserved.