6 Ways to Evaluate Personal Risk Before Joining a Nonprofit Board

Insurance expert, Thomas Herendeen of Travelers Bond and Specialty Insurance suggests ways to assess your risk of liability before accepting the role of nonprofit trustee.

For many, joining a nonprofit board is an attractive way to give back. Not only do board members contribute to social change and help improve the lives of others, but their positions give them a say in how this work is done.

But beware: Not all nonprofits are a good fit. Some have tumultuous leadership fights, and some have questionable financial arrangements. Nearly two-thirds of nonprofit organizations reported an insurance claim involving its directors or officers in the past 10 years, according to a survey compiled by Towers Watson, a global human resources consulting firm.

To protect yourself, here are a few basic steps to take before joining a nonprofit board:

1. Understand what is expected of you as a board member, e.g., specific governance responsibilities, time commitment, meeting attendance, avoiding particular conflicts of interest, fundraising, etc.

2. Find out if there has been significant turnover among senior officers or board members in the past 24 months. This could be a sign of problems within the organization.

3. Try to attend a board meeting before formally committing, or speak with a current board member or the board chair to better understand the leader’s style and to see if the culture is a good fit for you.

4. If allowed, review all important financial documents — including budgets, financial reports prepared by the organization’s outside accountant, senior leadership salaries — along with corporate governance documents, to get a better sense for the organization’s financial position and the level of guidance provided to its board members.

5. Identify whether there is pending or past litigation or regulatory investigations, auditing issues, or internal disagreements that could influence your decision.

6. Find out if the organization carries directors and officers liability insurance, and understand the level of protection offered to the organization and to you as a board member.