Why you should think twice about board service — Part 3: What to do before you join (or course corrections to take now)
Up to this point I have covered in detail most of the key areas you need to consider before joining a board as an attorney, so are you ready to commit? Or maybe you’ve been serving for a while. Either way you are ready to take the next step — but what is the next step? Well, there are a few things you need to understand moving forward.
So What, Now What?
This board service business is risky. True. This is why your malpractice insurance provider asks you to disclose any boards you sit on — because this stuff is tricky. But that doesn’t mean we shouldn’t serve on boards. That’s clearly not in the best interest of the community and Rule 6.1 exists because we need to do things for the community.
So, how do you navigate board service if you decide to take it on?
The answer of course is to generate some paperwork.
- Draft a letter to the board that describes the capacity in which you will (or do) provide services to the nonprofit organization — i.e. Is your service limited to board service only, not legal representation; or board service with occasional legal advice with the reminder that your practice areas are X, Y and Z and that you will urge them to seek competent counsel as the need arises; or another option of your creation? The important part is communicating it and making a record.
- In your letter and anytime you are acting as the attorney, make it very clear that:
a. The client is the organization and not the individual board members.
b. Clarify that the attorney cannot provide legal advice to board members about their individual service on the board.
c. Put the board on notice that attorney-client privileged communication only happens when you are giving legal advice. Entire board meetings are not protected by privilege unless you are acting in your capacity as counsel giving advice and not as a general business advisor.
d. When giving legal advice at a board meeting, for example, state it for the record that the conversation is privileged and after the meeting verify that the minutes do not detail the substance of the discussion.
e. And (obviously) follow the usual procedures for obtaining a signed engagement letter laying out the scope of the representation — yes even if it’s pro bono.
3. If your intention is to serve strictly as a board member you should periodically remind the other board members of your limited role. For example:
a. Send an annual letter to the board reminding them about the nature of your service (a repeat of the letter above, basically, with any new additions needed).
b. As necessary, be vocal and suggest at any meeting that the board should consider retaining qualified counsel and review the minutes to make sure your comment made the record.
c. When needed, comment at any meeting when your advice on a topic reflects your business judgment and is not legal advice, and review the minutes to make sure the record is clear.
Do not — under any circumstances — join a board that doesn’t have Directors & Officers insurance. Many states nonprofit corporations act (such as my home state of Minnesota’s Chapter 317A) provides a liability shield for directors and officers acting in their capacity as directors. It also allows a nonprofit to indemnify its directors and officers. And most organizations with well drafted Articles of Incorporation will provide for this too. But…to be able to actually pay for the indemnification and defense, one either needs a very deep pocket or insurance. Don’t be bashful about requiring a board that is courting your service obtain a D&O policy before you join. You are doing their board a favor because they should have it anyway.
Of course you should have your own professional liability coverage as an attorney. But be aware that your malpractice insurance will likely not cover claims that arise out of your service as a director. So D&O insurance for the organization is important. Even so each insurance provider could try to argue its policy does not provide coverage — especially if the role being acted out in the moment was unclear.
What Else? Think Before Serving
Before you join — or right now if you are already serving — do your own due diligence about your board service.
- Talk to the board members. What is their expectation for board members in general and for you specifically? Do they have a giving requirement? Do they have legal needs they are hoping to fill with your big brain?
- Think about what conflicts are likely to come up. If they are serious reconsider board service.
- Read a copy of the organization’s Articles & Bylaws. Do they provide for indemnity? Do they have a conflict of interest policy? Are they extremely out of date or current? Consider getting a second opinion from a colleague who is a nonprofit law practitioner.
- Ask about Director’s & Officer’s Insurance. Do they have coverage? Can you see the dec sheet? What are the amounts and limits of coverage? What kinds of acts does it cover? Consider getting a second opinion from a colleague.
- Review your professional liability coverage, call your provider or review your policy to verify if pro bono legal services you provide are still covered by your insurance. Do they limit your coverage if you’re also a director?
Ethical matters and board service are tricky business. But my intention isn’t to discourage you from fulfilling your aspirational goals for pro bono work or your community or civic engagement efforts in your community. Rather, my aim is to help get your lawyer super senses tuned up to know what to ask questions about next time you are approached for board service or next time you face a legal issue at a board meeting. Taking on a nonprofit board role as a lawyer can be perilous but it can also be highly rewarding