Lawyers Serving On Nonprofit Boards

Pick a nonprofit scandal.  Generally a lawyer served on the board of directors. When reading about nonprofit scandals, my question is “Where was the lawyer?”  It often appears they were absent as a board member and a lawyer.

During a recent CLE program, I spoke on lawyer’s legal and professional responsibilities using the example of a troubled “hypothetical” nonprofit.  While lawyers  have legal training and experiences, they should understand their responsibilities and limitations serving as a board member.

Lawyers typically are recruited to a nonprofit’s board for two reasons. They are expected to provide free legal services and to raise funds.

During my presentation I asked:  “Who liked to provide ‘free’ legal services?”

Few lawyers raised their hands.  Not surprising since most practice law for their livelihood. Yet charging for their services during or after serving on the board may be problematic.

When asked “How many liked fund raising?”,  none raised their hands.  Few board members do!

Writing this blog raised a third unasked question:  “How many marketed their services to the nonprofit’s board members and stakeholders?”

Likely many would have raised their hand including me.  That’s what I sought joining my first board.  I didn’t foresee how my experiences might lead to my current practice and this blog.  But I digress.

Boards are responsible for managing the corporation’s affairs. Board members function as leaders and managers with specific legal duties to the corporation and its stakeholders.  They are a political participant in the board’s decisions. Other board members generally consider their advice as if a client in the lawyer client relationship despite the lawyer’s disclaimer if given.  Yet this professional relationship does not exist in the board context.

Further, the lawyer/board member may lack the requisite competency or knowledge;  professional independence; or ability to fulfill ethical responsibilities to a lawyer’s detriment.  Many seminar participants did not realize neither their malpractice insurance nor their D&O liability coverage may insure them for advice rendered while on a board.

Today’s nonprofits require professional expertise specific to the nonprofit sector which many lawyers lack.  Few lawyers have nonprofit training nor even fewer have an MPA degree with a concentration in managing nonprofits.

Nonprofits should use and budget for legal services with nonprofits as a core competency.   As a proactive advisor, legal services are always less expensive than “after the fact” damage control!

There is a simple solution for a lawyer. Choose your role!

If a lawyer wants to provide legal counsel,  don’t serve on the board. If they want to serve on the board, then don’t provide legal advice.  A simple choice, but one which a lawyer should make.

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About Marty Martin, JD MPA

Marty Martin, JD MPA, Martin Law Firm, Raleigh, North Carolina, provides legal, tax, and training services related to nonprofit, tax-exempt, and social enterprise organizations serving local, regional, state, national, and international constituencies. He works with them throughout their lifecycle including start up, operations and management, board governance, merger, and closing down. He is an instructor with the Duke Nonprofit Management, Intensive, and Advanced Certificate in Nonprofit Leadership programs. He is a BoardSource Certified Governance Trainer. Martin is affiliated with North Carolina State University's Institute for Nonprofits. Martin served for three years on the IRS Advisory Committee for Tax Exempt and Government Entities ("ACT"). He was awarded the IRS TEGE Commissioner's Award which "is the highest honor of the Tax Exempt and Government Entities Division, and the highest honor we can personally bestow" for his service. He received a Master in Public Administration (MPA) degree with a concentration in managing nonprofit and public sector organizations from the Harvard Kennedy School and Juris Doctorate (JD) degree from Western New England University School of Law. He completed advanced training in nonprofit organizations from: Harvard Business School's Initiative on Social Enterprise; Harvard Kennedy School's Hauser Center for Nonprofit Organizations; Duke University's Nonprofit Management Program; University of California Berkeley Haas School of Business; Center for Creative Leadership; BoardSource; and the TCC Group.
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