The Responsibilities of Service.

Welcome to the ICHANGE Board Application

On behalf of ICHANGE, we appreciate your desire to lend your expertise, skills, and wisdom — with shared leadership principles — to bring our vision to fruition. Thank you for your interest in joining our board. We know that those with a desire to support ICHANGE in a leadership volunteer role have many choices. In our community, there are an array of remarkable organizations engaged in the important work of making our world a better place. We are truly humbled knowing that you are interested in dedicating your time, talent, and passion.

The application offers us an opportunity to get to know more about you — your unique skills, attributes, and what you would bring to the ICHANGE Board of Directors. It also gives you a clear sense of what matters most to us in any board candidate.

The ultimate goal of our selection process is to determine if we are a great fit for each other. We want to understand your level of commitment and ability to deliver on our expectations so that we can confidently work together to increase the scope, reach, and impact of our programs. Equally important, we want to know what motivates you and how you envision the growth of ICHANGE, ensuring we create an excellent, fulfilling board experience for you.

Thank you again for your deep interest in our work and for taking the time to complete this application with thought and care. We look forward to reviewing your responses with that same level of care and to continuing our conversations.

Board expectations

The Board as a whole

Our mission is to care for and improve the cognitive, emotional, and behavioral well-being of community members while addressing the social determinants of health, according to state and federal law. As the governing body of ICHANGE — and to satisfy its fiduciary duties — the board is responsible for:

• Completing Board orientation
• Guiding the overall structure of ICHANGE programs and services so they are conducive to the mission and goals
• Selecting and evaluating the performance of the Services / Assistant Director
• Strategic and organizational planning
• Ensuring strong fiduciary oversight and financial management
• Fundraising and resource development
• Approving and monitoring ICHANGE programs and services
• Enhancing ICHANGE’s public image
• Assessing its own performance as the governing body of ICHANGE

The Board member

Each individual board member is expected to:

• Know ICHANGE’s mission, policies, programs, and needs
• Faithfully read and understand the organization’s procedures, intern and independent-clinician documentation
• Serve as an active advocate and ambassador for the organization and fully engage in identifying and securing the financial resources and partnerships necessary for ICHANGE to advance its mission
• Leverage connections, networks, and resources to develop collective action that fully achieves ICHANGE’s mission
• Give a meaningful personal financial donation
• Help identify personal connections that can benefit the organization’s fundraising and representational standing and can influence public policy
• Prepare for, attend, and conscientiously participate in board meetings
• Participate fully in one or more committees

Board members are also expected to

• Maintain a passion and sense of ethics for the community we serve
• Follow ICHANGE’s bylaws, policies, and board resolutions
• Sign an annual conflict-of-interest disclosure and update it during the year if necessary, as well as disclose potential conflicts before meetings and actual conflicts during a meeting
• Serve a term of office of two years, or until a successor is elected and qualifies. The intent is that one-third of members shall be elected each year.
• Reflect equitable representation of the population demographics in the service area — a good-faith effort will be made to recruit board members from each county; however, the most important element of board membership is demonstrated interest in the mission of ICHANGE. Eligible Board members shall be at least twenty-one (21) years of age and be responsible members of the community.
• Include board representation of the community, including minorities, at least one consumer of mental health services and one family member of a child with an emotional disturbance
• Ensure that no more than forty percent (40%) of the Board’s members shall be providers of mental health services

Board responsibilities A–J

1. A. Acting as liaison for the service-area community — communicating community needs to the Board and communicating behavioral-health needs to the community ICHANGE services.
2. B. Fulfilling the duties expected of that office, when elected to a Board office.
3. C. The Board will approve in advance the signing of leases, single purchases, renovations, and independent contractors; will approve applications for grants and fundraising campaigns; will approve the addition or deletion of programs; and will review all new leases and contracts quarterly.
4. D. The Board will approve the selling, retiring, and leasing of all fixed assets and all other assets with a purchase value of $5,000 or more, and will ensure that assets will not be sold, transferred, or liquidated for less than adequate consideration, unless such sale, transfer, or liquidation is with the written permission of the Founder.
5. E. The Board will set policies and guidelines for the Corporation.
6. F. Executive Director of Clinical Services:
   1. (i) Preside at all quarterly and special meetings
   2. (ii) Approve all expenditures, subject to approval of Board of Directors
   3. (iii) Perform such other duties as pertain to the office
7. G. Assistant Director of Clinical Services:
   1. (i) Preside at all meetings in the absence of the Director and assume the duties and powers of the Director in that officer’s absence
   2. (ii) Assume the duties for the unexpired term of the Director upon the resignation or removal of that office
   3. (iii) Perform such other duties as pertain to the office
8. H. Director of Marketing:
   1. (i) Organize the press releases
   2. (ii) Create and maintain social networking sites
   3. (iii) Create and maintain the program website
   4. (iv) Transmit, with the program Director, any and all program communications — flyers, email notifications of events, newsletters, etc.
   5. (v) Perform such other duties as pertain to the office
9. I. Director of Fundraising:
   1. (i) Organize fundraising events per the approval of the Board of Directors
   2. (ii) Research viable options, in accordance with IRS policy, for funds through private and public donors
   3. (iii) Perform such other duties as pertain to the office
10. J. Director of Compliance:
    1. (i) Develops and periodically reviews and updates Standards of Conduct to ensure continuing currency and relevance in providing guidance to management and employees.
    2. (ii) Collaborates with other departments (Risk Management, Internal Audit, Employee Services, etc.) to direct compliance issues to appropriate existing channels for investigation and resolution. Seeks legal consult as needed to resolve difficult legal compliance issues.
    3. (iii) Responds to alleged violations of rules, regulations, policies, procedures, and Standards of Conduct by evaluating or recommending the initiation of investigative procedures. Develops and oversees a system for uniform handling of such violations.
    4. (iv) Collaborates with the National Association of Social Workers, National Association of Black Social Workers, Information Technology, Professional Development, and various other support services to achieve program and assessment goals.
    5. (v) Perform such other duties as pertain to the office

Officer duties

The officers shall consist of the President, Vice President, Secretary, and Treasurer. The duties of the officers shall be as follows:

Secretary

1. Record the minutes of all official / special meetings
2. Prepare the agenda for meetings when requested by the Director
3. Maintain an accurate membership roll and take roll at all official / special meetings
4. Conduct the general correspondence of the program under the direction of the Director
5. Perform such other duties as pertain to the office

Treasurer

1. Collect and deposit all monies belonging to the program in conformity with the regulations of the Charitable Organizations and Solicitations Act of 1975 (sec. 8: documents required to be filed with the Attorney General shall be open to public inspection; persons subject to this act shall maintain accurate and detailed books and records at the office of the resident agent or the principal office, which shall be open to inspection at all reasonable times by the Attorney General or his authorized representative).
2. Pay bills in conformity with the regulations within ICHANGE upon approval of the Board.
3. Present a monthly financial report to the Founder, Board, and Officers.
4. Perform such other duties as pertain to the office.

The Responsibilities of Service

A Guide for Directors of Nonprofit Organizations in Michigan — provided by Clark Hill PLC

Section 1: Purpose of the Board; Mission; Financial Planning

The overall purpose of the board of directors of a nonprofit organization is not to manage the day-to-day activities of the organization, but to monitor the results of day-to-day managers. Boards assume this responsibility by exercising two general functions: taking action and gathering feedback. Taken together, these two functions create an ongoing cycle through which the board of directors is able to govern the nonprofit organization effectively. The board takes action through its decisions and the delegation of its duties and responsibilities. The board then receives feedback from the individuals and committees to whom duties and responsibilities have been delegated, as well as from outside experts, attorneys, accountants, and others.

The responsibilities of the board can be separated into three major areas:

• Defining the mission of the organization
• Planning the budget and other financial aspects of the organization
• Selecting and overseeing the organization’s staff

Mission

The extent of the board’s work — the cycle of action and feedback within certain parameters — is dictated by the purposes and goals of the organization. Boards should develop and maintain a meaningful statement of the organization’s mission to clearly define working parameters. A mission statement serves to focus the board, and the organization as a whole, on long-term objectives. The board is responsible for the initiation, periodic review, and refinement of the mission statement and developing related strategies to accomplish the organization’s goals.

Financial planning

The board of directors is also responsible for financial planning. A principal function of many nonprofit organizations is raising funds. In most business organizations, capital is a resource necessary to create an end product or service. However, for many nonprofits, financial resources are themselves the end product. While the ultimate desire is that the mission be advanced, the work of the organization is to raise and steward the funds that make that advance possible.

Section 2: Governance structure, meetings, officers, committees

Governance structure

There are essentially two governance structures available to Michigan nonprofit corporations: directorship and membership. The articles of incorporation must specify which.

In a directorship corporation, there is a single governing body, such as a board of directors or trustees, that is usually self-perpetuating. Although the articles of incorporation will indicate whether members of the governing board are called “directors” or “trustees,” the distinction is one in name only.

In a membership corporation (whose members may also be called “shareholders”), there are two tiers of governance: the members, whose primary responsibility is to elect the board, and the board itself. In larger nonprofit corporations, contributors often comprise the membership. However, certain actions — such as amending the articles of incorporation or approving a merger or sale of substantial assets — can only be taken with membership approval, which may delay needed action.

Most nonprofit corporations find that corporate governance can be streamlined by organizing as a directorship corporation with a single governing body. A directorship corporation may still have members, but they would be non-voting members.

Meetings

A board conducts the business of a nonprofit corporation in one of two ways: through formal action adopted at a board meeting, or by unanimous written consent. Michigan law allows the board of a nonprofit corporation to hold regular or special meetings as needed. Although the law does not specify a minimum number of meetings, boards typically meet quarterly or monthly. A regular schedule of meetings is critical for directors to meet their fiduciary duties.

Michigan law provides a further incentive for directors to attend board meetings: in some circumstances, a director is assumed to have consented to action taken by the board during his or her absence. A director may, however, file a formal dissent to board action after the meeting.

Officers

The president is generally the chief executive officer and has the responsibility of supervising and controlling the activities and affairs of the nonprofit corporation. The president is further responsible for executing documents authorized by the board of directors. In the president’s absence, his or her duties are often delegated to the vice president.

The chairperson presides over the meetings of directors and members. Some nonprofit organizations give the chief executive officer the title “executive director.” This title may indicate that the position is a staff position rather than one with policy-setting authority.

The secretary of a nonprofit corporation is traditionally responsible for compiling meeting minutes, maintaining corporate records, and ensuring that directors receive notice of meetings.

The treasurer‘s responsibilities include oversight of receipts, payables, and other items related to the cash flow of the corporation; facilitation of audits; and supervision of reports concerning the financial standing of the corporation.

Committees

Committees of the board are instrumental in developing and executing corporate strategy. Although Michigan law allows for the extensive use of committees, there are limits to the board’s ability to delegate authority. The board may not delegate its power to:

• Amend the articles of incorporation
• Adopt an agreement of merger or consolidation
• Recommend the sale, lease, or exchange of substantial property or assets
• Recommend the dissolution of the corporation
• Amend the bylaws
• Fill vacancies in the board
• Fix compensation of directors
• Cancel stock or terminate membership in the corporation

There are three major types of committees: standing (or oversight) committees — usually permanent — advisory committees, and ad-hoc committees.

Section 3: Individual director duties

Duty of care

A director must exercise care. The concept of “care” incorporates both diligence and attention. Diligence requires an active interest — such as attending meetings, reading materials, and otherwise making an effort to learn about the corporation and its activities. Attention requires alertness and suggests anticipation of potential problems and issues.

A director’s satisfaction of the duty of care is measured in comparison to individuals in similar circumstances in like positions. The statutory duty of care in Michigan allows for the director’s reliance on experts both inside and outside of the nonprofit corporation, including accountants and attorneys. Reliance on another party does not relieve a director of his or her individual duty of care, but it does provide a measure of protection if the experts relied upon have been selected with reasonable care.

In business corporations, directors who have satisfied the duty of care are afforded the protection of the “business judgment rule.” This rule prevents courts from second-guessing the past business decisions of directors. It is intended to provide total protection from liability for decisions so long as the business decision had a reasonable basis of rationality, involved no conflict of interest, and was a reasonably informed one. Although the business judgment rule applies most directly to business corporations, it is easily analogized to nonprofit corporations.

Duty of loyalty

Conflicts of interest can be avoided by taking a number of precautionary measures:

• Composition of the governing board. Directors should be financially disinterested from the organization to the greatest possible extent. Small, weak boards which are dominated by one or a few directors are more likely to see conflicts of interest arising from the dominant director’s or dominant group’s ability to achieve personal gain.
• Working knowledge of applicable IRS rules. All directors should be able to recognize situations which may endanger the tax-exempt status of the organization as a result of private benefit or self-dealing.
• A formal policy. The conflict-of-interest policy should be in writing and encompass three key elements: awareness, disclosure, and disinterested review.

Section 4: Liabilities of directors

Generally, the board of directors of a corporation cannot be held liable for the actions of management and staff. The corporate entity is responsible for acts committed by employees, and corporate liability is usually limited to the assets of the corporation. However, in some situations, individual board members may be held personally liable for their actions as directors.

Breach of duties

The largest source of personal liability for an individual director is a breach of the fiduciary duties discussed above. These duties are owed only to the corporation and, accordingly, may be enforced only by an individual with an interest in, and acting on behalf of, the corporation — such as another director, an officer, a shareholder, or a member. The Michigan Attorney General is also charged with representing the interest of the general public relative to charitable organizations.

Self-dealing

Directors who use power or information obtained through their positions for their own benefit are vulnerable to personal liability. For example, a director who learns at a board meeting that a parcel of land adjoining the corporation’s property will soon be available for sale and purchases the land for his own account before the organization can act would be liable for self-dealing. By the same token, a director may be held liable for self-dealing for the benefit of family, friends, or other third parties.

Liability for board actions

Liability may be imposed upon individual directors who vote for or concur in actions taken by the board collectively if the action is prohibited under state or federal law.

Liability for staff activities

It is rare for directors to be held individually liable for the negligence of employees.

Lack of corporate identity

Individual director liability may also result if it is determined that the nonprofit corporation does not exist as a separate entity, but merely as an alter ego of a dominant director. In such circumstances, individual liability may be imposed by “piercing the corporate veil.” The requirements are: (1) the corporation does not maintain an existence separate from the dominant director, and (2) fraud or injustice would occur if the corporate veil were not pierced.

Statutory liability

Personal liability of directors of nonprofit corporations may also result from violations of state or federal statutes. Examples include knowingly falsifying records, failing to pay withholding and employment taxes, violating ERISA provisions, and (under the 1996 amendment) intermediate sanctions for officers and board members who receive excess benefit from the organization.

Section 5: Protection from liability

Statutory limitation of liability

The Michigan Nonprofit Corporation Act allows a nonprofit corporation to limit the liability of its volunteer directors in three respects:

1. Limit liability of volunteer directors and officers to the corporation and its members for monetary damages for a breach of fiduciary duty — subject to exclusions including breach of the duty of loyalty, actions not in good faith or involving intentional misconduct, knowing violations of law, unlawful acts relating to loans or the distribution of corporate assets, transactions yielding improper personal benefit, and actions amounting to gross negligence.
2. Tax-exempt charitable corporations (those described in Section 501(c)(3) of the Internal Revenue Code) may assume the liability of volunteer directors to third parties for acts or omissions if the liability was incurred in good-faith performance of the director’s duties.
3. The nonprofit corporation may assume the liability for all acts or omissions of a volunteer director, volunteer officer, or other volunteer — provided that the volunteer was acting in good faith and within the scope of his or her authority. The protection does not apply if the conduct amounted to gross negligence, willful and wanton misconduct, or an intentional wrongful act.

The term volunteer director means a director who does not receive anything of more than nominal value from the corporation for serving as a director, other than reasonable per-diem compensation and reimbursement for actual, reasonable, and necessary expenses. “Per diem” means “per day” — a reference to paying directors a specified amount for each meeting attended, as opposed to paying directors an annual salary or retainer.

Indemnification & insurance

Nonprofit corporations may indemnify directors and officers under Michigan law. An organization considering a Directors & Officers (D&O) policy or renewing its coverage should ensure that the policy is tailored to nonprofit organizations. D&O policies that are available to nonprofit corporations often will cover wrongful-discharge claims brought by terminated employees — coverage not usually available in D&O policies issued to business corporations.

Section 6: Sarbanes–Oxley

In response to governance abuses in the business sector, Congress enacted the Sarbanes–Oxley Act in 2002. While principally directed at publicly traded business corporations, two provisions have broader application and do apply to nonprofits:

1. Whistleblower provision. Makes it a federal offense to retaliate against a person who provides law-enforcement officers with information relating to the commission or possible commission of a federal offense.
2. Document destruction prohibition. Prohibits knowingly altering or destroying records or documents with the intent to obstruct a federal investigation or a bankruptcy case.

Best practices promoted by Sarbanes–Oxley in the nonprofit sector include:

• Establishing audit committees
• Revamping audit-committee charters to ensure independence
• Requiring the CEO to sign IRS information returns

Conclusion

Nonprofit board members are not expected to be experts in the area of director conduct and liability. However, by gaining a general understanding of the obligations that accompany a director position, an individual should be able to identify potential problems. Anticipating potential problems and seeking assistance in resolving them will help the individual director avoid a breach of fiduciary duty and possible personal-liability claim. With the ability to identify issues before they become problems, board members can direct their attention and energies to serving the organization and fulfilling its mission.

Contacts & resources

© Clark Hill PLC 2013 · Excerpts adapted with permission for ICHANGE board candidates.