Legal Obligations of Board Members

The Reasonably Prudent Person Test and The Principle of Good Faith.

The Reasonably Prudent Person avoids:

ª Mismanagement

Failure to follow fundamental management principles, e.g. failure to ensure that planning occurs; failure to review reports for problems.

ª Non-management

Failure to use existing opportunities for good management, e.g. failure to use available accounting control systems to insure proper management of funds.

ª Self-dealing

Involvement in activities or voting on decisions in which there exists the potential for personal gain.

The Principle of Good Faith states that board members should:

ª Attend all board and committee meetings regularly.

ª Have a thorough knowledge of the organization's charter and by-laws.

ª Heed corporate affairs and keep informed of general organizational activities.

ª Ensure that minimum legal/technical requirements are met.

ª Record personal conduct and register dissents officially.

ª Avoid the semblance of self-dealing or conflict of interest.

ª Make no financial profit from association with organization.