Fiduciary and Other Duties of Board Members
There are five key duties that board members have in carrying out their responsibilities under the Corporations Act 2001. These are also applicable to associations incorporated under the Associations Incorporation Act 1991, although they are not all specified in the legislation. The common law fiduciary duty applies to all incorporated entities.- Fiduciary duty: the duty to act in the best interest of the organisation.
- Within fiduciary duty is the expectation that board members will act with a duty of care, loyalty and obedience to purpose, in keeping with the philosophy and objectives of the organisation.
- Even if the staff and/or volunteers run the day to day affairs of the organisation, the committee or board are ultimately responsible for maintaining financial and legal responsibilities.
- Duty to act honestly: to apply reasonable skills, act in good faith and in the best interests of the organisation.
- Speaks for itself - just be honest and check if unsure.
- Duty of care and diligence: the duty to abide by the constitution of the organisation and to know and comply with all legal requirements.
- This includes taking all reasonable steps to minimise risk for the organisation.
- It also includes working on a positive public perception of the organisation.
- It also means making sure you have enough information to make decisions.
- Duty of confidentiality: the duty to keep confidential all organisational and Board information.
- This includes not expressing dissent about a board decision with which you disagree - remember the board speaks as one voice. If you cannot live with a decision you need to leave the board. Once a decision is made it is a decision of the board as an entity.
- Duty to declare any conflict of interest: the duty to inform the governing body of any personal interest in any matter before it and to absent yourself from issues where there is the possibility of a perceived or real personal or financial interest.
- A financial conflict of interest may be, for example, where an organisation hires a contracting firm run by a board member's partner. There is the possibility of direct financial gain to the board member. Another common cause of conflict of interest arises when board members undertake paid work for the organisation.
- An ethical conflict of interest may be, for example, a board member's partner is applying for the Executive Officer position. There may be no issue of direct financial gain but bias, real or perceived, may be an issue.
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