What Does "Fiduciary Responsibility" Actually Mean? (And Why Your Board Needs to Know)
Fiduciary responsibility is a legal and ethical requirement for a decision maker to abide by the best interest of the recipient of that decision. Your investment banker who acts as a fiduciary has a responsibility to make educated investments to grow your portfolio. For a nonprofit Board of Directors, it means members are required to make decisions based on what is best for the mission and organization. They are duty bound to look beyond their own needs to the wider future of the work being done.
Simple enough in theory. In practice, it's where a lot of nonprofits quietly come apart.
The Mistake New Boards Make
Boards in the early stages of an organization often think they have no real responsibilities because the organization is small or the mission is just getting started. This is exactly backwards.
At the beginning, board members are at their most important. Fundraising, network building, setting guiding values, principles, and policies — all of this falls under the purview of the board. The foundation you lay in those early months shapes everything that comes after it. A board that checks out because "we're still small" is a board that will still be checked out when the stakes get much higher.
What Happens When Boards Don't Show Up
When board members don't act on their fiduciary responsibility, the consequences can be absolutely dire.
Because the board has a responsibility to ensure that funds are properly appropriated, boards that don't act on it can open the organization up to fraud, theft, and misaligned grant spending. The same is true for their responsibility to the mission. If they're not paying attention to the work that is actively being done, organizations experience mission drift — ending up doing work that has nothing to do with why they started in the first place.
Neither of these things usually happens all at once. They happen slowly, in the absence of oversight, until one day someone looks up and realizes the organization has lost its way — financially, programmatically, or both.
What Being a Board Member Actually Means
Being on the board is more than showing up to meetings and fundraisers.
It's about believing in the mission so hard that you become the guardrails that make sure the work gets done. Build your network of friends and acquaintances. Be direct when you ask people to donate. Speak up when you feel like something is wrong.
You are dedicating yourself to the future you see as a possible reality through the work your nonprofit is doing.
IncuBrighter supports grassroots leaders in building organizations with strong foundations — governance included. Check out our The Big Three flyer to give new board members or reach out for direct, personalized support at Leah@IncuBrighter.org.
