What is a Board Member Agreement?
A board member agreement is a legal document or formal contract outlining the rights, roles, responsibilities, and expectations of individuals serving on a company’s board of directors. This document serves as a framework that clarifies the terms and relationships between the board members and the organization. These agreements often cover duties, compensation, confidentiality, conflicts of interest, code of conduct, indemnification, and termination/removal.
What is the main purpose of a board member agreement?
Board member agreements are important for promoting transparency, accountability, and responsibility among members within an organization. In addition, these help set standards for board conduct and obligations, and better focus on operating in line with the organization’s goals and vision. With a clear agreement in place, it can enhance board effectiveness and protect both the board members and the organization in cases of conflict or misunderstanding.
In nonprofits, the board member agreement ensures accountability, regulatory compliance, and a shared sense of purpose.
How to Write a Board Member Agreement
Whether for a nonprofit or corporation, a well-crafted board member agreement protects both the members and the organization they serve. Below are the elements and steps on how to write a comprehensive board agreement.
- Define the purpose of the agreement Start with an introductory section on the purpose of the agreement. This contextualizes why the document is essential for both the board and the organization.
- Specify roles and responsibilities Define the board member’s roles, including general responsibilities (e.g. attending meetings, participating in decision-making, serving in committees), and role-specific duties for chairperson, secretary, executive directors, and other positions.
- State the expected time commitment Apart from attendance in board meetings, board members are expected to commit time to board-related activities. Specify in the agreement the expectations for meetings, preparation time, and any additional events like fundraising.
- Include a code of conduct Establish in the agreement ethical guidelines that reflect the mission and values of the organization.
- Address confidentiality Include a confidentiality clause stating how board members should access and handle sensitive organizational information.
- Determine conflict of interest policies Outlining conflict of interest policies helps ensure that members act according to the organization[‘s best interest, avoiding situations where personal interests may interfere.
- Include compliance requirements This section should cover essential compliance requirements associated with their roles, such as adherence to federal and state regulations.
- Define term lengths and renewal process Clarify also in the agreement board members’ term length, any renewal process, and conditions for early resignation or termination.
- Specify board member compensation Terms on board member compensation and reimbursement must be included in the agreement. For nonprofits whose boards are serving voluntarily, clarify instead that there’s no financial compensation.
Sample Board Member Agreement Template
Here’s a simplified template you can use to create a board member agreement for your organization
[Organization Name] Board Member Agreement Purpose: This agreement outlines the responsibilities, expectations, and ethical standards required of board members serving [Organization Name]. Roles and Responsibilities: – Attend board meetings and participate in decision-making. – Specific duties per role: [Chair, Secretary, Treasurer, etc.]. Time Commitment: – Commit to attending at least 80% of board meetings annually. – Participate in any special events, committee work, or retreats as required. Code of Conduct: – Act with integrity and uphold the organization’s mission. – Promote transparency, honesty, and ethical decision-making. Confidentiality: – Maintain the confidentiality of all sensitive information. – Avoid disclosing information outside the board without proper authorization or unless required by law. Conflict of Interest: – Disclose any potential or actual conflicts of interest as soon as they arise. – Recuse themselves from discussions or votes where a conflict exists. Compliance and Legal Responsibilities: – Abide by all applicable laws and organizational policies. Term Length and Renewal: – Each term lasts three years, with one renewal term option. – Members wishing to resign must provide written notice at least [number of days, e.g., 30 days] before their intended departure date. Compensation: – No financial compensation. Reimbursements for approved expenses may be available.
By signing below, the board member acknowledges their understanding and acceptance of this agreement, committing to uphold the values and responsibilities outlined above. Board Member Signature: ___________________________ Date: _______________ Organization Representative Signature: ___________________________ Date: _______________ |
How often should a board member agreement be reviewed?
Ideally, board member agreements must be reviewed annually to identify adjustments aligned with the organization’s evolving needs. Moreover, regular updating must also be done to these agreements to reflect organizational changes and new legal requirements.