Board Legal Fiduciary Duties

Best Practice Guideline


All state statutory and case law holds that directors of nonprofit, 501(c)(3), corporations must serve as stakeholder (owner) agents, acting in ways that protect and advance their interests. Legalities aside, this is the foundation of great governance. In order to fulfill this obligation, directors must discharge three legal fiduciary duties: loyalty, care and obedience. Directors of healthcare organizations are individually/collectively accountable for being loyal, careful and obedient, and are liable if they are not.

Key Concepts: Owners/Stakeholders

All organizations have owners; they are called stockholders in commercial corporations and stakeholders in nonprofits. Boards are accountable to an organization’s owners, representing them and acting in their behalf; they are agents. Boards must ensure an organization’s resources and capacities are deployed in ways that maximize owner benefit. While stockholders and stakeholders are (in many ways) equivalent, there are some significant differences...

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