Risk Management Tip
Protect yourself while serving a nonprofit
If you serve on a nonprofit’s board of directors, it’s important to help protect your personal assets from potential litigation. No matter how scrupulously you perform your responsibilities as an independent director, if the organization is accused of misusing funds, for example, or a staff member files an employment-related suit against the nonprofit, you may be named personally in a lawsuit. Fortunately, there are steps you can take to protect yourself:
- Get familiar with the organization’s tax filings or ask your financial advisor to do so. Things to look at include how the executive compensation compares with that of similarly sized nonprofit groups in the same sector.
- Purchase a Directors and Officers (D&O) insurance policy to provide defense costs and indemnity coverage, including:
o Mismanagement of funds
o Discrimination
o Wrongful termination
o Harassment
o Libel & Slander
o Copyright infringement
- Work with legal counsel to evaluate the company’s indemnification provisions and a trusted insurance brokerage consultant to evaluate the organization’s D&O policy
