Serving on a Nonprofit Board: Avoid the Attorney Pitfalls
At some point in an attorney’s career, he or she may be asked to serve on a board. Or a nonprofit board seeking a new member may intentionally look for an attorney. Lawyers are a great resource to nonprofit boards. They have a unique set of legal skills, attention to detail, knowledge, ability to communicate well, a network of connections, and perhaps the possibility of free legal advice. An attorney may make sense to the board, and for the attorney, giving back to a community or a cause is admirable and very fulfilling. However, the attorney and the nonprofit board should thoroughly consider all potential conflicts before the attorney agrees to serve.
Clarify the Role
First, the attorney and the board must clarify the attorney’s potential role on the board. Will the attorney serve as a board member and only a board member? Will the attorney serve as a board member and the organization’s legal counsel? One of the primary ethical concerns for an attorney serving on a board is whether the attorney is perceived to be the organization’s attorney. Because of potential conflicts, discussed below, it is usually better if the attorney is not the organization’s or board’s attorney. In order to avoid accidentally establishing an attorney-client relationship with the organization, the attorney should periodically remind the board that he or she is serving in the capacity of board member only.
If an attorney is not the board’s attorney, what kind of input may he or she give? Any board member, including an attorney, can flag issues and discuss problems based on background and life experience. If the attorney is not giving legal advice, he or she can suggest to the board when to hire legal counsel.
If the attorney has decided to offer free legal advice to the board, the attorney must also bear in mind professional legal standards including competency. The American Bar Association’s Model Rules of Professional Conduct (Model Rule) and any similar state rules apply here. To the degree that an attorney has, intentionally or unintentionally, given the impression that he or she represents the organization, these rules apply. According to Model Rule 1.1, an attorney must give competent representation. If an attorney is being pressed by the organization or board to provide legal advice in an area of the law that the lawyer is not competent, the lawyer should be careful always to recommend that the board hire outside counsel. And even if the attorney is competent in an area, if an attorney is not the organization’s attorney, he or she should decline to provide specific legal advice.
Conflict of Interest
If an attorney is serving as a member of a nonprofit board in addition to being the organization’s attorney, everyone must be mindful of the conflict of interest this creates. The attorney should take certain steps to avoid an active conflict of interest and ethical violation. For example, if the board has a vote on whether the attorney or his or her law firm is retained, the attorney should be recused from the vote. (Note that some of the conflict of interest is mitigated if the attorney’s work is pro bono, because there is no financial gain.)
Further, if an attorney gives any legal advice at all, pro bono or not, the attorney may not then turn around and vote as a board member on the same matter. And if a board decision that was based in any way on the attorney’s advice is ever challenged, the attorney may not defend the organization as an attorney. The attorney should also provide and receive informed written consent from the board regarding the potential risks and potential conflicts of interest related to the execution of dual roles as a nonprofit attorney and board member, if the attorney desires to enter that relationship.
Another important piece to consider if an attorney board member offers legal counsel is whether the attorney’s professional liability insurance coverage and the organization’s Director and Officer insurance coverage extend to legal advice given by an attorney while serving as a board member.
Loss of Independence
An attorney serving the dual roles of board member and organization counsel must also consider Model Rule 1.7, which provides that a lawyer may not represent a client if there is a concurrent conflict of interest—in this case, the duty of loyalty that a board member has to the organization, and the duty of an attorney to exercise independent judgment. Lawyers should consider whether their independent professional judgment will be clouded if asked to give counsel on a board decision, particularly if the attorney has other opinions as a board member.
In sum, there are unique ethical challenges for attorneys to consider when contemplating serving on the board for a nonprofit organization. The board must also consider these ethical challenges, but the attorney has the responsibility to make them clear. If the organization needs the skill of the attorney as an attorney, the better approach is to retain the attorney as legal counsel rather than as the attorney to serve as a board member. An attorney should be very hesitant to provide legal advice for a board she is serving on. If she and the board really want to proceed in this direction, any engagement letter should carefully address the scope of the representation, and any potential conflict of interest. Then the attorney should be recused off board decisions related to that matter. As long as the proper attention to detail and commitment to be above reproach is demonstrated by the attorney, serving on the board of a nonprofit can be a fulfilling and enjoyable experience for all concerned.
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Because of the generality of the information on this site, it may not apply to a given place, time, or set of facts. It is not intended to be legal advice, and should not be acted upon without specific legal advice based on particular situations