A Nonprofit Director Board or A Nonprofit Trustee Board?

By: Eugene Fram

Nonprofit organizations refer to their board members as “ Directors” or as “Trustees.” I recently encountered one nonprofit board that referred to it board members as directors, but the charter, when referenced, clearly stated it was a trustee board. Do these board titles make a difference? They might! Look at these legal comments.

…[T] he primary role of the trustee was to preserve the trust, to be cautious, and to avoid risk, whereas the role of a director of a business corporation, was, and still is, to take risks to ensure that earnings continue and grow in the future.”
…[W] hen dealing with matters of internal management and delegation of responsibilities, nonprofit directors have always enjoyed greater flexibility than trustees of a charitable trust.*

It seems, as a layperson, that some nonprofit boards and managers need to review their charters to reaffirm their nonprofit status. Otherwise their financial strategies might not be in harmony with their charters, which could lead to legal issues. At the same time, they also should make certain their charters are congruent with their state statutes.

*James Fishman, (1987) “Standards of Conduct for Directors of Nonprofit Corporations,” Pace Law Faculty Publications, p. 402.