Tuesday, October 14, 2014

So you want a lawyer on your board …

By Zac S. Kester, executive director, Charitable Allies
Good nonprofit organizations seek out community leaders from diverse backgrounds to serve on their boards of directors. As they recruit directors, they know that having the right people with the right skills helps the organization achieve its strategic goals.
Nonprofits are tapping lawyers not only for their legal expertise, but also for their personal networks and reputation. With increased regulatory focus and challenges in nonprofit governance, business transactions and donations have taken on a new complexity that can benefit from a legal perspective.
Having a lawyer on board can be good for both sides: nonprofits receive the benefit of legal counsel, while lawyers get to support a cause they are likely passionate about, and connects them to other community leaders outside the legal circle. This opportunity is not lost on new lawyers who are encouraged by their firms to invest time volunteering in the community.
One nonprofit recently avoided a massive wage claim liability when it laid off several employees. The lawyer on board was able to help ensure banked vacation days were paid. Otherwise, the nonprofit and its board and officers could have faced triple damages and attorney fees awards for the nonpayment of wages.
Three primary benefits of bringing a lawyer on a nonprofit board:
·       Receive general legal knowledge. By virtue of their training, lawyers are analytical thinkers. They are steeped in the basics of law, including contracts, lawsuits, liability and liability insurance, as well as issues concerning employment, immigration, health care and government regulations. Lawyers on board draw from this knowledge while serving and can help make business and programming decisions.

·       Have help making the tough decision(s). Because of their training and experience, many lawyers can identify problems early. They can also help problem solve and mediate myriad interests among the board and stakeholders of the nonprofit.

§  Make connections. Most successful lawyers have many community connections. These may include grant-making organizations, community activists, politicians, business leaders, school leaders, accountants and other lawyers. Connecting the organization and its staff with some of these contacts is par for the course of serving on a board. Nonprofits can leverage the lawyer’s relationships to build a bigger network and increase their donor base. 

Despite these advantages, there are three cautions to consider:
·       Ensure subject-matter knowledge. Lawyers are required to be “competent” in a field or subject of law before providing legal services in that field. Out of a desire to help, many lawyers may attempt to answer questions outside of their competency or knowledge. Today’s nonprofits require professional advice specific to the nonprofit sector and the board members should be prepared to acknowledge this and seek outside and independent legal counsel where appropriate.

§  Properly manage conflicts. In addition to the typical conflicts that arise in the nonprofit sector (i.e. private benefit), Rules of Professional Conduct control many situations that happen when a lawyer’s representation of one client adversely affects his representation of another or his personal interests. For example, the lawyer may be asked to formulate an opinion on the appropriateness of a board decision in which the lawyer participated, making the lawyer a defendant or key witness and therefore ineligible to make such an opinion.

§  Protect the attorney-client privilege. It can be difficult to delineate exactly when the attorney-client relationship begins, especially when dealing with a lawyer on board. Additionally, if the lawyer does not make it clear that he or she is wearing only the “lawyer” hat when giving legal advice in the boardroom, then conversations with that lawyer-board member may not be privileged.

Having a lawyer on board can come with great benefits, both to the lawyer and the organization, and also comes with some risks to both. But when the risks are properly managed, the lawyer’s service can be positive and fruitful.

Attorney Zac Kester provides generalist and strategic nonprofit legal and consulting services. He holds a Master of Law, a post-law school advanced degree, in which he studied the unique needs of tax-exempt nonprofit organizations. His legal and consulting career has focused on nonprofit organizations. Contact Zac Kester, executive director, at 317-429-1649 or zkester@charitableallies.org with any questions.


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Unknown said...

So what you are saying is that it would be a smart move to have an attorney on board? I never thought about doing having a lawyer on board, but it makes sense and it would help everyone out a bunch. Having someone who knows business law well could really help a company make great leaps into the future. http://www.fabianlaw.com/practice/Business