Educate Board Members on Their Responsibilities to Mitigate Risk

Many institutions select donors or high-profile alumni to serve on their board of trustees. These people may have little knowledge about the institution’s workings or the fiduciary duty they undertake when becoming a trustee. As a result, United Educators (UE) has seen claims involving trustees’ actions.

Consider taking these actions to help your board of trustees or its individual members avoid causing a claim or becoming a crucial component of it.

• Educate trustees about their fiduciary and institutional oversight responsibilities when they’re considered for a board position. During the vetting process, inform potential board members about the responsibility they’re undertaking. Stress that their duty lies with your institution and not particular members of the administration or those courting them for a board seat. Providing robust orientation when adding a board member will solidify an understanding of a trustee’s responsibilities.
  
  Claims example: A longtime board member became a and friend of the President and was then named Board Chair. In his new role, he “rubber-stamped” presidential initiatives and  spending and used his influence to curtail other board members’ questions. With little oversight, the President signed questionable partnerships and misused funds. A state investigation of the institution resulted in significant legal costs and reputational damage.
• Train on institutional polices and your state’s nonprofit and fiduciary requirements. Trustees must understand the fundamentals of board operation and their individual legal duty to your institution. Include within board orientation materials institutional policies and procedures to orient trustees to your institution’s responsibilities. Explain how deviating from these policies and procedures is problematic. Make clear to trustees their role approving — and adhering to — your institution’s policies and procedures. Educate all members on additional state law requirements for fiduciaries of nonprofit organizations or educational entities.
• Engage trustees in enterprise risk management (ERM). ERM takes a holistic view of risks your institution faces at different levels and will help trustees understand the questions they should ask administrators. Topics include not only typical risks such as minors on campus or deferred maintenance, but also fiscal management, accreditation, and other fiduciary issues.
• Focus trustees on their role in litigation. Trustees must understand when they will be called upon to make decisions about continuing with or ending litigation brought against your institution. Providing a general overview of the litigation process will help trustees make informed decisions requiring their approval or authority. Educate on questions typically asked and on interaction with counsel. Provide updates to trustees on the status of significant claims involving your institution.
  
  Claims example: When a student brought a claim of sexual abuse by a teacher, trustees weren’t informed or involved in settlement talks until the end. At that point, the trustees weren’t well informed on the history of the litigation, the weaknesses of the institution’s defense (based on mistakes administrators made), and the case’s overall value. As a result, an opportunity for resolution was missed and the case dragged on for years.

Board members bring varied experiences and opinions that can help your institution flourish. To avoid entrenched thinking as well as long-term power and decision-making consolidation in a few board members, review how long members may serve. Avoid a complacent board mindset as well as domination by a few members. If you don’t have term limits, consider whether instituting them would benefit institutional governance.