At its most basic, our Fiduciary Duty to an organisation we govern is our legal and ethical obligation to put the interests of the organisation (and its beneficiaries) first and foremost.
In practice, this means putting the organisation’s interests above the interests of anyone (or anything) else – such as ourselves, competing agendas, or outside influences.
For a Board and its Directors, maintaining this Fiduciary Duty is critical, in order to uphold trust in our organisation, ensure fairness in our allocation of resources, protect our organisation from negative consequences, and stay true to delivering our Mission for those we serve.
The Fiduciary Duty often plays out in Board decision-making and is, to a large degree, underpinned by having (and using!) good practices for managing Conflicts of Interest.
When Directors are open and honest about declaring personal interests, and Boards effectively use their Register of Interests and their Conflict of Interest Policy and Procedures, the scene is well set for us to effectively meet our Fiduciary Duty to our organisation.
Directors still need to hold themselves personally accountable too, committing to a high degree of integrity and good faith, thus ensuring that any potential attempts to influence or sway their decision-making will be called out and addressed head on.
For example, I once had a prickly experience when upholding my Fiduciary Duty to an organisation whose Board I was a part of…
The Nominations Committee (of which I was a member) made a recommendation to the Board that we recruit a couple of extra Board members, over and above the minimum requirement. This was because history had shown us that we generally lost one or two Directors throughout the year, and in previous years this had left us with barely enough Board members to do the work towards the end of the term.
The Chair however was not at all happy with our recommendation, as this meant she had more Directors to induct, which she felt was inconvenient for her.
However our Committee stood firm and argued that our recommendation was for the good of the organisation as it would ensure strong and effective governance, by a good-sized Board, throughout the entire Board year.
At the end of the day, the Chair conceded, which, in the long run, proved to be the best thing for the Board and the organisation that year.
So, if you are not already, I encourage you to get familiar with this important notion of Fiduciary Duty. Make it part of your Board conversations and your Director induction discussions, and revisit it from time to time to keep people familiar with the term and what it means for them.
If your Board needs my help with this, do get in touch with me at megan@mjbconsulting.net.au, or book in a zoom chat with me HERE, and let’s talk!
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