Organizations of all sizes have risks.
Choosing to retain, transfer or mitigate risk is a daily cost-of doing business, and a deeper discussion for another time.
Today’s focus is for corporations (be you a for profit, or not-of-profit), organized with a board and bylaws (or constitution, or both!)
Follow these eight-tips for smoother sailing whatever waters your business travels.
1. Follow Your Bylaws
Operators who are skilled at their craft often don’t feel bound by any of the internal rules of their own organization, otherwise known as constitutions or bylaws. That can lead to severe legal consequences. Officers of your organization or association need to follow the bylaws at all times, especially when dealing in matters involving discipline or expulsion of members. Any association officer who fails to follow the bylaws in that area increases not only his or her association’s exposure to liability, but also will risk, in many cases, personal liability.
2. Don’t Keep Your Policies a Secret
All staff (be they paid or volunteer) have a right to know what their organization expects of them – and what will happen should those expectations not be met. Meeting and financial requirements, restrictions on activities and policies and mechanics must be made available to all stakeholdersmembers.
3. Don’t Suspend a Member Automatically
Anytime an organization or association officer uses the word “automatically” within five miles of the word “suspend” or “expel,” watch out! A staffer or association member who you think may have violated your bylaws must be given notice of the violation and a chance to defend the charge. Some state laws have specific requirements for suspension or expulsion of association members. Wherever you live, your association should coordinate any disciplinary action with local counsel to make sure appropriate guidelines are observed.
4. Don’t Assume Incorporating Will Avoid Personal Liability
The commonly held belief that the officers and members of an organization need not be concerned with personal liability if the organization incorporates is a fallacy. Incorporation is often seen as an absolute shield against liability – which it is not. Be sure to review your D&O (Directors & Officers) Insurance policy for exempted coverage
5. Deal with Potential Claims By Seeking Professional Advice
An attempt to “do it yourself” in defending a claim (or potential claim) could have a number of serious legal consequences. Officers and directors of your organization have a fiduciary responsibility to their associations and the members. Since they are entrusted with dues and other funds, officers are required to conserve assets by applying good business judgment. Consequently, officers must seek legal or accounting advice when a legal or accounting issue presents itself.
6. Keep Good Meeting Minutes
Without minutes, there is no official record of the action of the board or executive committee. As memories fade, the course an association decides to take may vary from meeting to meeting, with devastating legal results. And minutes should be taken correctly – quality over quantity – means that you include the action taken, but PLEASE don’t provide a replay of all discussion at the meeting!
7. Review Your Insurance Policies to Match the Risks Inherent in the Operation of Your organization
You conduct may meetings, clinics, provide services, coaching and education, supervise staff and volunteers, establish systems, engage personnel, develop internal and external mechanics and codes and event facilitate in-person or on-line events and interactions. Any one of those activities can lead to a lawsuit. Only your insurance expert can tell you if your coverage matches what your association does.
8. Pretend That You Are Running a Business
Ever hear an organization board member say, “All we want to do is xyz?” For most associations, the truth is, it’s not all you want to do – not by a long shot. You want to practice the full cycle of your particular craft, from recruit; to marketing, to value-added production, to reporting and repeat… In short, you want to determine your own fate. As in any business, each of those activities carries legal responsibilities that cannot be overlooked.
This article is for informational purposes only and is not legal advice. But your are invited to have S3 Solutions in your corner. A skilled set of fresh-eyes will bring experience and insight to help you improve your game! Contact us today