By Robert Barron, Staff Writer
Serving on a board may sound prestigious, but it isn’t always an easy thing to do.
There are laws and responsibilities affecting boards of directors, especially with respect to for-profit organizations, but also for nonprofits.
Enid attorney Mike Bigheart represents a number of banks and oil companies and also has served on boards of both for-profit and nonprofit groups.
“Your primary duty, no matter what type of board you serve on, is loyalty to the organization. That is a primary responsibility,” he said. “You must also exercise sound judgment.
“You always must avoid certain things, like conflicts of interest, situations where your personal interest conflicts with those of the organization,” he said.
‘Interests above your own when possible’
On a nonprofit board, members must help the organization determine its mission and purpose and ensure effective planning and management of resources, Bigheart said. Board members should be certain the nonprofit operates in compliance with rules allowing it to operate as such.
Oklahoma has laws protecting directors of nonprofit organizations from liability to a greater extent than for-profit board members.
“You still have a loyalty to put the organization’s interests above your own when possible. If you have a conflict you cannot resolve, you probably should not remain on the board,” Bigheart said.
Laws regarding for-profit boards have become stricter as a result of the Enron scandal and other corporate abuses in recent years. New laws at both the federal and state levels have placed additional obligations and responsibilities on directors.
“Larger public corporations have developed codes of conduct for their directors so they are more conscious of duties and responsibilities,” Bigheart said. “Corporations as a whole, especially people on the board, need to understand those responsibilities.”
Only change stays the same
Joe King, of Enid, is a retired banker and a member of the Central National Bank board of directors. During his career, King also served on a number of civic boards in Enid, notably the Denny Price Family YMCA. Things have definitely changed, he said.
“Changes in banking came about in the amount of regulations and rules you must follow to engage in business, how you treat your customers, meeting legal requirements. People have a right to know what they are doing,” he said.
“There is significant liability. Board members represent the shareholders to oversee management and operation of the bank on a profitable and continually operating basis.” King said.
If board members do not carry out their responsibilities they can be liable, he said. Public service boards have different goals than other boards, but they have the same purpose, continuing operation, he said. The main difference is how funding is acquired.
“Public service boards have to secure their funds from the public to continue their good works,” he said.
Attorney Dick McKnight was a member of the board of Community Bank & Trust when that entity went out of business, and he recalled the problems involved for board members.
“When they went under, the FDIC tried to assert all directors were liable. That never went to trial because we had liability insurance for the board members,” he said.
A sense of community responsibility
Most people serve on charity boards as a sense of community responsibility or a responsibility to help an entity. McKnight said participation on a board should be done seriously and not just as a way to pad a resume. It should be done as a true sense of responsibility. When participating on a board, a person is responsible to attend all meetings and take part.
“If something disastrous happens, especially financially, you may be called upon to explain why you didn’t attend meetings and why you didn’t fulfill your responsibility as a director,” he said.
That is especially true in a fiduciary situation. Fiduciary boards are held to a higher standard than other boards.
Those members have accepted a position of trust and responsibility, which involves more effort to actively participate in board meetings and discussion about how the board will act financially.
McKnight said it is difficult to find people to serve on boards because many people are not willing to make the commitment involved. However, he said Enid has a higher degree of participation in board membership than is seen in the nation as a whole.
Bigheart agreed, saying nonprofit service is volunteer but still requires a large amount of time, and it is sometimes difficult to find quality people to serve.
