Why you should think twice about board service — Part 1: The risk of wearing two hats
Attorneys are frequently approached by nonprofit organizations looking for board members. Most assume all attorneys are well-off and ready to make large donations, but also free legal advice is sure to follow! Should you feel flattered or frightened?
It is possible to serve as legal counsel for a nonprofit and also serve as a member of the board. So what’s the problem? Well, your duties as corporate counsel can sometimes be in conflict with your duties as a board member.
You can serve a nonprofit organization in two ways: (1) as a member of the organization’s board, and (2) as an attorney who represents the organization. Both roles could create a conflict with current clients, so you should run a conflicts check and obtain law firm approval before taking on either role.
This three-part series focuses on the risk of wearing two hats (attorney and board member), how to avoid running afoul of professional responsibility rules and the questions to ask before you get involved.
Corporate Representation 101: Who is the Client?
Even if you don’t practice business law every day, remember back to corporations and professional responsibility class. (Come on, you can do it!) When you represent a corporation — yes even a nonprofit — you represent the entity, not its individual volunteers, staff or directors. Rule 1.13(a) of the Model Rules of Professional Conduct (MRPC) states, “A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.”
When you represent the corporation and act as a board member, you serve as legal counsel AND one of the duly authorized constituents. You know the old adage about the ‘lawyer who represents himself has a fool for a client’…This dual role can lead to a smattering of issues around competence, independent judgment, confidentiality and conflicts of interest.
Rule 1.1 Competence
Rule 1.1 of the MRPC requires that “A lawyer shall provide competent representation to a client. Competent representation requires the legal knowledge, skill, thoroughness, and preparation reasonably necessary for the representation.” You’re smart and good at your job, so no big deal, right?
Competence is an issue for lawyers serving on nonprofit boards because the board will look at you for (free) guidance on a broad range of legal issues. Some (or most) of those issues are going to be outside your practice area or expertise. Even when you claim to be only a board member, everybody in the room looks to you for legal insight that you may or may not have. They are looking at you for free advice on issues that are most likely outside of your areas of competence.
And since it’s so easy to form an attorney client relationship you may even do it accidentally without thinking. Lesson here: you should always be careful to recommend that the board hire outside counsel if an issue arises outside your comfort zone.
Rule 1.6 Confidentiality of Information
Rule 1.6 of the MRPC encompasses your duty as a lawyer to keep a client’s information confidential “unless the client gives informed consent” or “the disclosure is impliedly authorized in order to carry out the representation.” Rule 1.6 does not apply to communications between you and the other board members if you’re only acting as a board member. But…if you’re intentionally (or unintentionally) acting as legal counsel for the organization, then Rule 1.6 requires you to keep communications related to that representation confidential. And you can see how that can get confusing, messy and complicated. In the everyday operations of being a board member, you might often communicate with board members, stakeholders, donors, etc. The need for clarity in which hat you’re wearing becomes high.
Also, board members may believe that board meetings are privileged communications and can be protected during a litigation discovery phase, since you’re acting as an attorney and a board member. But in reality, privilege can only be invoked while you’re acting in your capacity as legal counsel. As a director, you are a general business advisor, and none of that time is considered privileged.
These are critical details you need to consider before becoming a board member for an organization, but it doesn’t end here. Joining a board as an attorney is complicated, and you likely won’t recognize that until you confront the issues head-on. Take the time to prepare for what may lie ahead.
Check out parts 2 and 3 in this series for more to think about before agreeing to nonprofit board service!