Aprill & Horwitz, Fiduciaries, Constituencies, and the Duty of Loyalty in Modern Nonprofits
A fiduciary of a charity has a fundamental duty to act in good faith and in a manner the fiduciary reasonably believes to be in the best interests of the charity in light of its purposes. In theory, this duty of loyalty seems uncomplicated and, in simple cases, it often is. In practice, for many fiduciaries discerning the content of the duty of loyalty, and sometimes even identifying the charity and the legal purposes to which the duty is owed, is not in fact so simple. Challenges to identifying and complying with fiduciary duties can arise when board members serve a charity because they reflect the experiences of certain constituencies or identities. Examples abound. University boards, for instance, have long included members who are students, union members, or other stakeholder representatives. Complications related to intersecting entities can also muddle understanding of a fiduciary’s responsibilities. In this Article we offer a brief examination of the complications raised by various forms of constituency memberships, the ways in which fiduciary law attempts to clarify duties, and some tentative suggestions to ameliorate confusion regarding these duties.
Lloyd Mayer