Lawyers should seize the opportunity to give back to their communities by volunteering to serve on a board, whether non-profit or profit. However, you really need to be alert before you do so, even though this is a historical role of lawyers. Just after the formation of our country, a French political writer, Alexis de Tocqueville, spent considerable time in the new United States in the early 1800’s making observations about the new democracy (On Democracy in America). He was struck by the involvement of lawyers in every portion of the American society and felt their involvement and influence acted as a natural function against any excesses in democracy. He said: “The American is the Englishman left to himself.”
I suspect that you will find that to still be true today. In any small town in America, the local attorneys are involved in their churches, civic groups and non-profits. It is part of practicing law, in my personal view. However, if you plan to serve on a board, you must make the determination early whether or not you are going to be a lawyer, or a board member. If you are the lawyer for an organization, you really should not be serving on the board. You also have to recognize that many non-profits are asking you to serve on their board so they can have free legal advice. That really does not work. There is a real conflict in duties there. You need to tell them you would be glad to serve, but you cannot give legal advice or render legal opinions. In the alternative, you can consider donating your time as a lawyer to the organization and not serve on the board.
One of the common denominators with all lawyers is a lack of time, so logically you must first determine how much time you need to spend on this board, what your personal exposure for liability purposes might be, and how much money they are going to want you to raise or give. A drive-by approach to service on any board will help neither of you. If you are going to do it, then spend the time and do it right.
I always recommend personal due diligence by each person before they consider accepting the flattering offer to serve on a board. If the board is dysfunctional, poorly run, or dominated by a person or faction, then you do not want to be part of it unless you want to go in and change the entire structure. Eyes open for this type of service is my advice.
I also recommend that individuals immediately determine whether or not the organization has purchased directors’ and officers’ coverage (D&O). If not, they probably should. When you serve as a board member, your coverage must come from the organization or their insurance since most professional liability policies will exclude you from coverage as a board member. In other words, you are acting as a board member and not as a lawyer.
Conversely, if you are a board member rendering legal advice while on the board, most D&O coverage will exclude you from that. You are covered as a board member, but not as a lawyer. You are trying to do a good deed and you have no coverage in the process. So, some reasonable advice is to decide whether you are going to be a board member or the lawyer for the organization and act accordingly. Do not fall in the trap of answering legal questions and then having an absolute conflict of interest in the process. I think that is particularly true if it is a client of the firm and particularly if it is a for-profit corporation. Your duties as a board member are different than yours as a lawyer. The privilege is also different.
Some additional thoughts on service:
• Publicly traded board service is a bit more involved since the passage of the Sarbanes-Oxley Act of 2002;
• All law firms should require their lawyers to seek permission to serve from a firm body so such issues can be considered;
• Consider coverage issues;
• Consider validity of director’s indemnity for actions;
• Will your service disqualify your firm in some manner?
• Would the firm be vicariously liable?
• Will you be stuck with a higher standard of care than other directors?
• Closed family corporate boards can be problems and a firm imposed limitation or review may well give you cover from this.
I know, I’ve told you to go do it and then as a lawyer, I’m telling you all of the things you have to watch out for. That’s what lawyers do, isn’t it? Go serve and give back, but do it wisely and with full knowledge of any risks. See also, Serving on a Nonprofit Board: Identifying and Resolving the Ethics Issues (audio) (ALI CLE).
See also 30 Law Man. Prof. Conduct 23:
Corporate Counsel as Director
"It is not unethical per se for a lawyer to serve as a director of a corporation as well as its legal counsel, but this dual role can endanger the attorney-client privilege in several ways, according to the ABA Standing Committee on Ethics and Professional Responsibility. See ABA Formal Ethics Op. 98-410 (1998).
First, confusion may arise when the lawyer-director provides the company with advice that has both legal and business implications, the ethics committee noted. When management or the board of directors consults the lawyer-director for legal advice, the lawyer should make clear that the meeting is for that purpose alone. The lawyer-director should avoid the temptation of providing business or financial advice, the committee advised, unless it affects legal considerations such as the business judgment rule.
The lawyer-director also should realize, the committee said, that her status as director empowers her to waive the corporation's privilege, and may require her to reveal information to outsiders such as an auditor. Moreover, what the lawyer knows as a director may be imputed to the corporation and, in the case of outside counsel, what the lawyer knows as a lawyer may be imputed to other members of her law firm, the committee noted.
Similar concerns were expressed by an ABA task force on lawyer-directors in The Lawyer-Director: Implications for Independence (1998)."
This blog was originally posted on January 7 on Lawyering for Lawyers blog. Click here
to read the original entry.