The Importance of Confidentiality For Nonprofit Boards

Being a member of a nonprofit’s Board of Directors comes with a lot of responsibilities.  You are part of the organization’s governing body.  You are expected to provide guidance and oversight, as well as strategic planning.  You have a monetary role, accountable for the nonprofit’s budget and financial activity.  There’s also another important expectation, and that is maintaining confidentiality regarding matters that are not for public consumption.

Board members have a strict fiduciary responsibility to the nonprofit they serve.  When hearing that phrase, most people immediately think about money.  And often, that is probably what someone is talking about if they mention it.  However, a board member’s accountability as a fiduciary goes well beyond dollars and cents.

Legally speaking, a fiduciary is a trustee who is legally accountable to put the interest of the organization they serve ahead of their own personal interest.  We wrote a whole article about fiduciary responsibilities (linked above), so we won’t rehash all of that in this article.  The important part of our discussion here is that confidentiality is a key part of a board member’s fiduciary role.

You’ve heard the old saying, “Loose lips sink ships”.   A fun little aside is that this term originated on street posters in the US during WWII, reminding the public to be careful of unguarded talk that might undermine the war effort.  Who knew?

While your nonprofit is probably not engaged in mortal combat, there are likely many things discussed behind closed doors in a board meeting that are not meant for the world to know.  Some things, should they be publicly broadcast, could cause everything from personal embarrassment for someone to loss of trust for donors.  Again, this goes back to fiduciary responsibilities.  As a board member, you have an obligation to hold in confidence those things that are mutually determined by your fellow board members to be confidential.

What kinds of things are we talking about here?  Most often it is things involving people and their privacy.  It could be the job performance problems of a staff member.  It might be information about a key donor.  There are times that prospective strategic plans might need to be kept under wraps for a time.  The bigger point is, if it is supposed to be private, keep it private.

The concept of confidentiality in a nonprofit is a balancing act.  For board members serving a for-profit business, virtually everything discussed within a board meeting is totally confidential.  Breaching that trust can even have legal consequences to a board member with the proverbial “loose lips”.  In a nonprofit, it’s a bit different.

For the most part, board meetings of nonprofits…especially those of 501(c)(3) organizations…should be considered open meetings.  That means potentially open to the public.  Rarely does that happen, but the principle remains.  We recently did an article and video about nonprofit transparency, and that’s what I’m getting at.  There shouldn’t be a lot going on with your nonprofit that isn’t transparent to your donors and beneficiaries.  Boards can (and do) go into what’s often called Executive Session to discuss matters of privacy, but eventually, most everything of a non-personal nature becomes public record.

Given this balancing act, I’ll make two statements with obvious tension between them:

1. Don’t use confidentiality as an excuse to keep private what should be public, and
2. Don’t run your mouth about things that should be private under the guise of transparency.

See the tension?  Having spent many years serving on charity boards, in practice it’s not as difficult as you might think.

There are a number of policies every nonprofit should have.  Included among those is a Confidentiality Policy for board members.  Key elements of a good confidentiality policy should include:

• The purpose of the policy
• Who it applies to
• It should prohibit disclosure of confidential information without express authorization from the rest of the board
• It should spell out, as thoroughly as possible, what matters are generally considered confidential

The internet is full of templates and examples.  Find one that works for your nonprofit, adopt it, and make sure all board members acknowledge it and agree to abide by it.

When thinking about consequences, there are the collateral damages kind and the personal accountability kind.  They are very different, and I briefly want to address both.

Collateral Damage – Breaching confidentiality can cause great harm to people and organizations.  Reputations can be harmed, sometimes irreparably.  Trust can be lost, both between board members individually and loss of trust by the public.  It can get ugly and result in lasting damage to all involved.

Personal Accountability – This is what happens to the individual found to have breached confidentiality.  It is a good idea to include consequences in your Confidentiality Policy.  I recommend not having a one-punishment-fits-all-crimes mentality on this, however.  Some breaches are unintentional and/or relatively harmless and may deserve nothing more than a censure by their fellow board members.  Other breaches are willfully careless or intentional and maybe even malicious.  These deserve more serious consequences, including removal from the board.  It is possible to have situations egregious enough to warrant legal action.