A corporation should develop a thorough orientation for new D&O's and an on-going commitment to educating D&O's to the particular operations of the organization, the competitive and regulatory environment in which the organization exists, the nature of the industry in which the organization operates, and the legal arena in which the organization conducts its activities and in which the D&O's serve as fiduciaries.
To fulfill their legal responsibilities, directors and officers must have an intimate familiarity with the organization and their legal powers, duties and restrictions. Because both the factual and legal environment in which the organization operates and in which D&O's serve is constantly changing, the need for education is continual.
Mission of Organization
Unlike for-profit corporations, the basic mission of many non-profit organizations may not be intuitive. Therefore, D&O's must first identify, then periodically evaluate, and where appropriate, revise the fundamental purpose of the organization. A short, concise mission statement, which can then be implemented through interim objectives and policies, is recommended. D&O's should continually seek information as to whether the constituents of the organization are obtaining from the organization what they want or need and whether it is time for a change in policy to improve the organization's effectiveness.
Factual Orientation
Formal orientation programs are particularly necessary for new directors and officers. D&O's may be personally liable for wrongful conduct regardless of how new they are to their position. New directors should become familiar with basic corporate records and minutes of recent board and committee meetings, corporate disclosure documents (if available), recent annual reports, board structure and board committee organization, biographical data of the current board and current management personnel, planning documents and studies, management letters from independent auditors, information concerning facilities of the organization (including a tour when possible), and information concerning the organization's outlook with respect to current prospects and problems, critical issues and long-range objectives.
Legal Orientation
The orientation or on-going education of directors with respect to applicable legal principles must be tailored to the unique set of legal standards relevant to the particular organization and its directors and officers. The standards depend, among other things, upon the nature of the company's business, degree of charitable and for-profit activities undertaken, the state of its incorporation, the locations where it transacts business, the industry in which it competes, and the terms of its articles of incorporation, its bylaws and other internal documents.
The fundamental duties of directors and officers should be reviewed and understood. Legal guidelines should be presented, ranging from basic operational procedures such as always indicating on any executed document the capacity in which the director or officer executes the document, to a more in-depth review of the important statutes, rules and regulations restricting or regulating the conduct and operations of the company.
Training Seminars
These educational programs can also include training to enhance their skills as directors. Outside consultants are available to conduct seminars intended to develop directorial skills, similar to programs of continuing education for other types of professionals.
Internal Guidelines
The board should not only educate itself, but assure proper education of officers and employees. Among other things, directors should develop, publicize, maintain and enforce appropriate management policy statements or guidelines defining ethical standards and legal guidelines with respect to various potentially sensitive or misunderstood areas, including:
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Possible conflicts of interest
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Antitrust laws
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Proper accounting and financial integrity
- Payments that may be unlawful or unethical, including bribes and kickbacks
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Political contributions & confidentiality of corporate information
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Missappropriate of corporate assets oropportunity
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Identify Do Not list for officers and employees
These statements or guidelines should be developed with the assistance of legal experts and should be circulated to all potentially affected personnel. Each appropriate employee, including new employees, should sign a statement acknowledging their understanding of the policy and agreeing to abide by it. The organization should periodically review and update these statements or guidelines in view of new legal developments. Any updated material should be redistributed to and re-certified by each employee.
Although aggressive implementation and enforcement of these statements and guidelines will not stop determined wrongdoers, they will educate and guide the vast majority of employees on avoiding illegal conduct and may prevent the organization and its management from being charged with wrongdoing (or at least mitigate the severity of sanctions imposed) when a subordinate employee violates the guidelines.
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