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Fiduciary duty of board/committee members

Persons elected or appointed to of management committee or a board of an Incorporated Association have a "Fiduciary Duty". This legal term goes back hundreds of years.

This is what Wikipedia says about Fiduciary Duty:

"A fiduciary duty is the highest standard of care imposed at either equity or law. A fiduciary is expected to be extremely loyal to the person they owe the duty (the "principal"): they must not put their personal interests before the duty, and must not profit from their position as a fiduciary, unless the principal consents. The fiduciary relationship is highlighted by good faith, loyalty and trust, and the word itself originally comes from the Latin fides, meaning faith, and fiducia." (Wikipedia online encylopedia)

A committee member is a person who is placed in a position of trust. It is expected of a committee member that they will not betray this trust by failing to properly oversee the affairs of the association.

A committee member should adhere to the following guidelines:

·      Keep well informed of the company’s affairs. Ignorance or absence of dishonesty is not a defense.

Failing to attend committee meetings is an example. If the association becomes insolvent, for instance, an office bearer will not be able to escape liability on the basis of ignorance through not attending meetings.

·     Not take action out of self-interest or make use of their position on the committee for personal gain or a third party.

A committee member using their position on a committee to ensure their own selection, or the selection of their own athletes for overseas events when others more worthy are available, is an example.

·     Avoid conflicts of interest e.g. take business opportunities belonging to the company.

This is a common cause for complaint. Two examples:

  1. An office bearer who is a builder uses his position on the committee to win the contract for building the new clubhouse for his own building company.
  2. An association decides to import sports equipment from overseas to sell at a profit. An office bearer, realising that there is money to be made, also begins to import and sell the sports equipment in direct competition with the association.

·     Not make improper use of information

Office bearers should not make improper use of the information contained in the association’s database or any other information about members. The membership database should not be sold to marketing companies for instance.

·     Exercise a degree of care and diligence over the administration of the organisation’s affairs (especially financial affairs)