Most directors in foundations do their work voluntarily. They receive an expense allowance at best, and often not even that. Some directors are paid something, but the amount of that sum is not in proportion to their work. Does this make a difference for their possible liability when damage is caused? Can you be held liable less easily when you performed the work that you did (wrong) without pay? Do you have to pay less compensation in that case? Unfortunately for the volunteers, the answer to these three questions is three times ’no’. It does not make any difference.
Each director of a foundation has an agreement for services with the foundation by law. This means that this agreement exists, even if you have not made any arrangements in this respect. The moment you have accepted the appointment as director, this agreement for services is a fact in the legal reality, also if you have not explicitly accepted the appointment. Going to the board meeting and participating in the decision-making process already implies acceptance.
As of that moment, rights and obligations arise. One of the most important obligations of a director is acting in the best interest of the foundation. If you fail to do so as director, you can be held liable for damage caused by your action or omission. Examples are failing to pay taxes and national insurance contributions in time, unlawful dismissal of an employee (causing damage to the foundation), intentionally failing to pay invoices (causing the foundation to get in trouble), buying things in the name of the foundation when you know or could know that the foundation cannot afford it, etc.
In that case, the argument that you did the work as a volunteer unfortunately does not help. You work for free and yet you have to pay. Is that reasonable? I think so. If you undertake to perform work because your good heart tells you to, you have to do that work properly. If you cannot or do not want to, you should not become a volunteer, not to mention a director. Noblesse oublige. The legal system goes quite far in this respect. Well-known is the example of the notary who is asked for legal advice by a friend in a weekend at a party, late at night and after a few glasses of wine. This friend got his advice, but the advice turned out to be wrong. The court held that the notary had to pay the damage caused by it. That the advice had been given as a favor to a friend outside office hours at a party was considered irrelevant. As soon as you put on the hat of legal advisor, whether or not at a party, or as soon as you voluntarily provide medical assistance as a doctor in your leisure time, you have to observe the standards applicable to every normal professional. If you do not, you are liable for the damage. So, if you decide to serve a good cause as a volunteer by becoming a member of the board of a foundation, that is very noble. But you have to do it right, or you are in trouble.
Does this also apply to volunteers who are not on the board of the foundation but who perform unpaid work for the foundation? No, at least to a lesser extent. It is true that they are liable if they make mistakes in the performance of their (volunteer) work, but in general the foundation has to compensate for the damage caused by less serious mistakes. The foundation cannot recover it from the volunteer, so the volunteer gets away with it.
Do you have a question about corporate governance yourself? Please e-mail it to firstname.lastname@example.org and perhaps your question will be discussed in the next blogpost.