Nonprofit board confidentiality policies: Help keep information safe

A nonprofit organization was looking to expand its office space. The board met with their lawyer to discuss purchasing a larger parcel of land near the current office. The site had been on the market for a long time, and the board hoped to get it for less than the asking price. After the meeting, a board member told a colleague that the organization was interested in the parcel.

The colleague knew the owner of the parcel and informed her that the organization was able to pay more than the value of the land. When the organization made an offer, the lawyer discovered that the owner had raised the price considerably. The board member had inadvertently tipped their hand in negotiations and cost the organization thousands of dollars.

Maintaining confidentiality in board matters like legal cases and real estate negotiations is essential for board members. Unfortunately, many boards don’t clearly define confidentiality or include it in their onboarding and training. A formal, written policy on confidentiality can help.

Why do we need board confidentiality?

Confidentiality is included in the board’s fiduciary responsibilities, which is the legal or ethical obligation to act in the best interest of another party. Maintaining confidentiality  includes any personal or sensitive information they acquire during their service to the board. Board members have limits on how they can share information and with whom they may share it.

A breach of confidentiality on the board can happen for a variety of reasons. Three of the most common ones are:

• The disclosure of confidential information discussed at a board meeting.
• The disclosure of personal information.
• Conflicts of interest.

Nonprofit board meetings are often open to the public. However, board members may need to discuss certain issues privately. The board may go into executive session and ask board guests to leave during this part of the discussion. Reasons for moving into executive session include the need to discuss employee discipline, an employment contract, performance or compensation matters, a lawsuit or other pending legal matters, and contract or real estate negotiations

Board members have access to personal or sensitive information about their membership and fellow board members. Sensitive information may include health, employment, finances or other personal information. Board members shouldn’t disclose information that they’ve received as part of their position on the board.

Board members usually have a large network of constituents, network associates or other individuals to which they have some degree of loyalty. While this is a good thing, it often causes a conflict of interest when a board member shares information that they’ve gained as part of their employment or position or when board members rehash arguments outside of board meeting time that the board has already decided on a matter

Developing a confidentiality policy

Understanding fiduciary responsibilities should be enough to prevent problems with confidentiality, but there are several reasons for instituting a formal policy. A confidentiality policy clarifies expectations for board members and explains the context of how to apply it. Such a policy could form the basis of more detailed procedures if they become necessary and may govern future decision-making or actions. Having a confidentiality policy is part of best practices for boards.

The first step in writing a confidentiality policy is to identify the reasons the board needs it. The next section should spell out who the policy applies to, which may include board members, staff, committee members who are not on the board, the advisory board and others.

The policy should include a statement of the directors’ duty of confidentiality and explain that they are not to disclose or discuss confidential information about the organization’s matters with another person or entity, or use it for their own purposes, unless the board authorizes them to do so. This section should directions about speaking to the media and the public.

A confidentiality policy should specify what matters are considered confidential. Since nonprofit organizations vary substantially in their missions and activities, this content will be unique to the organization. Boards should also clarify the process in writing that board members should take if they want or need to obtain authorization to release confidential information.

Boards should state in the confidentiality policy whether they allow audio or video recordings, along with the circumstances in which they are — and are not — allowed.

Rather than starting from scratch, it helps to use a template from another nonprofit organization as a starting point.

Implementing a confidentiality policy

Once the board completes the confidentiality policy, they will need to formally approve it at a board meeting. The board secretary should link it to or combine it with the organization’s privacy policy and conflict of interest policy. The policy should be written into the bylaws and filed in all copies of board member handbooks.

The board secretary should include information about the confidentiality policy during board member orientation and ask new board members to sign a statement saying that they’ve read it and agreed to abide by it.

Staff members should also have a signed statement agreeing to the confidentiality policy in their personnel files.

What happens when you breach confidentiality

Board members, individuals or nonprofit organizations may suffer consequences if a board member or even a staff member breaches confidentiality, whether it happened unknowingly or not. Direct consequences may vary depending on the circumstances of the breach.

An element of good governance is full and frank disclosure of information in the boardroom. When board members can’t trust each other to keep confidences, it has a negative impact on the nonprofit’s governance.

The board needs to be sure that board members fully understand that once the board approves a decision, it becomes a decision of the whole board. If any board members disagree with a decision regarding confidentiality, they may register their dissent. Members who seriously disagree with the confidentiality policy, or any other policy, may choose to resign from the board.

Fiduciary responsibilities are the core responsibilities of board members, which is why board members should devise a confidentiality policy as soon as possible. Issues with confidentiality can damage the organization’s reputation. In turn, a bad reputation will have a negative impact on donations and grants, so it’s worth taking the time to write and implement a confidentiality policy.

How BoardEffect supports confidentiality

BoardEffect is designed with the unique needs of volunteer boards in mind. It offers a robust, user-friendly solution that enhances communication, supports secure data handling and drives greater board engagement. It makes training and onboarding easier, with secure access to documents and other board materials.

BoardEffect provides many valuable benefits for nonprofit organizations, from secure communications, easy access to key documents, streamlined agenda and meeting management and peace of mind against many of these risks and potential costs. Request a demo to find out more.