The “duty of care” essentially concerns the competent behavior of the board. According to the BoardSource, some 20 states have statutory language to the effect that “duty of care,” can be defined as “the care that an ordinarily prudent person would exercise in a like position and under similar circumstances.”
The “duty of loyalty” requires board members to be faithful to the best interests of the organization they oversee when making decisions or taking action in relation to that organization. Mainly, this duty pertains to NOT using information or contacts acquired as a board member for personal gain, or the gain of business associates, family members or friends. Similarly, board members should be aware of the principle of “private inurement,” which holds that income from non-profit organizations cannot be used for the benefit of those connected to the organization.
This does not mean that board members cannot be compensated for their work, but it does prohibit compensation considered excessive. In any case, board members should be extremely sensitive to even the appearance of conflicts of interest, and it is best to have strict policies and bylaws governing such issues firmly – and prominently – in place.
The “duty of obedience” calls for board members to act in accordance with the mission and goals of their organization. While board members are certainly entitled to exercise their own, individual judgment in pursuit of their organization’s goals, words and actions should not be inconsistent with their organization’s overall mission.