Organizational Structure


Note: Articles published before January 1, 2017 may be out of date. We are in the process of updating this content.

Indemnification is the organization’s direct expression of willingness to protect its board members (and its senior staff) from the financial burdens of liability. The organization makes a financial commitment to rely on its own resources to pay a board member’s legal costs in case he is called as a defendant in a lawsuit relating to his role as a board member.

If the state laws allow indemnification and the organization decides to adopt a policy on this issue, the details of the policy should be outlined in the bylaws.

Implications of indemnification for the organization:

  • Existence of a policy may help with board member recruitment.
  • The financial capacity of the organization to pay has an effect on its promise to deliver.
  • When a payment is due, this commitment may have quite devastating consequences for the budget.


Implications of indemnification for a board member:

  • The main caution of indemnification as a protective tool is its limited effectiveness. If there are not enough funds to pay a board member’s expenses, the protection may be minimal or create a false sense of security.