Understanding the CLO Doctrine

Exploring Core Principles of Nonprofit Governance

Governing a nonprofit organization is a multifaceted responsibility that involves navigating legal obligations, ethical standards, and operational demands. At the core of this governance framework are three foundational duties: care, loyalty, and obedience—commonly referred to as the CLO Doctrine. These principles provide essential guidance for nonprofit board members, helping to ensure that decisions are thoughtful, ethical, and aligned with the organization’s mission. By adhering to these duties, board members uphold the trust placed in them by donors, beneficiaries, and the broader public.

Let’s take a closer look at what each of these duties involves and why they are so vital to nonprofit success.

Duty of Care

The duty of care involves a commitment by each board member to act in the best interests of the organization through informed and attentive decision-making. This means taking the time to review reports, ask questions, stay engaged in discussions, and participate actively in meetings. It also involves a thorough understanding of the nonprofit's financial, legal, and operational status.

For example, a board member practicing the duty of care might contribute meaningfully to strategic planning sessions or ensure that the organization’s spending aligns with its approved budget. This level of engagement helps reduce the risk of poor decisions that could damage the organization and ensures that every action reflects thoughtful oversight. Ignoring this duty can result in serious consequences, both for the individual and the organization, including potential legal liability.

Duty of Loyalty

The duty of loyalty requires board members to put the interests of the nonprofit above any personal interests or outside obligations. This includes avoiding conflicts of interest, remaining transparent about potential biases, and maintaining confidentiality around sensitive information. A board member who owns a business, for instance, should recuse themselves from discussions or decisions related to awarding contracts to that business, putting the organization’s integrity and reputation before personal gain.

Demonstrating loyalty also involves safeguarding the organization’s credibility in public and private discourse. When board members act with loyalty, they strengthen public trust and foster a culture of honesty and accountability. Conversely, breaching this duty can damage the organization's reputation and undermine its ability to serve its community effectively.

Duty of Obedience

The duty of obedience is grounded in the responsibility of board members to honor the organization's mission and ensure compliance with applicable laws and internal policies. It calls for a deep respect for the organization’s founding purposes and a commitment to staying within the scope of its charter.

This duty also includes making sure that fundraising activities, financial reporting, and organizational operations adhere to both legal standards and internal ethical guidelines. For instance, reviewing fundraising practices to verify compliance with laws and ethical norms reflects a board's commitment to obedience. Upholding this responsibility helps protect the nonprofit from legal trouble and ensures long-term sustainability and mission alignment.

Bringing It All Together

These three duties—care, loyalty, and obedience—are closely interconnected and collectively form the foundation for strong, ethical governance. Each one reinforces the others. Together, they create a balanced framework that helps board members navigate the often complex decisions and challenges they face. Making informed decisions while upholding the highest ethical standards and staying true to the organization’s mission allows board members to lead with integrity and confidence.

By committing to these core responsibilities, board members help ensure that their organizations operate effectively, ethically, and in alignment with their missions. In a sector where trust is paramount, consistency in honoring these duties enhances the nonprofit’s credibility and impact, allowing it to thrive and continue serving its stakeholders with excellence.