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Facing up to the Liabilities of Non-profit Enterprise: A Strategy to Minimise and Finance Liabilities

McGregor-Lowndes, Myles (1992) Facing up to the Liabilities of Non-profit Enterprise: A Strategy to Minimise and Finance Liabilities. [Working Paper]

Abstract

This paper propsoes some reasons for the general discontent amongst nonprofit committee members and officers about their personal liability flowing from their voluntary positions. A practical strategy of risk management for nonprofit associations is outlines.

INTRODUCTION: There appears to be an increasing air of gloom among nonprofit managers, staff and board members which is not due solely to Australia's early nineties economic downturn. The gloom concerns the potential personal legal liability of managers and board members as well as the nonprofit organisation. The fear is that legal action will be brought against persons not only in their capacity as office bearers representing a nonprofit organisation, but also in a personal capacity. This may result in the loss of personal assets, such as the family home, to satisfy a court-imposed liability. The National Safety Council case, where an individual director was sued successfully for more than $90 million, and several local personal injuries cases concerning nonprofit organisations have only reinforced these concerns. Anecdotal evidence has board members refusing to serve because of the risk of personal liability or demanding the purchase of expensive insurance policies. Staff are requiring professional indemnity insurance and boards are confused about their legal position. Many volunteers are trying to ignore the whole issue and believing that "it will only happen to others".

This paper proposes a range of possible causes for the concerns with liability that requires further investigation by empirical research. It is not the first time that such concern has been raised in Australia, nor is it confined to Australia. It has been an issue recently in both England and the United States. The responses to the issue of nonprofit organisational liability are then examined. One response which nonprofit organisations may find useful in dealing with the issue of liability is risk management. This strategy is discussed in some detail.

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ID Code: 12046
Item Type: Working Paper
Additional Information: For more information, please refer to the publisher's website (see hypertext link) or contact the author.
Additional URLs:
Keywords: nonprofit, governance, liability, risk management, nonprofit organisations, nonprofit boards
ISBN: 0868568112
ISSN: 1037-1516
Subjects: Australian and New Zealand Standard Research Classification > LAW AND LEGAL STUDIES (180000) > LAW (180100) > Law not elsewhere classified (180199)
Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BUSINESS AND MANAGEMENT (150300) > Business and Management not elsewhere classified (150399)
Divisions: Current > Research Centres > Australian Centre for Philanthropy and Nonprofit Studies
Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 1992 QUT
Deposited On: 17 Jan 2008
Last Modified: 25 Sep 2013 22:39

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