The Ohio Revised Code explains the manner in which public boards may be operated, including the qualifications and fiduciary duties of board members1. Fiduciary duties are functions, tasks, and obligations assumed or imposed by law upon persons by virtue of the power given to them in their professional capacity. By reading the Code in conjunction with the opinions of Ohio courts and administrative agencies, you can gain an understanding of the fiduciary duties of public board members.

Essentially, public boards may exercise only those powers expressly granted by law or necessarily implied by a statute’s strict construction of language2. Members of public boards may only perform those duties deemed appropriate by the persons authorized to appoint them to the board, the board’s by-laws, and Ohio law governing their performance3. This article discusses the nature of the fiduciary duties public board members must honor and the practical ways those duties can be fulfilled.

Duty of Loyalty

Despite the diversity of missions among public boards, every public board member must operate in accordance with a pre-approved legal mandate. It follows then that the actions taken pursuant to that mandate are publicly sanctioned and binding4. Public officers wielding such power must remember that they are primarily accountable to the constituency directly served by their board and are ultimately accountable to the public at large as public servants.

Public board members are therefore obligated to uphold their fiduciary duty of loyalty while performing their official functions. The duty of loyalty is an established creation of common law, a concept that exists beyond statutes and regulations and yet remains inherent within them. At its core, the duty of loyalty requires that those who operate as agents exercising power on behalf of others must protect the interests of those persons served above all others, including themselves.

A public board member can satisfy the duty of loyalty by disclosing any personal conflicts of interest that place the constituency’s goals secondary to the board member’s personal concerns. Impermissible conflicts of interests are characterized by the Ohio Ethics Commission and Ohio courts as interests of a financial or fiduciary nature that divest some profit or benefit to someone other than the constituency5. For instance, an impermissible conflict and, therefore, a breach of the duty of loyalty occurs when a public official contracts with the public board that the public official serves. It is well-settled in Ohio law that a public officer may not contract with himself or herself directly or indirectly6.

Disclosure remains the best method of honoring the duty of loyalty. Once a conflict is identified, the impartial board members that remain may determine, in light of governing statutes and by-laws, whether simply removing the interested party from discussion of the matter would avoid breach of the duty of loyalty.

To guard against conflicts of interest, members of public boards might adopt a disclosure policy that encourages candor among board members from the outset of service in addition to demanding disclosure of conflicts as they arise. Questionnaires distributed to new board members requesting disclosure of personal affiliations and circulation of the disclosure policy, to be signed upon review, may help to keep the board vigilant against conflicts and better able to preserve the duty of loyalty.

The duty of loyalty can also be compromised if a board member discloses too much information to persons not authorized to hear it. Members of public boards must honor the confidences of fellow board members to the extent permitted by that board’s by-laws and applicable regulations. Ohio’s Sunshine Law requires that meetings of certain public bodies involving official action and deliberation of official business be held open to the public unless a specific exception authorizes a meeting in executive session7. A board’s discussions during executive session are confidential, and a member who discloses the content therein not only breaches the duty of loyalty, but also may be subject to criminal penalty8.

Duty of Care

The duty of care is also an established common law fiduciary duty most simply described as an obligation to dutifully and diligently perform the functions of a position. Preserving the duty of care involves little more than making a good faith effort to do a job well and doing just that. However, this vague description can be fleshed out in several ways that provide practical guidance for board members.

First, know the board’s mission.

Members of public boards should be knowledgeable as to the purpose and function of the board on which they serve, and their expected contributions. If the board has adopted a formal mission statement or strategic plan, its members are obligated to have a working understanding of the goals and objectives they outline. Board members must also be familiar with the legal mandate directing the board’s activity, whether it is the Ohio Revised Code or regulations devised by a superior administrative body. This knowledge helps avoid breach of the duty of care by ensuring that board members will actually know what duties to faithfully perform. Otherwise, public board members who recklessly fail to perform duties expressly required of them by law or perform an act expressly forbidden by law, can face criminal penalties for “dereliction of duty"9. Incompetence that results in a board member’s failure to perform an implied duty also constitutes a breach of the duty of care and justifies civil penalties10.

Second, honor your commitments.

Public board members must honor their commitments to the board (and the public) and respect the authority vested in their office by refraining from giving away too much of their power through excessive delegation of tasks11. Certainly, there are aspects of board administration that may be delegated and performed by other affiliates. However, board members who are authorized by law to exercise discretion must personally exercise that power to maintain the integrity of the office.

Satisfying the duty of care also requires compliance with new or modified duties imposed on an existing office. Dutiful performance might require that board members stay informed of advances in their respective fields by attending continuing education workshops and classes. Attendance at instructional classes is but one method to ensure a board members’ duties are truly performed to the best of their ability.

Public board members also honor their commitments and preserve the duty of care by regularly attending meetings prepared to participate in the decisionmaking process. In most instances, members of public bodies must be physically present in order to vote or be counted toward a quorum. Actions taken by a board without the requisite attendance may be subject to invalidation. Because attendance at board meetings is vital to satisfying the duty of care, if meetings are not pre-scheduled by statute, they should be scheduled at the most convenient times and intervals possible.

Meetings should be conducted pursuant to formal rules of parliamentary procedure and incorporate proper record-keeping. If permitted, circulation of the agenda before the board convenes encourages thoughtful responses from the membership and increases efficiency.

Third, seek professional help . . . and use it.

Members of public bodies “have the right, duty, and privilege in time of uncertainty to seek and receive advice and opinions from a duly constituted legal advisor and, once given, are under moral, ethical, if not legal obligation to act accordingly"12. Public board members may rely upon the opinions of accredited professionals and are encouraged to seek their advice concerning matters beyond their own expertise to ensure that the job is done right. Acquiring the assistance of a tax professional is a good example of professional assistance that promotes the duty of care. The complexities of the tax code offer no shelter for failed compliance and learned professionals can help avert disaster merely because of their familiarity and training in the field.

Liabilities of Public Officers

The mere fact that a public officer does not receive compensation for his or her service does not remove liability to the public for negligent or wrongful acts13. Members of public boards who are not compensated for their services are liable for their acts in a manner equivalent to those who do receive payment. Members of public boards are significantly protected from personal liability for breach of fiduciary duty by the common law and statute, particularly if their service affords them the status of a public official. Much like the business judgment rule in corporate law, public board members granted the liberty of exercising discretion to perform duties may not be held liable or accountable simply for errors in judgment14.

The Ohio Revised Code grants public qualified immunity for persons who err in determinations of law and fact while acting in good faith and within their authority15. In these circumstances good faith is presumed, and the charging party bears the burden of proving an act or actor is not entitled to immunity. Additionally, the “Public Duty Doctrine” prevents recovery by individuals injured as a result of a public official’s failure to uphold a duty absent a special relationship with that individual16. This stems from the theory that a public officer owes a duty to the public and not to individuals and, thus, failure to preserve that duty injures the public at large. If a public board acts beyond its legal authority, the public may seek the remedy of injunction to counteract the harm caused.

There are, however, activities that clearly constitute a breach of fiduciary duty and result in civil or criminal penalties against the wrongdoer. As previously stated, failure to adhere to express direction or prohibition may result in a “dereliction of duty” sufficient to incur criminal penalty. Also, a public board member who engages in overtly criminal acts, like embezzlement or theft, clearly cannot use his or her official position as a shield from the law.

Public Board Members as Members of Nonprofit Boards

Public officials who also seek to serve on public or nonprofit governing boards may do so if they qualify and are not prohibited by law from holding the position. Public board members can review the Ohio Revised Code to see if there is a prohibition against simultaneous service on a public or nonprofit board. Opinions of the Ohio Attorney General also provide direction for a public officer seeking simultaneous service as a member or trustee of a public or nonprofit board.

The myriad of office/board combinations presents opportunities where specific legal guidance might be lacking. In those instances, public board members must take care to avoid simultaneous service that results in a conflict of interest between their responsibilities as a public board member and their duties and loyalties as a member of a private or nonprofit board. Finally, public officers who act in good faith bear no greater liability for the actions of the board on which they serve than do private citizens and may not be sued as individuals for the actions of the board17.

Conclusion

Members of public boards are given authority to act on behalf of the public and in doing so are afforded considerable protection from public assault. However, the law provides protection only when board members reciprocate with legal compliance and preservation of the fiduciary duties. Because full compliance is possible only with an understanding of the responsibilities owed, public board members must make education and mastery of those duties a priority.

Footnotes

1. The term “public board member” as used within this article encompasses all persons who serve on public administrative boards and commissions in an official capacity, including but not limited to: county commissioners, township trustees, members of city council, members of school boards, members of zoning commissions, etc.

2. City of Cleveland v. State Bank, 16 Ohio St. 236 (1865).

3. RC 1702.34(B)(1).

4. Shipbaugh v. Kimball, 19 Ohio Dec. 33, 39–40 (1908) ([A public officer] acts only for the public; and the public are represented in the instance only by him; and the theory upon which his acts bind the public is that his acts have the public sanction, because they are exclusively in the interest of the public.”).

5. RC 2921.42(A)(4); State ex rel. VanMeter v. Lawrence Cnty. Bd. Cmmrs., 1994 WL 323703 (Ohio Ct. App. 4th Dist. Lawrence County 1994); Ohio Ethics Comm. Advisory Ops. No. 93-001 (Jan. 8, 1993), at 3-4, No. 81-008 (Nov. 19, 1981) at 1.

6. State ex rel. Taylor v. Pinney, 13 Ohio Dec. 210 (C.P. Franklin County 1902); 1979 Op. Att’y Gen. No. 79-111; 2002 Op. Att’y Gen. No. 2002-41, 12-13. However, an employer of a public official is not prohibited from doing work for the public entity on whose board the public official sits. In Advisory Opinion 86-004, dated 5-10-86, the Ohio Ethics Commission opined that, while Ohio law prohibits a member of a regional authority from voting on matters concerning the retention of legal counsel or using his or her authority to influence such decisions, it would not prohibit such member’s law firm from providing services to such regional authority. The Ethics Commission also opined that, while Ohio law prohibits a member of a regional authority who is a partner in a private law firm from having a direct interest in the profits or benefits of a contract between the authority and his firm, it does not prohibit such person from receiving a distributive share of partnership profits generated by the representation of such regional authority, provided he or she does not render the services personally. Advisory Opinion 86-004, Ohio Ethics Commission.

7. RC Chapt. 121. Municipal corporations operating under Home Rule Amend. are not governed by the Sunshine Law and must therefore consult the Ohio Constitution regarding the scope of board confidentiality. City Com. of Piqua v. Piqua Daily Call, 64 Ohio App.2d 222, 412 N.E.2d 1331 (1979).

8. RC 102.03 provides that it is unlawful for a public official or employee to “disclose or use, without appropriate authorization, any information acquired by the public official or employee in the course of the public official’s or employee’s official duties that is confidential because of statutory provisions, or that has been clearly designated to the public official or employee as confidential when that confidential designation is warranted because of the status of the proceedings or the circumstances under which the information was received and preserving its confidentiality is necessary to the proper conduct of government business.” RC 102.99 specifies that violation of RC 102.03 constitutes a first degree misdemeanor.

9. 15 O. JUR. Civil Servants and Other Public Officers and Employees § 362.; RC 2921.44(E).

10. State v. Gaul, 117 Ohio App.3d 839, 849–852, 691 N.E.2d 760, 766- 768 (1997).

11. Kelley v. Cincinnati, 7 Ohio N.P.360, 9 Ohio Dec. 611 (C.P. 1899); Bell v. Bd. Twp. Trs. Lawrence Cnty General Hosp., 34 Ohio St.2d 70, 296 N.E.2d 276 (1973).

12. State ex rel. Reeder v. Municipal Civil Service Commission, 82 Ohio L. Abs. 225, 165 N.E.2d 490 (1959).

13. 12 O. JUR. 3d Agency & Indep. Contrac. §105.

14. 15 O. JUR. 3d. Civil Servants and Other Public Officers and Employees § 355.; State v. Bair, 71 Ohio St. 410 (1905); Reckman v. Keiter, 109 Ohio App. 81, 164 N.E.2d 448 (1959).

15. Leibson v. Ohio Dep’t of Mental Retardation & Developmental Disabilities, 84 Ohio App. 3d 751, 618 N.E.2d 232 (1992); Catalina v. Crawford, 19 Ohio App.3d 150, 483 N.E.2d 486 (1984).

16. Brodie v. Summit County Children Services Bd., 51 Ohio St.3d 112, 554 N.E.2d 1301 (1990); Elliot v. Ohio Dep’t of Ins., 88 Ohio App.3d 1, 623 N.E.2d 87 (1993).

17. Harris v. Davis Constr. Systems, Inc., 34 Ohio App.3d 350, 518 N.E.2d 956 (10th Dist. Franklin County 1986).

Reprinted from Finley’s Ohio Municipal Service, with the permission of the publisher and copyright owner, West Group.