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A Fiduciary’s Legal Obligation is to Put Purpose Before Organization

Board members, as well as senior leaders, have three moral, legal, and fiduciary duties.

  • Duty of Obedience: Act with the care that an ordinarily prudent person would exercise under similar circumstances
  • Duty of Care: Ensure that the organization is upholding its legal and governing responsibilities
  • Duty of Loyalty: Exercise independent judgment while making decisions based on what best serves the purpose of the organization

In other words, Board Members and Senior Leaders are legally obligated to put purpose before organization by making decisions based on what best advances your reason for existence… Not based on what keeps your organization in existence.

Quote from Nonprofit Law Blog – “…fiduciary duties are owed to the charity’s purpose - rather than to the corporate entity”

The 2021 American Law Institute’s Restatement of the Law for Charitable Nonprofit Organizations states:  “In the case of a charity, fiduciary duties are owed to the charity’s purpose – rather than to the corporate entity. “A fiduciary’s good faith belief in what is the best interest of the charity must be objectively reasonable in light of the charity’s purpose.

Thus, the best interests of a charity may not be in its perpetuation; rather, in some instances, a charity’s purposes may be better carried out by its dissolution and the transfer of its assets to another charity to be used for similar charitable purposes.” Nonprofit Law Blog – Restatement of the Duty of Loyalty.

Quote from EVOVLE OR DIE

Although putting purpose before corporate entity may not be the common practice, it’s certainly not a new concept. Back in 2012, Charity Village put out a great piece called “EVOVLE OR DIE: Why and How Nonprofits are Thinking Differently About Our Organizations”.  The suggestions in the article are even truer today than they even were over 10 years ago.


“First, as a sector, we need to get past thinking about organizations and think about the mission we fulfill, the citizens we serve and the vision we aspire to achieve. Organizations are the means to through which we achieve these ends; they are secondary to these higher purposes. The way they were separately structured, and separately operated, may need to adapt to succeed.


Next, we need to think very differently about our organizations – reconfigure, recalibrate, redefine – in order to use resources more efficiently and, more importantly, perform more effectively. Some organizations will not have a choice, if they want to thrive, much less survive.”

Quote from The Four Principles of Strategic Impact Board Leadership

More recently, the President and CEO of BoardSource, Anne Wallestad, made the same case in a Social Innovation Review Article entitled The Four Principles of Strategic Impact Board Leadership:


“Traditionally, boards are understood to be “mission-driven,” which means the board is responsible for ensuring that the organization does good work that advances its cause. But while being mission-driven is centered on the organization’s role in doing good, we believe boards need to re-center on purpose: the fundamental reason that the organization exists.”


“The traditional board frame is all about the organization and its mission, with the organization at the center of its own universe and sphere of influence. Applying the concept of “purpose before organization” moves away from the organization as the center of its own gravity, re-focusing on its purpose and the question of how it can best steward its resources in service of that purpose.:

The Traditional Nonprofit Approach compared to a Strategic Impact Enterprise Approach

Traditional Nonprofit Organizations

Board members and senior leaders are loyal to an organization
Priority is on what’s best for staff, brand, and the 501(c)3 corporation
Preoccupied with fundraising and survival above all else
Little familiarity with the ecosystems in which their organization operates
Uses all available resources to scale the organization
Ask ‘how will our approach advance our mission?’
Strategic decisions are based on what’s best for organization

Strategic Impact Enterprises

Board members and senior leaders are loyal to the organization’s purpose
Priority is on what’s best for the ecosystem and community served
Preoccupied with purpose above all else
Strong relationships and partnerships with other members of the ecosystem
Uses all available resources to advance the purpose and scale the impact
Ask ‘how will our approach create more equitable outcomes?’
Strategic decisions based on what’s best for the purpose, ecosystem, and community