Kate H: So, Kate, quick question. When you joined your first committee, did anyone sit down and explain your legal responsibilities? Kate M: That was a very long time ago, Kate. I reckon that was in about 1985 when I joined the committee of my kids childcare center. I was, elected. I might have even been appointed. I can't remember. Anyway, I went on as the secretary. Did anyone actually sit me down and explain, what I needed to do, what I was responsible for, what would happen if I got it wrong, all of that stuff? No. They did not. Kate H: And yet you signed up for the job anyway, which makes this episode essential listening. Welcome to The Committee Room. Welcome back to The Committee Room. I'm Kate Hartwig, Kate one. Kate M: And I'm Kate McPhee, Kate two. We help volunteer board and committee members of small not for profit organizations who feel overwhelmed, frustrated or just plain stuck to get their organisation back on track, meet their legal and compliance obligations and work better together. Kate H: We're in the middle of our Great People, Great Committees series. So far we've covered who should be in the room and what committee members are there to do. Today, we're going to go a little bit deeper into the legal duties every committee member carries from the moment they're elected, whether anyone told them about it or not. So this podcast is for general information on best practice governance for small to medium associations. It is not legal advice. Kate M: Right. Let's get into it. When you strip away all the legal jargon, every committee member's duties come down to three things, care, loyalty, and obedience. Kate H: Which sounds uncomfortably like a nineteen fifties wedding vow, Kate. Kate M: It does. It does. But listeners, stay with us because this is actually a useful way to think about what you've signed up for. Let's take these things one at a time. Care first. Kate H: Okay. The duty of care means overseeing the activities of your organisation with the care that any ordinary, prudent person would use. You don't have to be an expert. You do have to be engaged, informed and diligent. Kate M: So what does diligent look like in practice? It looks like reading reports before the meeting, asking questions when something doesn't look right, making up your own mind rather than just going along with the room. Kate H: Now that one is really important. You are individually responsible for being informed. You cannot outsource your due diligence to someone else at the table. I assume someone else had checked it is not a defense. Kate M: Nor is, well, everyone else was voting yes. I've sat in on so many committee meetings where a significant decision, you know, a contract or something went through without a single person around the table having actually read it. That is a failure of the duty of care. Full stop. Kate H: When everyone goes along with something because nobody wants to be the one to push back, that's groupthink. And it's one of the most common ways the duty of care fails. Not through malice, not through laziness, just through nobody wanting to be difficult. Kate M: Being difficult is sometimes exactly what good governance requires, Kate. Kate H: It is indeed, and we're very good at it. Kate M: Very good at being difficult. Yes. I think we've been accused of that a number of times, each of us separately and together. I'm taking that as a badge of honor, Kate H: I wear it with pride. So duty number two, loyalty. Now this is where it gets personal. Kate M: The duty of loyalty means acting in the best interests of the organization even when that doesn't align with your own personal interests. The organization has to come first always. Kate H: Conflicts of interest live here too. Classic example, the committee is looking for suppliers for catering at their annual event. Now one committee member's partner runs a catering business and has put in a quote. Kate M: So what should that committee member do? Kate H: Well, easy. Declare the conflict at the start of the meeting. Make sure it's recorded in minutes. Leave the room during the discussion and the vote. Let everyone else decide independently. Kate M: Even if their partner's company is the best option? Kate H: Well, especially then, because the appearance of a conflict is almost as damaging as the actual one. So you need a clean, transparent process that protects the organization, and it protects the person with the conflict too. And let's face it, if your partner's quote was the best, then the rest of the committee will properly choose it anyway. Kate M: Exactly. Kate H: The alternative is a decision that can be challenged later and a committee member whose integrity is in question. Kate M: Or a committee whose integrity is in question. Kate H: Well, indeed. Kate M: So loyalty goes beyond conflicts of interest too. It connects directly to what we talked about in the last episode, speaking with one voice. If you're quietly telling members you disagreed with a committee decision, that's a breach of your duty of loyalty to the organization. Even if you genuinely did disagree with a decision, if you voted against it, you have to speak with one voice and then work with the committee to implement that decision. Kate H: Vigorous debate in the room, one voice outside it every time. Kate M: And the third duty, Kate, obedience. It does sound very old fashioned, but it's actually really powerful. Kate H: To put it simply, the duty of obedience really just means ensuring the organisation uses proper processes to fulfil its purpose and comply with all its obligations. The law, your constitution, your policies, your reporting requirements. Kate M: If your rules don't work, you change them using proper process. You don't quietly ignore them. So if your constitution requires a quorum of 15 people and only 14 turn up, you cannot hold the meeting and hope that nobody notices. Kate H: And at the more serious end, if your organisation is struggling to pay its bills, the committee cannot simply keep operating and hope things improve. That's a breach of your obligation to your creditors and it's one that can lead to committee members being personally liable for debts incurred. Kate M: That's when shit gets very real, very fast. Kate H: It does indeed. Regular financial reporting isn't a box ticking exercise. It's how the committee keeps its eye on the warning signs, and we'll go deep on the finance side in our series on financial confidence. Kate M: So there's one test that sits underneath all three duties. Kate, you mentioned it in your introduction. The reasonable person test. Would a reasonable person in the same circumstances with the same information available have made the same decision? Kate H: So that's the standard you're held to. Not perfection, reasonableness. And I think that's genuinely reassuring because it means you're not expected to be omniscient, all seeing and all knowing. Do you like that word, Kate? Omniscient? Kate M: No. It's a really, really difficult word. I've never tried to say it out loud. Kate H: I like it. It's fabulous. Decisions can go wrong even when you've done everything right. Kate M: What matters is the process. Did the committee members read the papers? Did the committee members ask the questions? Did they make the decision in good faith with the information that they had available to them? If all of that is documented and if you as a committee member make sure you record in the minutes what information you considered, what alternatives were discussed and why the committee made the decision that it made. Kate H: If something is questioned later, you can show you acted with care, put the organisation's interests first and followed proper processes. That is your protection. Kate M: And it's worth noting, Kate, for all of the listeners that what counts as reasonable does change over time. So governance expectations have shifted significantly in the last twenty years. The bar has moved. The community's expectations have moved, and committees need to move with it. Kate H: They do indeed, Kate. So, to recap. Three duties: care, be diligent, be informed, ask the questions, don't outsource your judgment. Loyalty, Put the organisation's interests first always. Declare conflicts, leave the room when required, and speak with one voice once a decision has been made. And obedience? Follow the rules. Your constitution, the law, your reporting obligations. Remember, if the rules don't work, change them properly. Don't just ignore them. Kate M: And when in doubt, ask yourselves, what would a reasonable person do? Document your process. Document your decision. That is the committee's protection. We've put a three duty summary card in the show notes. Care, Loyalty, Obedience in plain English on one page. So you can download it and share it with your whole committee. Kate H: And then your challenge for every committee member out there. Ask yourself this question. Have you and your committee genuinely met all three duties? This is not to beat yourself up, just to have an honest look. The committee that asked this question is already ahead of most. Kate M: If you found that today's session was useful, please subscribe or follow wherever you get your podcasts and share this episode with someone else on a committee. The show notes and the resources are at the committeeroom.com.au. Kate H: Next time, we're talking about elections, how to run a process that gets the right people into the committee room, why nominations from the floor at the AGM are a disaster waiting to happen, and what a well run election looks like from start to finish. Kate M: Until then, I'm Kate McPhee. Kate H: And I'm Kate Hartwig. Kate M: And this has been The Committee Room. And remember, Kate H: you don't need good luck if you've got good governance.