Understanding Fiduciary Duties: A Guide for Today’s Higher Education Governing Boards

At its core, a fiduciary relationship is built on confidence and trust. Board members of colleges, universities, foundations, and systems are fiduciaries of their organizations. This means that governing boards are stewards responsible not only for tangible assets such as buildings and endowments, but also for intangible assets such as their institution’s reputation and mission.

AGB recently hosted a podcast discussion about the fiduciary duties of today’s higher education governing boards. Tom Hyatt, general counsel, consultant, and a senior fellow at AGB, explained that board members and officers are obligated to represent the best interests of their institutions. Trustees must understand their fiduciary duties to govern effectively and maintain the confidence of students, faculty members, donors, and the broader community.

Governing boards must act in accordance with three primary fiduciary duties: the duty of care, the duty of loyalty, and the duty of obedience. These duties are legal requirements in the United States, but they are also the bedrock of ethical and effective board service.

Fiduciary duties are not abstract concepts—they have real-world implications for how boards operate. Each board member is individually responsible for upholding these duties, and failure to do so can result in personal liability and, more importantly, can jeopardize the institution’s future.

The Duty of Care

The duty of care requires board members to execute their responsibilities in good faith and with the diligence and skill that an ordinarily prudent person would exercise in similar circumstances.

AGB’s publication Higher Education Governing Boards: An Introductory Guide for Members of College, University, and System Boards explains that the duty of care involves overseeing both the financial health of the institution and ensuring the quality of academic programs. The duty of care also requires courage, according to Hyatt, as governing boards are responsible for difficult decisions that will have consequences for their institutions and a wide variety of stakeholders.

Exercising the duty of care means:

• Being Informed. Board members must be knowledgeable about the institution’s mission, operations, and environment. This includes reading and evaluating meeting materials, staying current on institutional issues, and understanding the broader context in which the institution operates.
• Active Board Participation. This includes regular attendance at meetings, asking questions, and engaging in thoughtful discussion.
• Sound Judgment. Decisions should be made based on a careful balancing of interests—considering the needs of students, faculty members, staff, and the community, as well as the institution’s long-term sustainability.

The Duty of Loyalty

AGB’s Principles of Trusteeship notes that the duty of loyalty requires board members to act in the best interests of the institution, system, or foundation, rather than in their own interests or those of another person or organization. Hyatt added that trustees must be clear about their personal interest in any matters before the board and act with integrity.

This includes:

• Avoiding Conflicts of Interest. Follow the board’s conflict of interest policy by disclosing any personal interest and recusing yourself from decisions that might personally benefit you.
• Exercising Independence. Decisions should be made free from undue influence, whether from political, corporate, or personal interests.
• Maintaining Confidentiality. Sensitive information must be protected to preserve the integrity of board deliberations and institutional reputation.

The Duty of Obedience

The duty of obedience requires that governing boards ensure that the institution, system, or foundation operates in furtherance of its stated purposes and follows the laws applicable to the entity.

An institution’s mission, vision, and values represent the “North Star” of the organization, so governing boards must always make decisions that are consistent with those principles, said Hyatt. The AGB Board of Directors’ Statement on the Fiduciary Duties of Governing Board Members emphasizes that governing boards must institute effective internal controls to achieve compliance with applicable laws as well as to identify and address problems such as fraud, misuse of funds, or regulatory violations.

Board members must:

• Uphold the Mission. All actions and decisions should align with the mission and governing documents of the institution, system, or foundation.
• Ensure Legal and Ethical Compliance. Boards are responsible for making sure the institution, system, or foundation adheres to applicable laws and regulations (for example, accreditation, athletics, and labor standards).
• Review and Update Mission Statements. The board periodically should reevaluate the organization’s mission statement and be prepared to amend it as necessary to reflect changing circumstances or legal requirements (while maintaining institutional independence).

Conclusion

Higher education needs conscientious trustees who support their institutions more than ever right now, and there is no room for “absentee trustees,” Hyatt concluded.

Board members’ fiduciary duties—care, loyalty, and obedience—are at the heart of good governance in higher education. Upholding those responsibilities is not just a legal obligation; it is a commitment to the stewardship, advancement, and protection of higher education for generations to come. By embracing these responsibilities, board members help their institutions, systems, and foundations remain mission-focused, legally compliant, and positioned for success in the coming decades.

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