AGB President & CEO Update: Fiduciary Duty (Foundation)

You are viewing the Institutionally Related Foundation version of this CEO Update. An Institution and Systems version is also available.

In these turbulent and uncertain times for higher education, we recognize the immense challenges that college and university leaders (including volunteer boards) face in guiding their institutions forward. The evolving landscape demands adaptive leadership, informed decision-making, and strong governance to ensure stability and progress. AGB is committed to equipping all our members with the essential resources and insights to navigate this complexity and ambiguity—helping you not only to understand your roles but also to harness the power of effective governance to secure and advance your institutions, systems, and foundations.

Understanding Fiduciary Duty for an Independent Foundation Board

Institutionally related foundations (IRFs) exist to support their affiliated college, university, or system as strategic philanthropic partners. Under Section 501(c)(3) of the Internal Revenue Code, college and university foundations are classified as public charities rather than as private foundations. IRFs may operate with varying degrees of independence from their partner institution. Available resources, state legislation, system policy, and institution culture may all inform the staffing and business model of foundations and the degree to which they are operationally integrated with their partner institution. Regardless of the scale of operations and the way in which the foundation-institution relationship is structured, all foundations are governed by an independent board made up of willing-to-serve volunteers. These “trustees” are obliged to serve the interests of the foundation, to honor and fulfill donor intent, and to fulfill the mission of supporting their partner institution.

At the heart of effective governance lies fiduciary duty—a core responsibility that board members must uphold to ensure organizational integrity and success. Board members must exercise a duty of care, duty of loyalty, and duty of obedience to the foundations they serve. This means:

Making well-informed, good-faith decisions aligned with the foundation’s mission and best interests.
Acting independently, placing the interests of the organization ahead of their own interests and avoiding undue external influences.
Upholding governance principles as outlined in the foundation’s articles of incorporation, bylaws, board policies, and codes of ethics.
Assuring the organization abides by all applicable laws (state and federal) and regulations—in other words, remaining compliant and always audit-ready.

Key Questions for Boards to Consider

How does our board ensure that it understands and upholds fiduciary duties?
How does our board evaluate what kind of influence would qualify as contrary to its fiduciary standards?
How do we calibrate financial and operational relationships with the institution to maintain an appropriate degree of corporate independence while making the best use of resources and fostering strategic alignment, transparency, and collaboration in light of state regulations and case law?
Are our decision-making processes transparent, mission-aligned, and free from undue external influence and potential conflicts of interest?
What are we doing to effectively onboard new members and educate each of them in their role(s) as trustees?
How are we equipping board members to navigate governance challenges effectively?
How will we assess individual trustees and the board’s collective performance and effectiveness against our own governance and operational standards?

Go Deeper

Explore these key resources to deepen your understanding of fiduciary duty and other aspects of good governance:

Book: Institutionally Related Foundation Boards: An Introductory Guide for Board Members
Book: Principles of Trusteeship
Book: The Governance Committee (Foundation Boards)
Book: An Anatomy of Good Board Governance in Higher Education
Trusteeship magazine article: “Fiduciary Duty Is the Law”
Video: “What Is a Fiduciary?”
FAQs: Fiduciary Duties for Institutional Board Members
Additional support: AGB-Facilitated Board Workshops and Retreats
Program: Board Member Orientation for Foundation Boards
Seminar Series: Striking the Balance: Finding the Sweet Spot of Foundation Independence
Event: AGB Institute for Foundation Board Leaders and Chief Executives

The Institute, coming up June 4–6 in Newport, Rhode Island, affords a unique opportunity for foundation chairs, chairs-elect, and CEOs to spend time together and develop strategies to strengthen governance and elevate the work of the foundation as a strategic partner.

In Case You Missed It—Implications of the Executive Order on the U.S. Department of Education for Governing Boards

A new Executive Order proposing the dismantling of the U.S. Department of Education—while unlikely to be fully enacted—signals significant potential disruptions to federal support for higher education. In our latest AGB Policy Alert, we outline key risks for board leaders, including risks to student protections, financial aid, accreditation, and research funding, and offer strategic guidance to help boards prepare and respond.

AGB Receives Mellon Foundation Grant Supporting Academic Freedom and Free Speech

I am proud to share that AGB is partnering with the Mellon Foundation on a new initiative designed to strengthen boards’ understanding of academic freedom and free speech. As this initiative progresses, we invite additional partners and funders to join us in expanding this work. As foundation leaders, your role in protecting the values of open inquiry and integrity is critical. Participate in our short, anonymous survey.

Promoting the Value of Higher Education

Higher education has long been a catalyst for progress, fueling innovation, economic prosperity, and democratic stability throughout American history. AGB is championing the value of higher education through two major initiatives:

Why College Matters—We’re a proud sponsor of a new public service campaign that highlights the value of college and the far-reaching impact of higher education. Learn about the campaign and join AGB in endorsing it.
Higher Education as a Strategic Asset (HESA)—As the incubator of HESA, AGB continues to provide strategic support and guidance to this commission dedicated to reshaping policy, funding, and collaboration of higher education to strengthen U.S. innovation and competitiveness. HESA recently released its report outlining key strategies to drive U.S. prosperity and security. Learn about HESA and read the report.

2025 AGB Conferences

I was delighted to meet so many of our members at the 2025 Board Professionals Conference and the National Conference on Trusteeship in Chicago last week. Like the Foundation Leadership Forum in January, the importance of fiduciary duty was a recurring theme, both in sessions and in informal conversations. With growing state and federal challenges and confusion about the role of board members, discussions focused on how board members can keep fiduciary responsibility front and center—ensuring that governance remains mission-driven, principled, and resilient in an increasingly complex landscape.

Please remember that AGB is here to connect you with the experts, tools, insights, and peers you need to lead in this changing and challenging environment. Thank you for your continued leadership and engagement. I look forward to the work we will accomplish together.

Ross Mugler
AGB Board Chair and Acting President and CEO