What are the limits of the role of observers at board meetings?

Dear Agony Uncle,

I would like to understand the role of an observer who attends a not-for-profit board meeting. I have recently commenced as a board member for an NFP and we have an observer whose organisation grants the major funding for this board to manage a community facility. I have no issue with the observer role, except that they have the same access to board documents and information that a board member has. Their contribution is really good as they have a working knowledge of our funding agreement with them and appear very helpful and supportive. I do, however, have an issue with the fact that they sit at the table and contribute to and influence decision making, yet have no liability attached to their role. I challenged this and was told that they prefer to maintain the title “observer” because their position with the organisation is their primary function and they would void indemnity with them if they became a full board member on the NFP board. I am confused. This person would also like the board to amend the constitution to allow her organisation to select this observer role without the approval of our board. I have suggested that the observer should not have full access or full rights as a board member regardless of their contribution to the board. I am new to this board and I don't want to be a thorn, but I am certainly uncomfortable with the status of this role. I can't find anything to help me understand an observer's role in this situation.

Agony Uncle's answer

Just to be clear, Our Community doesn't give legal advice, only advice. That said, I can't see that any legal issue arises here. The board can invite anybody it wants to attend any or all of its meetings. An observer would have the rights of a board member only if they were permitted to vote, stand for office, or count in a quorum, which – correct me if I'm wrong – the current observer doesn't.

If they can influence the board only through argument, I can't see that their position is fundamentally different from mine.

The board could also put a constitutional amendment to the AGM, if it wished. It would probably be a good idea, in any case, to make it clear that the board had the power to go into in camera session and exclude the observer.

More generally,

1) you may be overrating how much liability board members in practice bear, and

2) if any organisation I’ve had anything to do with could please a large donor so easily, they would have a named parking spot within the hour.

I suppose there are some extremely unlikely situations where such an observer would be regarded as a person of influence in the organisation, which might have some legal consequences for them, but that would probably rest largely on their funding role rather than their board attendance.

Best wishes,
Agony Uncle.