DATELINE: October 18, 2007
We've been getting a lot of questions about conflicts of interest lately. That's not surprising given the ever-increasing focus on transparency and good governance. Many think the solution to all conflicts simply is for the conflicted person to recuse themselves from the decision process. No doubt that does help, but in most cases, the...
| The Desktop Guide is Quickly Becoming the Must Have Guide for Nonprofit Executives Jack Siegel's new book, A Desktop Guide for Nonprofit Directors, Officers, and Advisors: Avoiding Trouble While Doing Good, has quickly become the go to guide for nonprofit executives and advisors. So what are people saying about the Guide? When our Jack Siegel introduced himself to one of the leading authorities on the law of federal tax exemption after she had made a presentation at a recent conference, the speaker said, "You're the 'Jack' in the Guide! We are fighting over your Guide in our office." A second speaker held the book up to two people who were asking questions after her presentation, exclaiming "I love this book. I tell everyone at conferences to buy it." One state charity regulator has indicated that the Guide is great and has recommended it to her fellow regulators. Some of our readers have followed the link to the Amazon.com Web site, but apparently have not bought the Guide. If they were turned off by the price, they should reconsider. One prominent attorney in the exempt organization field grabbed a review copy of the Guide and couldn't put it down. She has instructed a number of her clients to buy it, pointing out to them that for less than 1/2 hour of her billable time, they receive a lesson (and resource) that tells it like she would like it told. If you are starting a new charity, the Guide could save you thousands of dollars in legal fees by teaching you how to better utilize your legal counsel and framing the issues so you don't spin your wheels at $400 an hour. Buy your copy today at Amazon.com, Barnes & Noble, or John Wiley (the publisher). |
analysis is far more complex. This is illustrated by an article appearing in yesterday's New York Times authored by Julia Moskin and entitled An Early Departure for Beard Board Head. According to Moskin, Dorothy Cann Hamilton resigned her position as the board chair of the James Beard Foundation. You know them, the people who bestow the awards on purveyors of the culinary arts.
Hamilton is the founder of the French Culinary Institute, the host of a PBS cooking series, and an author. She decided to resign early so that those activities could be considered for this year's Beard awards. Under the contest's rules, panels of independent judges select the winner for each category. These judges vote by secret ballot. A judge in one category cannot be considered for the award in that category, but he can be considered for an award in the other categories. The board of trustees have overall fiduciary responsibility for the Beard Awards, but don't participate directly in the selection. Nevertheless, members are not permitted to be considered for an award as long as they are trustees, as is evident by Campbell's explanation for her resignation. In a sense, her resignation can be viewed as an extreme form of recusal.
We appreciate the Beard Foundation's efforts to maintain the integrity of its awards. As a practical matter, little is at stake here but the credibility of the awards. There is no concern that charitable assets are being misused through a related-party lease or sale, or through excess and inappropriate compensation being paid to an insider. Those are the typical sorts of conflicts that state regulators and the IRS focus on.
Nevertheless, mere resignation does not strike us as sufficient. We would like to see a rule that no one can serve as director if they have received a reward within the preceding two or three years. We would also like to see a similar rule that precluded a former director from receiving an award for a comparable period following their tenure as a board member. In other words, we like our award winners to be old and cold in terms of their service as board members.
Our concern centers on the appearance of that phenomenon sometimes referred to as back scratching. We have no evidence and do not mean to suggest that back scratching has occurred at Beard. However, the current procedure opens the foundation up to the following questions: Is that new director who received an award two years ago going to thank the departing director by somehow trying to influence the outcome of the competition? Or is the board, out of appreciation to the existing board chair, going to similarly attempt to influence the outcome. Admittedly this would seem to be difficult because the board does not vote on the awards. Nevertheless, the foundation's Web site does specifically refer to the board's fiduciary duties and oversight when it comes to awards.
As we said, no money is at stake. It may be that the foundation's board has done enough to protect the integrity of the awards. If the public buys into that, end of story. The point we are making is that there are appearance issues that might not be curable through a simple recusal or resignation.
Internal Revenue Service - Circular 230 Disclosure: As provided for in Treasury regulations, any advice (but none is intended) relating to federal taxes that is contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.
THE FOREGOING IS NOT AND SHOULD NOT BE TAKEN AS LEGAL ADVICE. IF LEGAL ADVICE IS REQUIRED, THE NONPROFIT OR OTHER PARTY IN QUESTION SHOULD SEEK THE ADVICE OF QUALIFIED LEGAL COUNSEL. If you liked this post, please visit http://www.charitygovernance.com for a description of our training and consulting services. You will also want to acquire a copy of Jack Siegel's book, A Desktop Guide for Nonprofit Directors, Officers, and Advisors: Avoiding Trouble While Doing Good."
Copyright 2007, Charity Governance Consulting LLC. All Rights Reserved. You may not copy any portion of this post to a computer "clipboard" for re-posting anywhere or e-mailing, or otherwise reproduce this post. If you want others to review this post, you may provide them with a link to this web blog. Any use of the material or ideas in this post by reporters or other publishers shall make reference to Jack Siegel, author of "A Guide for Non-Profit Directors, Officers and Advisors: Avoiding Trouble While Doing Good" and this web blog. For additional information call 773-325-2124
