Results tagged “fiduciary duty” from Uncivil Society
If you want to write a screenplay and you're stuck for a plot, you can always trot out the shopworn "big bad profit-seeking corporation threatens to evict humble do-gooders" motif. Or you could be really trendy and flip it: big bad charity threatens to evict humble entrepreneurs.
We've already mentioned here the eviction of CBGB by its landlord homeless shelter. Today brings a couple more stories:
- Carnegie Hall cites charitable mission in evicting artist tenants
- Charitable status gives elite school right to evict rent-controlled tenants
Among the victims in noted in these articles: a celebrated photographer and, um, a lawyer.
Y'know, it says something about the diminishing reputation of charitable landowners in this city that they're making even lawyers seem sympathetic. As one scholar said in response to the recent decision to approve Columbia's West Harlem expansion:
“The record of this commission is that their allegiance is only to other wealthy people,†Michael Henry Adams, an architectural historian, told Newsday. “I guess the rest of us can just go to hell and die.â€
The issue: whether the charity had paid excessive compensation by approving a 1.265 million dollar retention bonus. The AG
ultimately was comfortable with the process because of the following factors: (i) the board was consistently involved in setting Spaulding's compensation and reviewing his performance; (ii) independent comparables were used by the compensation committee in developing Spaulding's pay package; (iii) there was no evidence that Spaulding attempted to assert undue influence; (iv) the amounts of the deferred bonus were consistently disclosed in regulatory filings; and (v) with one exception, the minutes reflected the major decisions.Re the last point, Siegel highlights a recommendation that I also make to my nonprofit law classes:
The most significant problem that Spackman [the AG] pointed to was a missing set of minutes for an important meeting (the May 3, 2001 one). Spackman made it very clear that the decision, including the reasoning behind it and the economic analysis, should be reflected in the minutes of the board and the committee. This simply reinforces our continuing belief that meeting minutes should be more detailed than many lawyers currently prefer. In our view, boards and their lawyers make a serious mistake when they claim they are avoiding potential board liability by stripping meeting minutes of any meaningful content. As we continue to observe practices, we find that more detailed minutes often would have avoided embarrassment and provided a solid defense for board decisions.
Yesterday in my law class we reviewed how good record-keeping can be key to defending a lawsuit against a nonprofit's directors and officers.
But what if you lose? Or, even if there isn't a lawsuit, how can you minimize the risk of loss for your organization's leaders?
Directors and officers insurance. More here.
Continuing the list with explanatory links:
Supporting organization (and types)
My top secret plan for tonight's nonprofit organization's law class is to use the Princeton case to provide an overview of prudent (and imprudent) management practices.
The case is a classic example of why you want a lawyer who can sift out the losing claims. The lawsuit reflects a number of legitimate concerns arising from lack of attention to donor intent, but damn, the plaintiffs' lawyers make so many crappy arguments that my neck got worn out from how hard I was shaking my head. They would have done much better to laser in on the strong points (I mean, a 71 page complaint?!?), because the obvious longshots seriously diminish the overall credibility of their clients' case.
The family's lawyers would have also strengthened their case by seeking a less extreme remedy--say, an injunction ordering Princeton to avoid certain practices and to engage in others--instead of the attention-getting but most likely futile bid to get a judge to hand over an 800-million-dollar Ivy League academic center to the original donors' kids.
If you want to read more, check out the opposing websites run by the Robertson family and Princeton.
So I was walking down Park Avenue on my way home from the office when a tourist comes up to me and asks, "How do you get to Carnegie Hall?"
And I said, "Practice Marry the chairman's daughter!"
Ba-dum-bump. I'm here all week, and remember to tip your server.
Why the stupid joke? Check out the deets of this news story--
Carnegie Hall's chairman and current major donor is Sanford Weill, who used to head Citigroup.
The architect chosen for the Hall's 150 million dollar renovation? His son-in-law, chosen ostensibly because of his previous work for another charity . . .
. . . led by Sandy Weill's wife.
The lawyers offering their opinion in this NY Times article distinguish between law and reputation, and it's a principle every nonprofiteer needs to remember: just because it's legal doesn't mean it's right. In this instance, I would imagine that the Carnegie Hall board followed the "disclose and abstain" procedures common in standard conflict-of-interest policies, and they probably also set a market-rate compensation supported by analysis of comparable practices in similar situations (more on that soon!).
Still, it looks skeezy, doesn't it?
Note Sandy Weill's defense against accusations of nepotism. One argument is clever, the other, not so much.
- The not-good-because-it-only-reinforces-the-criticism argument: “I’m proud of what he does. I think there’s nothing wrong with being proud of a son-in-law.â€
- The clever (if transparent) anti-discrimination argument: “You can’t actually disqualify someone because they’re somebody’s son-in-law.â€
Key paragraphs after the jump:
