Saturday, September 5, 2009

More on Executive Compensation

The Boston Globe reports that Massachusetts Attorney General Martha Coakley unveiled plans to closely scrutinize executive compensation in the state's nonprofit health care sector.  This is interesting for a couple of reasons.  First, it seems to belie what I often tell my Nonprofit Law students about the lack of scrutiny of nonprofit organizations at the state level.  In my home state of North Carolina there are plenty of laws and reporting requirements on the books, but no one in state government seems to pay attention unless an enterprising newspaper reporter sniffs out a scandal.  In contrast, Massachusetts has a history of holding nonprofits' feet to the fire.

Second (and I realize this second point may partly contradict the first), it raises the question whether such intensified scrutiny of nonprofits is tied to political ambition.  When I was practicing law in Boston in the early '90s, the then-Attorney General Scott Harshbarger spearheaded a high-profile effort to examine compensation and conflicts of interest in Massachusetts' educational nonprofit sector.  Harshbarger landed some big fish, including the then-President of Boston University, John Silber.  If memory serves, Harshbarger wasin the process of lining himself up for a run for governor at the time.  It may or may not be a coincidence that Martha Coakley's plans to rein in nonprofits coincides with her announcement that she is seeking the United States Senate seat left open by Ted Kennedy's passing.  

I have heard it said that the initials A.G. stand for "aspiring governor."  Is that why Massachusetts nonprofits are coming under scrutiny at this particular time, or is it merely evidence of a rare state that takes its monitoring responsibilities seriously?

TAK

September 5, 2009 | Permalink | Comments (0) | TrackBack (0)

Joseph Kennedy, Social Enterprise, and Executive Compensation

A New York Times article reports intense speculation over whether Joseph Kennedy, former congressman from Massachusetts and son of Robert F. Kennedy, will run for his uncle Teddy's seat in the United States Senate.  The article mentions in passing that Joseph has run a nonprofit organization, Citizens Energy Corporation, since leaving office.  I would wager that the history and current activities of Citizens will become a campaign issue if Joseph declares for the Senate. 

Citizens was a hybrid social enterprise before the lingo existed to describe it.  When I first encountered it in Boston in the late 1980s, it was clear that its mission was mixed.  It ran programs to furnish low-cost heating oil to low and middle income families in Massachusetts, but it was housed in fancy corporate office space, paid salaries competitive with the private sector, and was heavily involved in what sounded to me like for-profit oil trading.  Indeed, the Times article mentions that Joseph's annual salary is upwards of half a million dollars. Surely his political opponents will pounce on that.

TAK

September 5, 2009 | Permalink | Comments (0) | TrackBack (0)

Friday, September 4, 2009

Another Donor Intent Case

The Nonprofit Times reports that a New Orleans judge has ruled in favor of Tulane University in a donor intent dispute.  The plaintiff is the great niece of a donor who more than a century ago left a large bequest to Tulane so that it might establish a women's college.  The college existed for more than a century, but during a post-Katrina reorganization Tulane decided to close it down and replace it with an institute that would focus on similar issues.  (This is similar, I believe, to what happened a few years ago to Radcliffe College.)

This is another in a long string of recent cases -- many involving universities -- where donors or their heirs have challenged charities' use of donated monies.  I enjoy referring to these cases in my Nonprofit Law class because they illustrate the fact that US nonprofit law is still a befuddling mix of corporate and trust law doctrines.  Visitation rights applied to corporations?  Quasi cy pres?  They find it stimulatingly unpredictable and confusing.

TAK

September 4, 2009 | Permalink | Comments (0) | TrackBack (0)

Corporate Sponsorships: A Modest Proposal

The New York Times reports that at least one school, the City College of San Francisco, is offering donors a chance to sponsor academic classes.  School officials view this as a way of restoring courses that have been eliminated due to budget cuts.  When the plan was first conceived, donors would have had naming rights.  However, board members at the school scotched that idea for fear of ridiculous or humiliating results: tobacco companies sponsoring health courses, for example.

I say City College's board was too timid!  Here at University of North Carolina we recently opened the gleaming Fed Ex Global Education Center.  This gave me the idea, which I only mostly-jokingly shared during a faculty meeting, that we search for a corporate sponsor for our new law school building, the construction of which has been held up by the financial crisis.  By way of example, I suggested The Church's Fried Chicken UNC School of Law.

I confess it did not occur to me to move corporate sponsorship down to the level of the classroom, but I like it!  How about "Nonprofit Law, brought to you by H & R Block."  We could have a faculty committee to weed out anything too unseemly.  This could be the answer.  This could be the future.

TAK

September 4, 2009 in Current Affairs | Permalink | Comments (0) | TrackBack (0)

Thursday, September 3, 2009

Venture Philanthropy Overseas

The British newspaper The Daily Telegraph demonstrates in a recent web article that venture philanthropy is not exclusively an American phenomenon.  It highlights the work of a London-based venture philanthropy firm called Impetus.  Typically British, the article describes the organization's chief executive as "ruthless" and quotes her as saying "I don't think all charities deserve to live."

TAK

September 3, 2009 | Permalink | Comments (0) | TrackBack (0)

Madoff Charities May Have to Give Back Money

An item in the Wall Street Journal reports that charities that profited from Bernard Madoff's decades-long Ponzi scheme may have to give back some of the money.  I know little about this case and virtually nothing about this area of law, but this strikes me as a harsh result unless the charity at issue had some institutional knowledge of the wrongdoing.

TAK

September 3, 2009 | Permalink | Comments (0) | TrackBack (0)

Wednesday, September 2, 2009

Law Student for Research?

The International NPO and NGO Committee of the International Law Section of the ABA is looking to put together a Task Force to write comments on the recently enacted "NGO" legislation in Zambia. Does anyone on the list have a student or students interested in working on such a project?  We have a template (based on comments on similar legislation in Zimbabwe a few years back) as well as more information on what the international standards are for such legislation.

Please reply to me at simon@law.edu.

kws

September 2, 2009 in International | Permalink | Comments (0) | TrackBack (0)

Kerfuffle Concerning L3Cs

Low Profit Limited Liability Companies, or L3Cs, are being heralded by some as a promising new entity that can create a rational and workable legal scaffolding for hybrid social enterprises.  My forthcoming article, Law and Choice of Entity on the Social Enterprise Frontier, which will appear later this year in the Tulane Law Review, concludes that L3Cs hold significant potential, particularly for social enterprises hoping to capitalize their operations by means of program related investments.  Although  Dana Brakman Reiser did not endorse the L3C concept, she discussed it in her recent Fordham Law Review article, For-Profit Philanthropy.

The Nonprofit Times is reporting a dust-up between L3C promoters and a skeptical IRS official.  The official was quoted as saying that no one in the IRS has yet approved the L3C concept and that there is not yet any basis for believing thatL3Cs will pass IRS muster as vehicles for program related investments.  This gave rise to a rebuke from MarcusOwens, who was one of the drafters of original L3C model legislation and who formerly was the head of the exempt organizations division at the IRS.  Owens apparently wrote a letter saying that it was "not entirely accurate" and "possibly misleading" to maintain that the IRS had not yet ruled on at least some of the tax implications of L3Cs.  Robert Lang, another L3C booster, was quoted as saying that in the IRS "the right hand is not knowing what the left is doing."

The Nonprofit Times article contained other interesting updates onL3Cs, including the fact that five states (plus the Crow Indian Reservation in Montana) have adopted L3C legislation and that several more are considering it.

TAK

September 2, 2009 | Permalink | Comments (0) | TrackBack (0)

Intimidation of Nonprofits in Niger

On this blog we have read recently about repressive regimes in China and Zimbabwe singling out the nonprofit/ngo sector for harassment and prosecution.  Similar repression is taking place in Niger, where I regularly travel to perform legal research.

Since the mid-1990s, Niger has been on a tortuous path toward democratic governance.  During that time the country has drafted and adopted a secular, essentially liberal constitution and has held several free and fair elections.  Recently, however, there have been some complications.  The constitution included a provision limiting presidential candidates to two five-year terms.  The current president, Mamadou Tanja, is approaching the end of his second term and he very clearly does not want to cede power.  He called for a referendum to ask the people whether the constitution should be amended to grant him an additional term and, while they were at it, grant more political power to the office of the president.  When the country's Constitutional Court ruled that the referendum was illegal, he dismissed it.  When the National Assembly raised objections, he dissolved it.  Not surprisingly, the referendum went in his favor.  According to Transparency International, when the ngo/civil society sector began to protest the electoral coup, he began putting sector leaders in jail.  It is is a distressingly common story.

TAK

September 2, 2009 | Permalink | Comments (0) | TrackBack (0)

Tuesday, September 1, 2009

Update on B Corporations

The Christian Science Monitor recently ran a story on the growing trend of socially conscious businesses forming (or re-forming) as B Corporations.  The B Corp concept (B stands for social benefit) has not yet, so far as I know, been adopted by any states, but corporations can dedicate themselves to a socially responsible future by registering with B Lab, a nonprofit organization, and agreeing to comply with its dictates such as committing irrevocably to socially responsible business activities,taking cognizance of stakeholder concerns, and conducting an annual social benefit audit and report.  If the corporation complies, it receives whatin essence a Good Housekeeping Seal of Approval from B Lab and can describe itself as a B Corp.

According to the article, two hundred corporations have committed to socially beneficial practices by registering with B Lab.  Organizers think they will have three hundred by the end of this year.  When I last read about B Corporations a few months ago I saw no evidence that boosters were arguing for tax benefits for B Corporations; however, the article reports that B Lab founders are urging Obama administration officials to consider taxing them at lower rates.

TAK

September 1, 2009 | Permalink | Comments (0) | TrackBack (0)

Straddling the Line Between Business and Charity

In my law school clinical practice I have received an unusual number of requests this year from entrepreneurial organizations seeking advice on whether to form as nonprofits, for-profits, or some combination of the two.  Several of the requests have come from organizations engaged in sustainable agricultural practices who plan to grow organic produce, add value to it by processing it in one way or another, and then selling it wholesale and/or retail.  I do not know whether this rush of agricultural projects is a coincidence or early evidence of a social and economic trend in my home state of North Carolina.

The New York Times recently reported on a different sort of organization that straddles the line between for-profit and nonprofit: scooter-taxi services.  If you have been out at a bar and had a few too many drinks, you can phone the service, which will dispatch a chauffeur to your location on a folding scooter.  The chauffeur will take your keys, fold his scooter up and place it in the trunk of your car, drive you home, and then return to his office on the scooter.  The article quotes several taxi-scooter entrepreneurs about the fact that their motivations are largely charitable but the businesses can be profitable.  Some have formed as nonprofits, others as for-profits. 

I sense a Nonprofit Law exam question brewing.

TAK

September 1, 2009 | Permalink | Comments (0) | TrackBack (0)

Update on B Corporations

The Christian Science Monitor recently ran a story on the growing trend of socially conscious businesses forming (or re-forming) as B Corporations.  The B Corp concept (B stands for social benefit) has not yet, so far as I know, been adopted by any states, but corporations can dedicate themselves to a socially responsible future by registering with B Lab, a nonprofit organization, and agreeing to comply with its dictates such as committing irrevocably to socially responsible business activities,taking cognizance of stakeholder concerns, and conducting an annual social benefit audit and report.  If the corporation complies, it receives whatin essence a Good Housekeeping Seal of Approval from B Lab and can describe itself as a B Corp.

According to the article, two hundred corporations have committed to socially beneficial practices by registering with B Lab.  Organizers think they will have three hundred by the end of this year.  When I last read about B Corporations a few months ago I saw no evidence that boosters were arguing for tax benefits for B Corporations; however, the article reports that B Lab founders are urging Obama administration officials to consider taxing them at lower rates.

TAK

September 1, 2009 | Permalink | Comments (0) | TrackBack (0)

The Rewards of Volunteering

A Los Angeles Times story reports that donating money and time to charitable works makes the donors happier and longer lived.  According to several psychological and medical studies quoted in the article, such actives "elevate levels of neurotransmitters like dopamine," and "impact the release of endorphins, the body's natural opiates, resulting in what has been widely documented as the 'helper's high.'"  Again straining to connect this news tidbit to a legal issue, I ask whether the concrete physical and psychological returns to the donors ought to affect the tax deductibilty of their donations.

September 1, 2009 | Permalink | Comments (0) | TrackBack (0)

Monday, August 31, 2009

Flirting for Philanthropy

I cannot vouch for the credibility of the on-line publication The Daily Tell, which purports to report on "the better side of human nature," but I feel compelled to pass on their story about the launch of GiveAndDate.com.  This new organization will post photos and profiles of single New Yorkers and will ask readers to make charitable donations.  As a reward for their donations, the readers/donors might have their contact information passed on to the singles shown in the photos.  Since this is a nonprofit law blog, I pose the question: What portion of the donation, if any, is deductible?

TAK

August 31, 2009 in Current Affairs | Permalink | Comments (1) | TrackBack (0)

Zambia—Repressive NGO Bill Signed by President

AllAfrica.comreports that Zambian president Rupiah Banda has signed legislation regulating the operations of civil society, sending shock waves through the sector, which fears its independence will be severely compromised. Presidential assent means the 2009 NGO Bill, withdrawn in 2007 after widespread protests by civil society and opposition parties, now only needs gazetting to become legislation that will require "the registration and co-ordination of NGOs" and can “regulate the work, and the area of work, of NGOs operating in Zambia.”  Dickson Jere, a special assistant to the president for press and public relations, confirmed in a statement: “His Excellency the President Mr Rupiah Banda has assented to 13 Bills, which were recently passed by the National Assembly, including ... the Non-Governmental Organisations Bill.”  The new stipulations will compel NGOs to re-register every five years and submit annual information on their activities, funders, accounts, and the personal wealth of their officials; failure to comply could result in the suspension or cancellation of registration.  On 28 August 2009 civil society organizations held an emergency meeting in the capital, Lusaka, to plan a response to the looming regulations, which the NGOs have termed “unconstitutional.” “We have already resolved to carry out a peaceful demonstration next week on 4 September 2009 in Lusaka, and there are arrangements going on so that people in the provinces also carry out the protests. I think the court action [a proposed injunction] is a definite intervention as well, but we are still talking,” an NGO worker, who declined to be identified, told IRIN News Service.

 

kws

 

August 31, 2009 in International | Permalink | Comments (0) | TrackBack (0)

Sunday, August 30, 2009

The Dilution of the Term Venture Philanthropy

In a recent post on this blog I discussed Jacqueline Novogratz who founded one of the early venture philanthropy funds, the Acumen Fund.  She and her collaborators have gone to great pains to organize their philanthropy along the lines of a venture capital firm.  But the working definition of venture philanthropy is broad and slippery.  To take one example, a recent article in the Wall Street Journal reports on the activities of the "billionaire philanthropist, Eli Broad," and quotes him as claiming that he, too, is a venture philanthropist.  Why?  Because "he wants to see results."  Is that all it takes?  I suppose then that we are all venture philanthropists.

TAK

August 30, 2009 | Permalink | Comments (0) | TrackBack (0)

Fiscal Sponsorship and an African Well

 I am new to blogging but I have been told that Sunday is a slow news day for nonprofit law.  I will fill the news hole with a personal nonprofit law anecdote. 

As the director of a law school-based community development law clinic (which is a straight nonprofit law clinic in all but name) I often find myself in the position of dissuading people from rushing to form new nonprofit organizations.  I counsel them to test their charitable ideas by seeking a fiscal sponsor: an existing tax exempt organization that will act as an administrative umbrella for their project.  This way, they can seek tax deductible donations, and in some instances get help with basic project administration, without going through the hassle and expense of forming a new organization.  If the project succeeds, if it has legs, they can always form the organization and apply for tax exemption later.

Not long ago, I had the chance to follow my own advice.  My son and I had spent time together in the West African Republic of Niger and decided it would be a good idea to help fund the digging of a well in a rural village where I had done some research.  We pulled together a core group of supporters who -- you guessed it -- wanted to form a new nonprofit.  At my urging, we instead sought fiscal sponsorship from an existing tax exempt organization, Friends of Niger.  They very kindly agreed to receive donations for what became known as the Saabu Dey Well Project.  They were happy to publicize our project and, unlike some fiscal sponsors, did not ask for a slice of the funds we raised (otherwise known as administrative fee).  My son raised the money through e-mail and snail mail appeals and by convincing his high school's student council to donate proceeds from its coffee cart sales to the project.  A week or so ago, we received news that the the well diggers had hit sweet water at fifty-six meters.

I close by admitting that I am not my own best client.  Even though I urge my clinic clients to draft letter agreements or MOUs to set the terms of their fiscal sponsorship arrangements, we did ours on a handshake.  It seems to have worked out.  Up next is the Fandou Berri Well Project.

TAK

August 30, 2009 | Permalink | Comments (0) | TrackBack (0)