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Nonprofit Governance

What are some of the most important concerns about managing or overseeing a nonprofit? Professor Julia Mahoney discusses issues about mission, financial integrity, and effective communication. Professor Mahoney points out that many lawyers are donors, volunteers, and board members at various nonprofit organizations so it’s crucial to be aware of what is involved in responsible governance. https://youtube.com/watch?v=pcxP0RNDdN4

Transcript

I think the biggest question that comes up in managing and overseeing non-profit organizations is, how do you measure success? Another big question is, when do you change the mission? Some missions are going to become obsolete. Who should decide when that mission is changed? There are many, many cases on this in the context of charitable trusts. What should happen to money that's been put into a charitable trust if the specific object of that charitable trust has been achieved or has become, obviously, unachievable? Very importantly, who should decide? Do we trust public officials such as the state attorney general to decide how to redeploy the money? Or do we think that there should be some other mechanism? There are also questions of executive compensation. When news breaks that someone who is the head of a non-profit firm is being paid a significant salary, say, half a million dollars or even a million dollars a year (Think about how much many university presidents are making these days.), a reaction of many people is, "That's outrageous.” This is supposed to be a charity or something very similar to a charity. Why on earth would someone be getting a high six-figure or even seven-figure salary for, in effect, running a charity?" At the same time, there's an obvious rejoinder. Many of these organizations are enormous, require great managerial talent. Given what others with that managerial experience and talent are being paid in the economy, the salaries may not be that much out of line. Most people give to charity, and an enormous percentage of law school graduates will end up serving on the board of a non-profit firm at some point in their careers. I would call non-profits a mainstream subject, one that, I believe, every law student should have at least some exposure to. The most important thing, I think, to bear in mind, if one is on the board of a non-profit firm or if one becomes a trustee or other officer, is that this is not a social club. Many of the worst scandals that have arisen in the context of non-profit organizations come up when those in charge of the organization forget that they're not there to make friends. They're not there to engage in social chit-chat. They are there to make sure that resources that are supposed to be committed to a social welfare purpose, and often a charitable purpose at that, are not wasted or even, in effect, taken by those who've been entrusted with the money. These are very serious responsibilities, to make sure that the non-profit firm is being run efficiently and being run honestly, and being run in accord with its mission.

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