“Independent” Boards for Non-Profits?

Over at the Volokh Conspiracy, Todd Zywicki points to an article suggesting some “common sense” reforms to the governance of non-profits. Some are indeed “common sense,” but others are not. The one that jumps out at me is: “greater separation of governance from fundraising so that board members are appointed for their expertise and engagement on governance, not merely as a reward for their largesse…” This seems like an exceptionally bad issue to legalize. It may indeed be a good idea for some non-profits to select more, or even all, of their board members on the basis of “expertise.” This may especially be the case for large, well-established organizations like operas or art museums, which may be better thought of as “public trusts.” But what of smaller, more entrepreneurial, “start-up” stage non-profits? These sorts of organizations may not have the kinds of networks that would allow them to get “experts” to be on their boards, and they may need to place large donors on their boards in order to get the funding that will allow them to get off the ground. In addition, contributors who give a very large sum of money to a start-up non-profit may have a very understandable desire to obtain a place on the organization’s board in order to ensure that their money is spent in the way that the organization’s leaders have told them that it will. That is, exchanging contributions for a board seat can be thought of as a very effective way of enforcing “donor intent,” and eliminating this mechanism may lead to a considerable drop in funding, since there will be no institutional mechanism for solving the principal-agent problem associated with non-profit contributions. This is a case where I see very little need for a legal solution–let non-profits design their boards however they see fit, allow different models to emerge, and let contributions flow to the organzations whose board governance seems best to those asked for funding. Finally, what’s a libertarian like Todd doing suggesting, or even hinting at, a one-size-fits-all legal-regulatory solution anways?

Author: Steven M. Teles

Steven Teles is a Visiting Fellow at the Yale Center for the Study of American Politics. He is the author of Whose Welfare? AFDC and Elite Politics (University Press of Kansas), and co-editor of Ethnicity, Social Mobility and Public Policy (Cambridge). He is currently completing a book on the evolution of the conservative legal movement, co-editing a book on conservatism and American Political Development, and beginning a project on integrating political analysis into policy analysis. He has also written journal articles and book chapters on international free market think tanks, normative issues in policy analysis, pensions and affirmative action policy in Britain, US-China policy and federalism. He has taught at Brandeis, Boston University, Holy Cross, and Hamilton colleges, and been a research fellow at Harvard, Princeton and the University of London.