Probably the most defining rule of a non-profit is that the funds of the
corporation may not be distributed, either to "shareholders" or Board
members. A violation of that rule would be an immediate cause for the IRS
to yank the 501(c)(3) status of the organization.
------
Robert Handy
Brazoria County Historical Museum
100 East Cedar
Angleton, Texas 77515
(409) 864-1208
museum_bob
[log in to unmask]
http://www.bchm.org
----------
From: Indigo Nights[SMTP:[log in to unmask]]
Sent: Friday, November 20, 1998 4:45 PM
To: [log in to unmask]
Subject: Re: Open Door - was Paid Curator also a Board Member?
My question/concern is this: Board members of Corporations are
frequently paid a handsome stipend and/or benefits for their
involvement.
Is this not also the policy for the nonprofit arena? Remember, a
Board member has legal responsibility for the action(s) of his entity.
Is this a pro bono function with no compensation? Seems to me, in a
litigatory sense, then the contract that allows someone to be an
officer of a board without compensation would have inadequate
consideration to enforce suing.
Am I missing something here?
There is, of course, an important law that was passed going into
effect for the new year which affects compensation in the nonprofit
arena. This affects any compensated member.
Here is a snippet of insight into the new law:
If a tax-exempt organization engages in an "excess benefits
transaction" with
a person who could exercise "influence" over the organization, the
organization's directors and managers, and the influential person
could be
subject to a tax of up to 200% of the "excess benefit." Some
protection is
available by appropriate Board action and by working with experienced
tax-
exempt organization counsel.
Background:
Charitable organizations' assets are supposed to be forever
dedicated to
public benefits, not private gain. After a flurry of publicity about the
tenure of William Aramony at the United Way and similar examples of
persons
supposedly exploiting tax-exempt organizations for their own benefit,
the
Internal Revenue Service sought new powers from Congress to punish
those who
engaged in serious misconduct. Previously, the IRS could only strip the
organization of its tax-exemption, which penalized the organization
for an
individual's wrong-doing.
The new penalties became Section 4958 of the Internal Revenue
Code, which
imposes new excise taxes. During development, however, the new
penalties were
expanded and changed. The new penalties are no longer limited to the
most
serious misconduct, but apply to virtually every financial transaction
with
"insiders." Now every charity (tax-exempt under 501(c)(3) of the tax
code)
or a social advocacy group (tax-exempt under 501(c)(4) of the tax
code) must
take steps to avoid organizational and personal liability in every
financial
transaction.
Gayle Montgomery
[log in to unmask]
Southern California.
---Ross Weeks <[log in to unmask]> wrote:
>
> Greetings:
>
> I'd like to veer into another important matter involving governance
of a
> stewardship institution.
>
> I believe that museums and other non-profits that govern "openly" are
> adhering to our highest ethical obligation as institutions having a
public
> trust. When governing boards operate behind closed doors, they are
> violating that ethic. When they encourage participation in their
> deliberations by ranking staff, those boards accept that in the USA,
by our
> ideals we are obliged to have participative governance. Museums
should help
> lead, set an example.
>
> My view is that ordinarily, a paid staff member of a non-profit
organization
> should not be on its governing board. However, this issue (among many
> others) needs to be viewed on a case-by-case basis.
>
> Corporate executives routinely serve on their boards. They usually
are not
> on the committees that establish compensation plans, etc.
>
> In small communities, non-profits may need to overlook what might be
seen as
> a conflict of interest elsewhere. There are only so many committed
people
> to go around in grassroots USA. If a staff member of a museum also
happens
> to have unparalleled community contacts or a good "ear to the ground,"
> there's much to be said for having that person on its governing board.
>
> In the course of 33 years of working with institutional boards, I
have found
> that when they meet openly and encourage staff participation, their
work is
> much more effective. Closed-door boards, just by being closed, foster
> speculation, worry, and devious behavior within the boards themselves.
>
> This museum, in smalltown USA, has an excellent board consisting of
people
> from many communities, different walks of life. One of the board
members,
> whose second term will soon expire, became our educational director
five
> years ago at my specific initiative. The board had nothing to do
with this
> appointment, except to accede to my recommendation. I experience no
> tension as the result of this "conflict."
>
> At my initiative, the board changed its bylaws to remove my position
from
> being an "ex officio" member of the board. Instead, it agreed to meet
> openly with all of our small staff. Yesterday's meeting was so
productive,
> and so affirming to staff and board themselves, that I joked today
that we
> might have created a "cult" here. After seven years of getting
accustomed
> to speaking openly, the board is finally comfortable.
>
> Ross Weeks Jr.
> Tazewell VA
> [log in to unmask]
>
==
Indigo Nights
[log in to unmask]
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