non-profit, disclosure, board of directors, corporate governance, contributions, corporate
Non-profit corporations must comply with federal tax laws, and their governing bodies must satisfy corporation law-based duties, but they are not subject to the regulatory requirements of publicly traded corporations. This discrepancy should be troubling, because the stakeholders of non-profit organizations are far more vulnerable than the typical investor. Accordingly, non-profit boards have a particularly strong need for good governance. However, our research shows that non-profit board members believe that board selection procedures prioritize giving over the ability to attract and retain members with attributes commonly associated with good governance. To address this problem, we argue that laws should require non-profit organizations to identify directors making contributions and the amounts of those contributions, as well as certify that quality governance is the top priority of the organizations in selecting governing board members. To do otherwise improperly validates the decisions of organizations to accept money in exchange for influence at the expense of their duties to stakeholders.
Heidi Grunwald & Daniel Isaacs, Non-Profit Organizations Should Prioritize Governance in Board Selection Decisions—Those That Prioritize Money May Pay Too Much, 27 Fordham J. Corp. & Fin. L. 443 (2022).