How good documentation saved a nonprofit from government hell
Jack Siegel runs a blog on nonprofit corporate governance that is essential reading for anyone who needs to know the latest in the field. For example, here's a story about how one Massachusetts nonprofit managed to avoid serious penalties in an investigation by the State AG.
The issue: whether the charity had paid excessive compensation by approving a 1.265 million dollar retention bonus. The AG
The issue: whether the charity had paid excessive compensation by approving a 1.265 million dollar retention bonus. The AG
ultimately was comfortable with the process because of the following factors: (i) the board was consistently involved in setting Spaulding's compensation and reviewing his performance; (ii) independent comparables were used by the compensation committee in developing Spaulding's pay package; (iii) there was no evidence that Spaulding attempted to assert undue influence; (iv) the amounts of the deferred bonus were consistently disclosed in regulatory filings; and (v) with one exception, the minutes reflected the major decisions.Re the last point, Siegel highlights a recommendation that I also make to my nonprofit law classes:
The most significant problem that Spackman [the AG] pointed to was a missing set of minutes for an important meeting (the May 3, 2001 one). Spackman made it very clear that the decision, including the reasoning behind it and the economic analysis, should be reflected in the minutes of the board and the committee. This simply reinforces our continuing belief that meeting minutes should be more detailed than many lawyers currently prefer. In our view, boards and their lawyers make a serious mistake when they claim they are avoiding potential board liability by stripping meeting minutes of any meaningful content. As we continue to observe practices, we find that more detailed minutes often would have avoided embarrassment and provided a solid defense for board decisions.
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