Best Practices: Nonprofit Corporate Governance
One of the most significant and valuable developments of the post-Sarbanes-Oxley Act environment has been the
emergence of governance “Best Practices” proposals designed to enhance and improve corporate responsibility and
governance.
These proposals have come from a wide variety of sources, ranging from self-regulatory agencies (e.g., NYSE,
NASDAQ) and business groups (e.g., The Business Roundtable, The Conference Board, National Association of
Corporate Directors) to professional associations (e.g., the American Bar Association) and major corporations (e.g.,
General Electric, WorldCom, TIAA/CREF). While most of these Best Practices proposals have been recommended
for adoption by public companies, their relevance as an aspirational goal for nonprofit corporations and non-public
companies is widely recognized. From these and other resources, we have developed the following set of guidelines
as “food for thought” concerning governance “Best Practices” to assist nonprofit corporations in responding to the
current “corporate responsibility” environment.
To set the proper perspective, a few important caveats are in order. First, these are Best Practices guidelines, and
do not in most instances, reflect current legal requirements. Instead, the guidelines reflect our perspective on
evolving trends in nonprofit governance and law. In many circumstances, adoption of, and adherence to, “Best
Practices” may reduce a nonprofit corporation’s exposure to potential state and federal corporate, charitable trust
and tax challenges. Their adoption by nonprofits may also improve the ability of corporations to attract charitable
contributions and grants, to the extent it evidences a commitment to appropriate stewardship of charitable assets. It
must be stressed, however, that no negative inference should be drawn from a board’s decision not to adopt, or
adhere to, any or all of these guidelines. “Best Practices” are...