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Is charitable organization owned by the community?

Your Legal Questions Answered

Is charitable organization owned by the community?

I believe a charity is owned by the community, not by the founder or the board. Is that not true?

I don’t think so. I think this is one of the great myths of commentary on charities. Ownership is more than mere interest.  Ownership implies and imposes responsibility.  Just because my neighbors and I are interested in how a charity operates doesn’t mean that we “own” it. We may be passionately interested in our local pro football team, but we don’t own it, can’t control who starts as quarterback, and don’t have any responsibility for its performance.

We should start with the fact that no one literally “owns” a charity. Nobody gets dividends from its operation or shares in the proceeds of a sale. Although nobody literally owns a charity somebody does control it. Psychological ownership rests -- and should rest -- with those who control it.  (See Ready Reference Page: “The Key Question: Whose Organization Is It?”

I often get a reaction like yours when I promote a sole member structure for a charity so that the founder can control its direction and assure that it will pursue the founder’s mission and vision. (See Ready Reference Page: “Sole Member Bylaws Can Protect Founder of Nonprofit”). Your statement goes further to suggest that even the board doesn’t ultimately control the organization. You suggest that “the community” owns it, which would imply that the community has some responsibility for it. But “the community” doesn’t have any responsibility and won’t run it if it gets into trouble.  Normally, “the community” doesn’t even have legal standing to raise a question in court.

The state Attorney General has a right to represent the public interest in supervising a charity (or “a” public interest, as I like to say, since the public is not monolithic in its view of what the public interest actually is).  But the Attorney General isn’t responsible for the operation of the charity and isn’t going to run it if it fails. The people who are in control are the ones responsible, and the board members have a fiduciary duty to exercise their discretion in good faith and in what they believe to be the best interest of the corporation.

We had an important case recognizing the role and responsibility of the board in Philadelphia about two years ago. Members of the community opposed an attempt by an arts group to sell its building for $4.85 million to raise funds for its programs and sought to force it to sell for $2.65 million in order to save a “priceless” artistic façade. The Court came down squarely on the right of the board to exercise its discretion as it deemed in good faith to be most appropriate and made clear that the board did not have to follow the wishes of some in the community. (See Nonprofit Issues®, Vol. XXX, No. 4)

It is the board that has the duty and responsibility. The community can make noise, but it can’t control and ultimately has no responsibility for the operation of a charity. I don’t think the community “owns” a charity.

Tuesday, October 26, 2021


Your reply merits a standing ovation. The questioner exhibits the worst kind of fuzzy, self-righteous "progressive" thinking, and you respond with precise facts, deeply considered arguments, and admirable restraint. It is this quality of prose that makes me a fan of your website.

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