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Should conductor of symphony and key vendor serve on board?

Your Legal Questions Answered

Should conductor of symphony and key vendor serve on board?

The conductor of our nonprofit symphony has asked to be made a voting member of our board of directors.  Is this common or is it something you advise against?  Also, for 10 years I was volunteer president of the board and built up all of the infrastructure that includes branding, marketing, websites, programming, and our ticketing system.  I recently stepped down as president and asked the board to contract with my corporation to handle the management for a small fee.  I am the person providing the service.  Is it appropriate for me to remain as a voting member of the Board?

Neither of these is a “legal” question.  Both of you can legally serve.  The issue of who should serve, however, goes to my basic question:  whose organization is it?  Whose input and commitment are critical to helping the organization meet its highest potential? 

It is not unusual for the artistic director of an arts organization to serve on the board.  They are the leaders most directly involved in the artistic success of the organization.  I was recently reviewing bylaws of a successful dance organization that had two key creative artists on its board.

It is significantly more unusual for a key vendor to serve on a nonprofit board.  Your own service, of course, would not be primarily because your company is a key vendor, but because of your personal dedication and your experience in growing the organization’s program.  Proponents of term limits would probably argue its time for you to sit out a while.  As a skeptic of term limits (See Ready Reference Page: “Term Limits Are For Cowards”), my question is whether you still have the enthusiasm and interest to serve.  If you are prepared to continue to contribute and the others want you to continue, I see no reason not to stay on the board. 

You will have to recuse yourself in any matter involving the contract, of course.  Some observers want to avoid any conflict situation on the board, but I personally think that is an unnecessarily rigid position.

If you are an owner of your company, your organization will probably be reporting two directors on the Form 990 who are not “independent,” which can be a cautionary item for some observers.  But you can explain that on Schedule O if you wish.  You will also have to worry about excess benefit tax issues, for the conductor’s compensation and the price of the contract if you are an owner.  You ought to follow the safe harbor rules to protect the organization and yourselves against overpayments.  (If you are an owner of the company, stepping off the board will not eliminate the issue with your contract because you will be considered a disqualified person for at least five years after you leave the board.)

It’s ultimately a judgment call in both cases.  You haven’t told me anything, however, that makes me think the cons outweigh the pros.

Tuesday, April 24, 2018

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