Sugin, Linda

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Nonprofit Law, Economic Challenges, and the Future of Charities: Introduction

Fordham University School of Law

Fordham Law Review Volume 76 Issue 2 Article 1 2007 Nonprofit Law, Economic Challenges, and the Future of Charities: Introduction Linda Sugin Fordham University School of Law Follow this and additional works at: https://ir.lawnet.fordham.edu/flr  Part of the Law Commons Recommended Citation Linda Sugin, Nonprofit Law, Economic Challenges, and the Future of Charities: Introduction, 76 Fordham L. Rev. 517 (2007). Available at: https://ir.lawnet.fordham.edu/flr/vol76/iss2/1 This Article is brought to you for free and open access by FLASH: The Fordham Law Archive of Scholarship and History. It has been accepted for inclusion in Fordham Law Review by an authorized editor of FLASH: The Fordham Law Archive of Scholarship and History. For more information, please contact tmelnick@law.fordham.edu. SYMPOSIUMNONPROFIT LAW, ECONOMIC CHALLENGES,AND THE FUTURE OF CHARITIESINTRODUCTIONLinda SuginA generation ago, the law of nonprofit organizations was virtuallyinvisible compared to the law of business organizations. But there has beena growing focus on the nonprofit community and the legal regime thatgoverns it, by politicians, regulators, and the press. The current flurry ofproposed legislation and regulation for nonprofits discussed in the essaysthat follow may simply reflect nonprofit law catching up. The charitablesector has become larger, but its importance to the economy and the socialfabric has grown disproportionate to its size-nonprofit institutions includemost higher education, health-care, arts, religious, and social serviceorganizations. These institutions have become more visible, and the needfor a well-developed legal regime designed specifically for the independentsector has become clear. While business corporations have long been welladvised, even today many large nonprofit organizations do not have fullystaffed in-house general counsel. The increasing professionalism of thenonprofit sector has been accompanied by increasing attention to the legalregime in which nonprofits operate. It is a development that should notsurprise us and that we should greet as a reflection of the sector's coming ofage.As part of that maturation process, the shortcomings within the nonprofitcommunity have become more apparent, and demands for its accountabilityhave grown. We have seen a multitude of proposals, both legal andaspirational, for improving the governance of nonprofit organizations.Many of those proposals resemble regulation of for-profit corporations, andsome of the essays in this Symposium discuss that resemblance and whetherthe model fits for nonprofit organizations. The need for law thatspecifically addresses the demands and functions of charities has becomeclearer, and the role of lawyers has become more crucial in navigating themany challenges that nonprofits face.The purpose of this Symposium is to discuss law and practice in thenonprofit world-to think about how lawyers, boards, and managers cangrapple with the changing landscape of regulation, the changing publicperception of the nonprofit sector, and the sector's overall growth andFORDHAM LA W REVIEWdevelopment. Sometimes it seems that the law goes in its own direction,oblivious to the purposes for which it exists. Even without adoption of anyof the new regulations that are on the table, we live in a world in whichnonprofit organizations are subject to a fair dose of regulation at both thestate and the federal level. Regulation is justified because nonprofitorganizations, and charities in particular, enjoy significant advantages underthe law, and carry out important social functions in which the public has astrong interest.This Symposium grew out of what I see as the public/private conundrumfacing the nonprofit community and the law governing it. Nonprofitorganizations are being called upon to better resemble for-profitorganizations in a variety of ways. Those calls come from differentsources-from donors increasingly interested in results that can beunderstood in terms parallel to bottom-line assessments to which businessesare accustomed, from cuts in government funding and increasedprogramming that make nonprofits add more businesslike activities tofinance their work, and from increasing numbers of for-profit competitorswho have been able to mobilize technology and marketing to succeed inmarkets previously reserved to nonprofit organizations. At the same time,the law of nonprofit organizations imagines a simpler world in many ways,and new legal issues arise with surprising frequency. The focus oncorporate governance and accountability in the post-Enron for-profit worldhas spilled over into the nonprofit world, and nonprofit organizations arebeing called upon to govern their institutions more like their for-profitcounterparts.State attorneys general and the Internal Revenue Service, the officialenforcers of nonprofit law, cannot keep up with the increasing number,variety, and innovations of nonprofit institutions, so organizations operatein a world of little governmental oversight. Despite the interest of a handfulof state officials and a couple of powerful senators, there seems to be littlepolitical will to fund a scheme of comprehensive governmental control;many people undoubtedly believe that it is a good thing. The governmentand the nonprofit sector have always had a complicated relationship, andskeptics disagree about whether the coercion of government or the privatepower of organizations presents a greater threat to the public good.Whether minimal government control is a good idea or not, it means thatinstitutions and individuals who care about the charitable sector mustincreasingly provide their own oversight, along with the press, whose rolein recent years has become central in informing both the public and theregulators about problems within the sector. Without greater governmentresources, we will need increased institutionalization of alternativemechanisms for oversight, so that the regulatory regime can integrate thepress and nongovernmental or quasi-governmental organizations into thealready overlapping scheme of federal and state regulation.At the same time that we are concerned about abuses of the public trustand insuring integrity within the sector, I think that many of us still expect[Vol. 76INTRODUCTIONcharities to reflect our altruistic spirit and provide a wide variety of publicgoods. We want charities to be better, in some sense, than ordinarybusinesses. We want their goals to be loftier and their managers to be morevirtuous, and even while we demand that they are accountable in the sameways as for-profit businesses, I think that we genuinely believe that mostpeople who choose to devote their energies to charity are really committedto the goals of their organizations and the public good. It is not new thatpeople are becoming philanthropists, that groups are organizing to achievegoals that government is unable or unwilling to pursue, or that someindividuals in the charitable sector are abusing the public trust and thegenerosity of donors. But I think it is new that we are expecting the highestlevel of professionalism and accountability from charities, and that we aredemanding legal consequences for missteps and oversight of internalgovernance. The increased public focus on the nonprofit sector brings newopportunities to achieve good, but also the threat of failure and exploitation.More people are donating to charity than ever before, the number oforganizations is ever increasing, and public awareness of good works is onthe rise. The calls for greater transparency and effectiveness that we hearare a consequence of this trend, and should be embraced as a sign of thesector's success and importance. I hope that the following discussions willhelp us better define our direction into the future.This Symposium is the product of the hard work of many individuals, inaddition to the participants whose work is included here. I am especiallygrateful to Deans William Treanor and Matthew Diller, who supported thisconference financially and otherwise. Helen Herman, and her staff in theoffice of academic programs, did an excellent job taking care of all thelogistics related to the conference. Lesley Friedman Rosenthal and CeceliaGilchriest at Lincoln Center were wonderful partners in conceiving andorganizing this conference. And finally, the Fordham Law Review's editorsand staff have done a tremendous job throughout the process, seeing thisbook to publication.2007]Notes & Observations

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Nonprofit Law, Economic Challenges, and the Future of Charities: Introduction

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