Janice Rosen of Washington, DC, wrote to [email protected] on March 21, 2002:
I was invited to join a board of a nonprofit 501(c)3 organization. The president of the organization has told me that minutes of board meetings and any other board
discussions are "proprietary." And
he adds that because they are "proprietary" the minutes must not be shared
with anyone who is not on the board. I have never seen this term used in relation to minutes of
board meetings for nonprofit 501(c)3 organizations. Can anyone help clarify for me? How are minutes of nonprofit board meetings
"proprietary"?
Several people responded from a variety of perspectives.
Michael L. Wyland of Sumption & Wyland in Sioux Falls, SD:
I'd make a
distinction between official board minutes and board discussions and
informal communications. Official board minutes should be open to
inspection, as they record the formal activities and actions of the
board. The minutes should not reflect, and those outside the board should
not be privy to, the content of individual board member's comments and
deliberations leading up to the official board actions reflected in the
minutes.
The board speaks with one public voice, regardless of their private
disagreements and differences. The board minutes should reflect the
actions taken in that public voice, and should be open for inspection.
The exception to this is actions that are *properly* taken in executive
session. Executive session is a meeting or part of a meeting taken
confidentially, often without staff present, for consideration of personnel
issues or litigation/legal matters where employee privacy or
attorney-client privilege supersede the public's right to know. Actions
taken in executive session (termination of an employee, decision to
participate in a lawsuit, etc.) are typically reported in the board
minutes, without comment or explanation, at the next board meeting.
Jane Garthson, a consultant in leadership & ethics to Canada's voluntary sector from Toronto, Ontario:
Even if board minutes are open for inspection, draft ones are usually
confidential. Only after they are approved at the subsequent meeting are
they available
You need to check the bylaws and the law under which the organization is incorporated - if it is incorporated - as they may require some degree of disclosure. For example, the Corporations Act in Ontario, the statute applicable to most nonprofit corporations here, requires that the minutes be readily available to members for inspection
If the laws do not restrict your options, urge your Board to consider
making the minutes available. Most of what the board discusses is the
governance of a public benefit organization that needs the trust of its
members, donors, clients and community. The minutes are one way to
demonstrate accountability. I'm even hearing of organizations that post the
minutes on their web site. Likely no one reads them, but it reassures
potential donors and volunteers that you have nothing to hide. Other
organizations are so paranoid they won't even let staff see the minutes -
sometimes because they don't know how to write minutes!
Note that what Michael calls "executive session" is called "in camera" where
I live. I'm mentioning it in case you hear alternate terminology.
Michael L. Wyland of Sumption & Wyland in Sioux Falls, SD, added:
Whether official board minutes SHOULD be open to inspection is a
different question than whether the minutes are proprietary
information. I think that almost any attorney would conclude that the
official board minutes are the property of the corporation and are not
public documents. They do not necessarily have to be disclosed to
anyone who wants to see them. So, from a legal point of view, the board
president was correct in saying that the minutes are proprietary and
should not be disclosed by individual board members.
When organizations do not make their minutes available, I would encourage donors, volunteers,
potential board members, the media, etc., to take that refusal into account
when evaluating the nonprofit's accountability and its worthiness of
support. There may be times when such refusal is appropriate for the
organization and the public, but I believe the bias should always be in
favor of disclosure. Further, the refusal should be publicly tied to a
specific reason that is not merely self-serving of the organization and/or
its "insiders."
My question, I suppose, would be "what are they hiding?" Minutes, properly
kept and maintained, do not divulge confidential information. Adherence to
minimum federal standards on financial disclosure (in the Form 990) is a far cry from public accountability.
I use the term "duty" advisedly; it implies that which one does not wish to
do, but should be done. So, I stand by my assertion that public
accountability, including the sharing of board minutes with interested
parties, is a duty of nonprofit corporations. Moreover, properly handled
by motivated nonprofits, this duty may be leveraged into an opportunity for
growth, strength, and support that benefits both the organization and the
community.
Sue Stromquist of Duluth, MN:
Some of this depends on state law - in Minnesota there are open meeting laws
that apply to some organizations that determine how private these matters
are. We are in a joint powers agreement with school districts and county
agencies so we have to make available for public access except things
involving salary negotiations and employee matters. If we change a meeting,
we have to post it so many days ahead of time in the place where such
meetings usually occur.
Dan Prives, who does infrastructure consulting for nonprofits $500,000 to $5 million in Baltimore, Maryland:
Most board minutes I have seen are not written to be public
documents. Most of them don't make much sense if you are not
intimately involved with the organization. They would be easily
taken out of context and misinterpreted. Not to mention the
fact that they would generally need to be reviewed more closely
(taking much more time), if they were known to be subject to
public release.
Jane Garthson, of Toronto, Ontario, continued:
Yes, there is no general requirement that Board minutes be public - though some jurisdictions have laws that they must be available to members.
However, nonprofit organizations earn trust by being open about how they handle the pubic trust that has been granted to them. Any potential donor, volunteer or other supporter is entitled to wonder 'what are they hiding' if financial statements, board minutes, annual reports and other documents are refused, and many do decide to support other organizations in such cases. My comment is based on anecdotal evidence, not formal research as I don't believe any has been done.
There is a proliferation of standards, some very well respected, such as the Maryland Standards of Excellence, and others much less so, partly because their governance checklists are so weak. Even the higher standards do not deal with making board minutes public; it's too small an item.
Dan, you are absolutely correct that many boards do not know how to write good minutes - but an accurate summary of the organization's history of board decision-making is highly desirable and those boards should learn. There are workshops and books available on taking better minutes. And it generally takes much LESS time to review good minutes than bad ones.
David E. Ross pointed out:
California Corporations Code section 6333 (under Division 2, Part
2 -- Nonprofit Public Benefit Corporations):
"The accounting books and records and minutes of proceedings of
the members and the board and committees of the board shall be
open to inspection upon the written demand on the corporation of
any member at any reasonable time, for a purpose reasonably
related to such person's interests as a member."
In other words, in California, a member of a charitable
organization has the right to review the minutes of board
meetings. Subsequent sections of this law provide for enforcement
through the courts. Similar provisions exist for private benefit
corporations (e.g., fraternal organizations, condominium
associations).
Putnam Barber, Editor of this Nonprofit FAQ, commented:
But, it's important to note, many nonprofit organizations do not have 'members' in the sense of this paragraph. In fact, many nonprofit corporation statutes specifically define the term 'member' and state that persons who do not have the enumerated powers are not 'members' for this sort of purpose, whatever the organization may choose to call them.
Donald A. Griesmann, Esq., of Ventnor NJ, added:
State law may handle some of the issues raised in this discussion -- or it
may muddy the waters. I can only speak about New Jersey law but you may find
similar factors in your state as well.
The minutes and records of the board of trustees (New Jersey calls the board
"trustees" not "directors") and committees may be kept in or outside the
state.
The corporation must maintain a list of all members showing the date of
membership, the number, the class and the series of memberships within the
state. The list of members may be inspected by a member who has been a
member at least 6 months. A member may ask a court in the state to require
the inspection of the membership list regardless of the number of months the
person has been a member.
The certificate of incorporation (some states call it the "articles of
incorporation") must list the founders/first board with their regular mailing
addresses, not that of the corporation. Every nonprofit must file an annual
report with the state giving the names and addresses of the trustees (not
members) and officers and the address must be at a regular mailing address
and cannot be the office of the corporation. Both the certificate and the
annual report are public documents.
The state statute is silent about the public having access to the minutes or
the names and addresses of the members. Since the members have to run
through some hoops to get records, it appears that the public does not have a
legal right to review the minutes or have access to the list of members. Of
course the allegation of fraud or conflict of interest in a court proceeding
by someone from the public may open those books to inspection as part of
discovery.
Any member may request financial records in writing with at least 5 days
notice.
Experience with federal funds over a 27 year period in four states
demonstrates to me that there can be other factors that open minutes and
other records to inspection through the annual audit. Under the funds I
worked with we were required to open all minutes and other records to the
auditor to report that all decisions carried out by management were not
contrary to decisions of the board, particularly grants that required board
approval, such as United Way. The minutes had to reflect a board decision
about all contracts, leases etc. The audit is a public document under some
grants.
None of this prevents an organization from making certain documents public.
We had signs stating what was public and how quickly we had to produce them.
No one ever asked...in 27 years.
In my own view a nonprofit has to make careful decisions about transparency
and have written policies, procedures and record keeping that are followed by
staff and board. The more that can be shown legally, the fresher the air I
think.
Ultimately an organization has to look at its value system and its culture,
its relationship with its constituents and make the decision about how much
transparency will be offered. That which is not prevented by law may be made
available to the public.
Reasonable people and organizations can disagree about those matters not
protected or not required by law. Safety of members and staff can be a high
value. Recognition that board members' names and addresses are public may
give pause to some candidates. Certain missions may be more controversial
than others. Conscious and careful planning about these issues are the same
as other matters in the management of a nonprofit. They require planning and
a response in policy, procedures and record keeping.
The future concerning nonprofits is toward openness. It has been an
evolution for decades. Openness will not cease in my opinion and nonprofit
leaders have had little success or organization to slow it down.
[Don Griesman has written an item for this FAQ on requirements for disclosure by nonprofits (see http://www.nonprofits.org/npofaq/0/1505.html).]
CAVEAT: I am required to tell you that I am an attorney in the state of New
Jersey and it has not been my intention to give you legal advice. I may have
given you legal information, but not legal advice.
Dan Prives from Baltimore:
In response to this discussion in the nonprofit news
group & email list, here are some points about public release of
board minutes.
Board minutes are internal documents that include information
required to be private, as well as information about future plans
that could be used against an organization by competitors or
vendors in situations that involve bidding.
In addition, board minutes can directly or indirectly reveal
internal deliberation of the board. Public release could
interfere with free internal discussion. There are many
legitimate reasons for keeping board minutes private.
None of the groups that rate, review, or audit charities call
for public release of board minutes. (See texts and links at
http://www.avagara.com/nonprof/accountability/)
In reality, neither the public nor donors are interested in
board minutes. People interested in board minutes are people
with a gripe or a grudge against the organization or journalists
interested in a story. Release of internal documents should be
part of an overall policy for the handling of adverse and
adversarial public relations situations. The claim that this is
an "accountability" issue is phony, in my opinion. People want
minutes so that they can convict an organization in the court of
public opinion. Organizations don't have to play their game.
A useful board policy would be "Board minutes are only
released outside the organization as required by law, or to
individuals who have signed a confidentiality agreement with the
organization." Other circumstances could arise, but under this
policy they would have to be dealt with individually by the
board, which is a prudent approach.
Generally, I feel that an organization is taking the least
risk from a PR standpoint by releasing only the information that
is required by law and by the broadly recognized "watchdog
groups," neither more nor less. I believe groups should focus
their attention on having an annual report with a program
narrative and summary financial results as the primary vehicle
for public disclosure.
But in any event, individual board members do NOT have a right
to relate internal board discussions (written minutes or
otherwise) to outside parties. This principle derives from the
board member's duty of loyalty, I believe.
Sandy Deja (http://members.aol.com/exempts/full.htm):
Regardless of whether the board decides to disclose minutes to the general public, the secretary, or other person who keeps the minutes, and the other board members, who review the minutes, should be aware that if the non-profit is selected by the IRS for audit, they can be CERTAIN the IRS will review at least one year's worth of minutes, and possibly more.
I was an agent auditing non-profits in the seventies and early eighties. You would be amazed how often minutes would contain statements like, "John Doe has been assigned to figure out how we can keep the IRS from finding out about XYZ."
Posted 3/25/02; revised 7/2/05 -- PB
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