By Daniel K. Berry, DO, PhD

I read that the LSU Board set up a committee to “discipline,” or quite possibly kick out, three board members for sharing information with three church officials, at the division or general conference level. I have these observations to make regarding potential “discipline” of certain LSU board members:

A business owner has the authority to purchase, spend, hire, fire, set policies and take other actions necessary to run his or her company. However, large companies have more than one owner. Therefore, the business owners must share the power to make the decisions, depending on the percentage of the company that they own. The business owners of a large company are known as shareholders, as each owner owns a share of the corporation. A large corporation with many shareholders would have far too many bosses to effectively run the corporation, so they set up a board of directors to govern the company. This board has the right to hire and fire the president and CEO of the company, and other personnel, as well as set the policies by which the corporation is run:

A board of directors is the governing body (called the board) of an incorporated firm. Its members (directors) are elected normally by the subscribers (stockholders) of the firm (generally at an annual general meeting or AGM) to govern the firm and look after the subscribers’ interests. The board has the ultimate decision-making authority and, in general, is empowered to (1) set the company’s policy, objectives, and overall direction, (2) adopt bylaws, (3) name members of the advisory, executive, finance, and other committees, (4) hire, monitor, evaluate, and fire the managing director and senior executives, (5) determine and pay the dividend, and (6) issue additional shares. Though all its members might not be engaged in the company’s day-to-day operations, the entire board is held liable (under the doctrine of collective responsibility) for the consequences of the firm’s policies, actions, and failures to act. Members of the board usually include senior-most executives (called ‘inside directors’ or ‘executive directors’) as well as experts or respected persons chosen from the wider community (called ‘outside directors’ or ‘non-executive directors’).¹

Therefore, the board derives its legal authority from the stockholders (who are the share holders). The authority of the board comes from the owners of the company.

Imagine if you decided you wanted to be an independent board and run a college. Would you be able to just write your own charter and elect people? Could you then go down to the local college and tell them that you are their board? The college would correctly say that you could not tell them what to do and that you had no authority over them.

Where does the board of a nonprofit organization (such as a college) get its legal authority? All nonprofit organizations get the authority for their board from their membership. (The Seventh-day Adventist church is a nonprofit organization.) A few weeks ago the Seventh-day Adventist church released an official press release from the 59th General Conference Session in Atlanta, GA, which said:

Ted N. C. Wilson, a general vice president of the General Conference of Seventh-day Adventists and the son of a former church president, was elected June 25 to serve as president of the 16.3-million member global Protestant denomination. Wilson, 60, was appointed by the church’s 246-member Nominating Committee and confirmed by the General Conference Session delegation, which is an international body of 2,410 appointed members and the highest governing body in the church. He succeeds Jan Paulsen, who had served as president since 1999.²

The legal authority of the Seventh-day Adventist church goes from the membership to the General Conference Session delegation (the highest governing body in the church), to the General Conference. The line of authority then goes down to the Division, then to the Unions, and then to the Conferences. In the case of our Seventh-day Adventist colleges, the line of authority still comes from the General Conference but goes from the Unions directly to the Colleges.

Authority and accountability always go together, but there is a big distinction in the direction as these always flow in the opposite direction. Authority always come from a higher source and is delegated down, whereas accountability goes up to the higher source from which the authority originates. Ultimately the authority of all nonprofit organizations and their boards comes from its membership, and the institutions and boards are ultimately accountable to the membership. However, as far as day-to-day operations are concerned the line of authority goes from the highest elected leaders of the membership down to the lowest level of board and institution.

The authority of a board of trustees is derived from the institution’s charter. The charter lays out the initial structure and composition of the board. For some public and religiously affiliated institutions, there may be another board (i.e., a consolidated board) or parent organization (i.e., the church denomination) to which the institutional board is beholden. This will impact, and potentially limit, the board’s range of autonomy and authority.³

In the case of the LSU Board, the parent organization (i.e., the church denomination) is the Seventh-day Adventist Church. To be more specific the overarching parent organization that gives the legal authority to the LSU board is the General Conference of Seventh-day Adventists. Note: The Seventh-day Adventist church is headquartered in the United States of America, and thus is subject to the laws of the United States with regard to nonprofit organizations. The word “legal” means in compliance with the federal, state, and local laws in the United States. The legal authority for the charter comes from the membership through the parent organization.

I surmise that the LSU board is considering retaliation against members of the board who allegedly reported deficiencies in the board’s internal controls with regard to the teaching of subject material that is in opposition to the beliefs of the Seventh-day Adventist church. What did the board members report to the General Conference? Was it only the evidence of evolution being taught at LSU, or was it that LSU was teaching other doctrines that are in opposition to the Seventh-day Adventist church? Regardless of what specifics were reported, the reporting of such action to the parent organization from which the board derives its authority is a protected activity. The “three members” who reported this to the General Conference are protected under whistleblower protection. If the LSU board is now trying to mischaracterize this reporting to the parent organization as some sort of leaking of confidential information to outside sources, I maintain that this could not hold up in a court of law. Case law shows that whistleblower protection exists even if an organization fails to have a whistleblower policy or an anti-retaliation policy. In fact an organization without a written whistleblower policy or an anti-retaliation policy is at higher risk than an organization with a whistleblower policy or an anti-retaliation policy.

The National Council of Nonprofits states: “Plus, federal and state laws prohibit employers from retaliating against employees who file complaints. Claims for retaliation are one of the most prevalent causes of actions against employers (including nonprofits) today.”⁴

The Nonprofit Risk Management Center states, “Guideline #7 – Implement an ‘open door’ policy or other procedures for reporting hazards or risky activities as well as a “whistleblower protection policy.” Communicate the procedures to everyone: paid and volunteer staff, including the board.”5 Notice the last sentence in this quote from the Nonprofit Risk Management Center. This means that the LSU board members do have whistleblower protection as they are included in “paid and volunteer staff, including the board.”

The Nonprofit Risk Management Center also states, “It is the responsibility of all directors, officers and employees to comply with the Code and to report violations or suspected violations in accordance with the Whistleblower Policy.”6 The Public Council Law Center, Whistleblower Policy, California Nonprofit Public Benefit Corporation (Made possible through the support of the Annenberg Foundation) provided a sample whistleblower policy for nonprofit organizations which includes the following:

The purpose of this policy is to encourage and enable employees and volunteers of the Corporation to report any action or suspected action taken within the Corporation that is illegal, fraudulent or in violation of any adopted policy of the Corporation, to a source within the Corporation before turning to outside parties for resolution,” and “No employee or volunteer who in good faith reports a Violation or cooperates in the investigation of a Violation shall suffer harassment, retaliation or adverse employment or volunteer consequences. Any individual within the Corporation who retaliates against another individual who in good faith has reported a Violation or has cooperated in the investigation of a Violation is subject to discipline, including termination of employment or volunteer status.

If there is an apparent violation of church fundamental beliefs (and an apparent violation of even LSU’s own stated policies) and several board members choose to report such suspected violation(s) to the higher authority of the General Conference, there are no grounds to accuse such members of violating any rules of confidentiality. In fact, such board members would be reporting “within the Corporation.” If retaliation measures are instituted against such board members then those who are involved in the retaliation are the ones who are subject to termination of employment or volunteer status.

My concern is that if the LSU board retaliates against their board members then they may push these members too hard. These board members might seek legal counsel purely for protection. If outside attorneys become involved I suspect that this may escalate.

Even if the LSU board could somehow manage to win in court, LSU would find that once the court system is involved they will end up with a lot of their documents becoming accessible to the public. These kinds of public records could easily be obtained by the media. I understand LSU’s concern of not wanting private board information to be seen by outside sources, but if these matters ended up in courts of law, this same information would be viewed on a much larger scale and by real outside sources.

References:

1. http://www.businessdictionary.com/definition/board-of-directors.html
2. http://www.adventistreview.org/article.php?id=3501
3. http://education.stateuniversity.com/pages/1793/Board-Trustees-College-University.html
4. http://www.councilofnonprofits.org/node/5669
5. http://www.nonprofitrisk.org/tools/hallmarks/hallmark5.shtml
6. http://bestpractices.cof.org/files/5E%20-%20Sample%20Whistleblower%20Policy%20-%20NCNA.doc

Daniel K. Berry is a physician, retired United States Air Force Colonel, and has been a member (and Chairman) of two nonprofit boards for over 15 years (10 of these years on a college board).

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