Nonprofit Governance in an Age of Compliance

and | August 19, 2020 | Charitable Nonprofits, Compliance and Enforcement for Organizations

ABSTRACT
The stakes for proper nonprofit governance are extremely high. Over 1.5 million nonprofits are registered with the IRS, collectively employing 12 million people and accounting for 5.4% of US GDP. Yet while for-profit companies have significant checks on the behavior of boards and management, nonprofit firms lack many of the same types of internal and external governance control mechanisms. COVID-19 is just the latest in a long history of shocks to expose the lack of preparedness and capability of many nonprofit boards in fulfilling their essential governance functions.

This Article contributes to the corporate governance literature by identifying aspects of nonprofit governance that create unnecessary risk to nonprofit entities and to society overall. Currently many governance failures that would be corrected in traditional for-profit entities go unaddressed among nonprofits. We make unique contributions to addressing these governance shortcomings by suggesting an enforcement reorientation by both public and private actors. Our novel solutions encompass disclosure, certification, oversight by state attorneys general, and federal actors.

Citation:
Molk, Peter and Sokol, D. Daniel, Nonprofit Governance in an Age of Compliance (August 7, 2020). Available at SSRN: https://ssrn.com/abstract=3668951 or http://dx.doi.org/10.2139/ssrn.3668951

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Peter Molk

University of Florida Levin College of Law

Peter Molk is an associate professor of law at University of Florida Levin College of Law. Professor Molk’s research focuses on issues of organizational choice and design, law and finance, and insurance law. His scholarship has been published or is forthcoming in the Minnesota Law Review, Washington University Law Review, and Iowa Law Review, among others, and it has been selected for presentation at the Stanford/Yale/Harvard Junior Faculty Forum. He teaches contracts, securities regulation, corporations, and insurance.

D. Daniel Sokol

University of Florida Levin College of Law

D. Daniel Sokol is a professor at University of Florida Levin College of Law. He focuses his teaching and scholarship on complex business issues from early stage start-ups to large multinational businesses and the issues that businesses face: corporate governance, compliance, innovation, pricing strategies, M&A, collusion, technological transformation, and disparate business regulation around the world. Sokol has published his work in law reviews, peer review non law journals, books, and the popular press.

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