CHICAGO (June 22, 2004) — The Nonprofit Organizations Practice Group of McDermott Will & Emery released today an extensive proposal outlining its recommended best practices for nonprofit corporate governance. The best practices proposal, which has emerged as a result of the Sarbanes-Oxley Act, is designed to enhance and improve corporate responsibility and governance of nonprofit organizations.
The Sarbanes-Oxley Act does not apply to nonprofits. However, in light of increased government regulation in the nonprofit area, including today's U.S. Senate Finance Committee Hearing on Tax-Exempt Organizations, McDermott lawyers have taken the initiative to compile corporate governance recommendations for nonprofit organizations.
"As everyone knows, corporate responsibility is a significant issue in Corporate America, particularly in connection with the effects of the Sarbanes-Oxley Act," commented Michael Peregrine, partner in the Firm's Nonprofit Organizations Practice Group. "The corporate responsibility environment will not end with public companies. Multiple developments around the country strongly indicate the spill-over effect implications of Sarbanes-Oxley for nonprofits."
The proposals set forth in McDermott's Best Practices: Nonprofit Corporate Governance come from a wide variety of sources, ranging from self-regulatory agencies (e.g., NYSE, NASDAQ) and business groups (e.g., The Business Roundtable, The Conference Board, National Association of Corporate Directors) to professional associations (e.g., the American Bar Association) and major corporations (e.g., General Electric, WorldCom, TIAA/CREF). While most of these best practices proposals have been recommended for adoption by public companies, their relevance as an aspirational goal for nonprofit corporations and nonpublic companies is widely recognized. From these and other resources, McDermott has developed guidelines as “food for thought” concerning governance “Best Practices” to assist nonprofit corporations in responding to the current corporate responsibility environment.
Best Practices: Nonprofit Corporate Governance does not in most instances reflect current legal requirements. Instead, the guidelines reflect the Firm’s perspective on evolving trends in nonprofit governance and law. In many circumstances, adoption of, and adherence to, Best Practices: Nonprofit Corporate Governance may reduce a nonprofit corporation’s exposure to potential state and federal corporate, charitable trust and tax challenges. The adoption of, and adherence to, Best Practices: Nonprofit Corporate Governance may also improve the ability of corporations to attract charitable contributions and grants, to the extent it evidences a commitment to appropriate stewardship of charitable assets.