Compared to the more common fiduciary duties of care and loyalty, the duty of obedience to mission is often forgotten. Unlike directors in the for-profit sector who seek to maximize profit for shareholders, non-profit directors must consider their organizational purposes and mission statements when making decisions. Non-profits share more in common with trusts than corporations in this regard. It can be easy to lose sight of mission or purpose when looking out for the bottom line. This can be a costly mistake. Many state charitable fundraising laws require donations to be applied to the cause for which they were solicited. These laws impose steep penalties on organizations that deviate from the requirements. For a tax-exempt 501(c)(3) organization, going too far afield from the purpose set forth in the IRS Form 1023 may require the organization to notify the IRS or risk jeopardizing the organization’s tax-exemption.
Obedience to the mission includes both obedience to the corporate purpose, the purposes set forth in the IRS Form 1023, and the organization’s current mission statement. The corporate purpose is the purpose stated in the organization’s organizing document (often called the “articles of incorporation”). This same corporate purpose is also included in the bylaws. Similarly, in the IRS Form 1023, the organization states its intended exempt purpose, which should be consistent with the corporate purpose in the articles and the bylaws. The corporate purposes set forth in the organizing document and application for tax-exemption are rarely, if ever, changed. For strategic planning and marketing purposes, organizations also often adopt a mission statement, which provides a more specific vision to guide the organization in its programming and decision-making. The mission statement must fall within the corporate purpose. The organization can periodically change its mission statement and do so with little inconvenience, as the mission statement is not typically reported to government authorities.
The first step to fulfilling the duty of obedience (and avoiding these negative outcomes of noncompliance) is familiarizing yourself with the organization’s mission and purpose. Below are a few simple steps directors can take to better familiarize themselves with their organization’s purpose statement and mission statement.
Catholic Charities USA Mission Statement: “The mission of Catholic Charities is to provide service to people in need, to advocate for justice in social structures, and to call the entire church and other people of good will to do the same.”
Catholic Charities USA Purpose Statement: “The purpose or purposes which the Corporation will hereafter pursue are: to provide a forum for discussing the application of Catholic thought in the general field of social welfare and to stimulate action, research and the publication of material in this field. The Corporation is organized exclusively for charitable, educational and scientific purposes, including, for such purposes, the making of distributions to organizations that qualify as exempt organizations under section 501(c)(3) of the Internal Revenue Code of 1986 (or the corresponding provision of any future United States Revenue Law).
Once you have familiarized yourself with the organization’s purpose and mission statement, be sure to reference and consider both the purpose statement and the mission statement as the organization evaluates key decisions. From recruitment and hiring to programming and expansion, every decision should further the mission of the organization in some way.
January 16, 2023 | Faith-based nonprofit organizations should recognize whether they are obligated to follow the requirements under the Fair Labor Standards Act (“FLSA”).
December 13, 2022 | Faith-based nonprofits will likely face more lawsuits and government actions challenging religious freedom after Congress passed the Respect for Marriage Act (RMA) repealing the Defense of Marriage Act of 1996. The RMA impacts faith-based organizations in two specific situations. Both relate to interactions between the faith-based organizations’ work and the state and federal government. The threats to faith-based organizations remain despite language in the RMA purporting to protect religious freedom. Both supporters and skeptics of the RMA agree that the RMA’s religious freedom language has no “meaningful effect.” Below are key questions and “known unknowns” related to the RMA’s impact on faith-based nonprofits.
November 22, 2022 | At first glance, the voting requirements in a nonprofit’s bylaws may not seem an exciting topic. Most nonprofits have not seriously considered their bylaws, perhaps because they have inherited old bylaws, copied the bylaws of another company, or even originated their bylaws from a quick internet search! If any of these scenarios applies to your organization, your organizations’ bylaws may include director voting requirements not tailor-made to your preferences or the specific needs of your organization.