The International Journal
of Not-for-Profit Law
Volume 1, Issue 2, December 1998
Editor’s note. This issue of the Journal contains reviews of two “Handbooks” that deal with aspects of the not-for-profit sector and its regulation. They are very different books, the Non-Profit Handbook by Gary Grobman having more practical content and the Handbuch Stiftungen by the Bertelsmann Stiftung taking a more theoretical approach. Yet they are interesting books to compare – each has considerable strengths and each serves as a useful reference tool. One hopes that the approach taken in the Bertelsmann book, which deals with issues relevant to German foundations, will be replicated with a more international perspective. And one also hopes for other national “how to” handbooks like the Grobman book (which deals with the US) to assist those thinking about setting up not-for-profit organizations in other countries — the “Non-Profit Handbook” can serve as a useful model.
In the first issue of the Journal, we promised a review of the new Philanthropy and Law in Asia for this issue. Unfortunately the review copy had not arrived by the time this issue of the Journal was ready to go to press. It will be reviewed in the next issue.
By Gary Grobman
Reviewed by Karla Simon, General Editor
Gary Grobman’s excellent compilation of information in the first edition of the Non-Profit Handbook makes clear 1) why such a book is worthwhile and 2) why a new edition is needed. This book was called “must reading” by Joe Geiger, the Executive Director of the Pennsylvania Association of Nonprofit Organizations, in his Foreward to the 1997-1998 edition. It is clearly a useful primer for anyone interested in establishing a not-for-profit organization in the United States. In addition, it is a useful reference book for lawyers advising not-for-profit organizations and their founders because it reviews essential general information in addition to providing a “State Directory”, which is a listing of the various state regulatory agencies, with their contact information (this is the part that needs updating).
The book is organized thematically, beginning with chapters that consider whether one should or should not incorporate an organization that is being formed, how one goes about the incorporation process, and other worthwhile general information that lay persons will find useful as they seek to determine how to structure a new not-for-profit organization. In addition, several chapters consider the role of the board and issues relevant to appropriate internal governance (e.g., setting a conflict of interest policy). It is likely that many lawyers will also find that these sections provide a worthwhile review of the issues that arise in counseling not-for-profit organizations.
Another major theme has to do with personnel issues – what legal requirements exist, how to set up staff manuals, what to do with volunteers, etc. All to frequently new not-for-profit organizations have considerable difficulty with the concepts inherent in employment law and adopt loose practices that can harm them. The book is quite helpful as a resource for effective human resources management techniques.
Some of the other important themes in the book have to do with financial issues such as financial management, the role that tax exemptions can play in the life of the organization and how one obtains federal, state and local exemptions, and establishing fund raising practices. Still others consider advocacy and political activities, and the restrictions placed by the tax laws on such activities. In each case the advice given is comprehensive and very helpful.
Another feature of the book is the appendix listing – the “State Directory.” This section compiles essential information on each of the fifty states and the District of Columbia under the headings: Incorporation, Lobbying, Tax Exemptions, and Charitable Solicitation. With respect to each heading, it gives the name of the state agency responsible for administering the law, as well as a citation to the applicable law. While the information provided is in summary form, it permits a reader to easily obtain an overview of what the state law requirements are for each of the headings. Thus, one can learn that Minnesota’s Attorney General’s office publishes a booklet on Fiduciary Duties of Directors of Charitable Organizations; Colorado’s incorporation law requires that the corporate name be transliterated into letters of the English alphabet if it it not in English; and Utah has the same permitting and bonding requirements for paid solicitors and fund raising counsel. Each of the state listings is comprehensive as well in terms of the contact information given, including websites, where available.
Another appendix reproduces sample by-laws for an not-for-profit organization. And the endnotes list useful references for each of the chapters. This Handbook is in short a well-organized and informative resource for all of us associated with the not-for-profit sector in the United States. We can highly recommend that it be included in any comprehensive library containing resource materials on the sector.
Edited by Bertelsmann Stiftung
In 1998 the Bertelsmann Stiftung published a very large compendium of essays as a “Handbook on Foundations” (Handbuch Stiftungen (Bertelsmann Stiftung, publisher, Gabler Verlag, 1998, ISBN 3-409-19896-2) (in German). This is a wide-ranging and valuable resource book, which is sadly unavailable to anyone who does not read German. Nevertheless, this review essay will discuss some of the significant issues considered in the Handbook in the hope of bringing relevant materials to the attention of those who otherwise will not have access to them. The principal purpose of the review essay is to focus on the relevant legal problems (including broader social-legal and economic-legal problems) facing foundations and the societies within which they operate. Although the book itself concentrates on the German foundation world in particular, many comparative essays are included. In addition, it is clear that the social-legal and economic-legal problems faced by German foundations are on a theoretical level not dissimilar from those faced by foundations in any society. We therefore suggest that the Foundation consider plans for publishing a similar, more comparative book of essays about foundations in English, so that it will be readily accessible to a wider readership.
Introduction. The Handbook is an outgrowth of significant developments within the Bertelsmann Stiftung, which is the largest operating foundation in Germany. As such, the Foundation has undertaken to become a leader in research and analysis of the foundation world, in particular in Germany, but also more generally in Europe and to some extent internationally. The Foundation presently has a specific section devoted to such endeavors, called the section on “Stiftungswesen.”
The Handbook itself is preceded by a Forward by the former General Director of the Foundation, Reinhard Mohn, who suggests the importance of the role of foundations in the modern world. He notes specifically the desire of people to engage in endeavors that will help others, that are “gemeinnützig” or for the public benefit, in the largest sense. Certainly many foundations are historically and in modern times outgrowths of such impulses. But he notes that foundations can play a larger role in society than mere purveyors of charity, by acting as agents of change, and by stimulating and resolving normative conflicts. This larger role is an independent one, outside the state’s control except on the periphery. As such, it of course causes some politicians, particularly in the United States at present, but in such places as revolutionary France in the past, to want to curb the power of foundations and the perpetuation of control by the “main mort.” Nonetheless, the statement by Dr. Mohn gives clarity to the purpose of the book, a purpose it admirably fulfills.
Authors and Editors. The list of authors is quite impressive and includes many professionals in the foundation field in Germany, Europe, and the United States. One criticism that can be made, however, is that there are not more critics of the work of foundations among the authors (such as, for example, Robert Bothwell, Executive Director of the Committee on Responsive Philanthropy in the US). If a more comprehensive analytical structure is envisioned for a similar, but more comparative book to be published in English, perhaps more critical analyses might be included. However, since the book is in the nature of a “Handbook,” it may well be that the name itself dictated the choice of what to include.
Organization. The Handbook is organized into five chapters, which cover the following topics:
- Foundations in Society
- Leadership and Organization
- Project Choice and Project Management
- Representation of Interests and Decision-making by Foundations
- Legal Formation and Government Oversight
Although we had originally set out to review only Chapter V, it became clear that legal and regulatory issues pervade the various discussions. Thus, this review essay will provide a sampling of the issues discussed throughout the book, using a thematic approach similar to that taken by the editors.