Profit v Non-Profit: Governance and direction

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Continuing to think through the potential legitimacy of shifting from a profitable/taxable to a [profitable]/tax-exempt entity, I wrote to J____, our legacy planner.

The matter of board governance lays heavily on Sarita’s and my mind as we consider the possibility of shifting to a 501(c)(3) form. We have observed too many 501(c)(3)s to enter into this lightly. Some concerns:

How do we write up our corporate papers in such a way that we can ensure . . .

Our company will be properly managed to fulfill its purpose and mission with the kinds of business sensibilities and sensitivities we have learned and sought to pursue while the company has been a for-profit organization? [As I mentioned to you yesterday: we have very strong feelings that most people are able to pay for--and ought to pay "full boat" prices for the things we sell. But there are some for whom we may want to subsidize costs. . . . We recognize that other people -- some of whom we may invite onto our board -- may have other sensitivities or sensibilities: "What's a non-profit organization for? To give things away!" --We don't want to get into loggerheads with people like that.]

Our company, as a 501(c)(3), will fulfill the same charitable purposes Sarita and I have pursued so far on our own via our (current corporate) charitable giving? [Once more: we have established some fairly strong directions, but . . . ]

How do we write up our corporate papers in such a way that we can ensure we achieve these goals not only short-term, while we are alive, but to the extent possible, long-term, after we die? Or is it even possible to ensure such things — especially considering the horrible track records of entities staying on-track? (We are aware of too many horror stories associated with perpetual trusts and other very-long-term bequests.) Problems can come as a result either of the original bequester over-specifying his or her requirements or under-specifying.)

These matters are of concern to us most particularly because of what we have observed in the 501(c)(3)s of which we have been a part: where, among other things, we have observed boards, themselves, veer away from the expressed purpose(s) of the corporation’s founder(s)–to the point where the board has relieved the founding president of involvement in the organization (against the founder’s wishes), and/or, in other ways, the founder and board have come to loggerheads and the organization has struggled to maintain any kind of momentum. . . .

Very disturbing thoughts. . . .

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