Lessons From Penn State

Leigh Cole
Dinse, Knapp & McAndrew PC
Burlington, Vermont

We’ve been following the Penn State situation closely. The responses of the university and its various constituents and the NCAA to this unprecedented institutional disaster will inform our advice to our college and university clients going forward in so many contexts, including employment matters, athletics compliance, board governance and leadership, institutional structure and reporting, and compliance generally, among others. And like the Sarbanes-Oxley reforms years ago, which were mandatory for publicly held companies and accepted to a large extent as best practices for private businesses, institutions and non-profits, the Penn State case raises awareness of board accountability generally. This is a subject of great interest at our firm, because we not only represent a large number of institutional and nonprofit clients, but virtually all of us are directly involved in the nonprofit community as engaged directors and volunteers, supporting and leading nonprofits through good times and challenges. A Vermont commentator recently discussed the lessons of Penn State for nonprofits of all sizes, in an opinion piece focusing on much smaller controversies faced recently by Vermont nonprofits. The author takes some liberty in quoting Vermont nonprofit law, suggesting that the law requires directors to “acquire a working knowledge …” and “contribute positively to board discussions …” which aren’t statutory requirements. But the general idea that Vermont nonprofit corporation law requires directors to pay close attention, inquire and probe, and serve in the best interest of the organization, not the present staff of the organization, and to serve the nonprofit mission of the organization rather than any profit-driven goals, is an important reminder for everyone serving on nonprofit boards of directors. We routinely field questions from boards of directors at colleges and universities about standard of care, board structure and leadership, ethics, legal compliance and the host of other issues that are faced by nonprofits of all sizes. The reaction of Penn State and its constituents (board, administration, faculty, students, alumni) to the Sandusky case generally and the NCAA sanctions specifically continues to unfold as of this writing, with important Penn State trustees meetings today and tomorrow, and the ramifications and legal proceedings will continue for years. It’s a sad and disturbing case, but one that provides important lessons and precedents for all nonprofits.

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