Charity Governance, in a January 22, 2006 post, examined the intriguing question of whether board members of the Boys and Girls Club of Burlington, Vermont breached their fiduciary duties by turning down an apparently unrestricted $2,250 donation from Hooters, the popular, racy restaurant chain. In its analysis, Charity Governance concluded that "the club and its board made a mistake."
The Boys and Girls Club explained that it declined the donation because the donor did not present a positive value for the children served by the organization. Charity Governance asked: "If the Boys and Girls Club is going to start engaging in this sort of line drawing, is it going to turn down gifts from manufacturers of sugar-coated cereals, hamburger and taco franchises that sell food with high fat content, and clothing manufacturers that rely on low-cost foreign labor?" While not claiming this to be legal guidance, Charity Governance stated that it would draw the line at illegal gains.
Charity Governance noted that a spokesperson for the American Cancer Society, the organization that accepted the rejected Hooters donation, said that the Society would not accept a donation from the tobacco industry. The policy seems perfectly rationale to me. Such a donation would provide a marketing benefit to the tobacco company, which could contribute to greater sales of tobacco products by the company, the very antithesis of one of the Society’s most important goals. Accordingly, the Society’s board could reasonably conclude that the donation would have a detrimental net impact on the furtherance of the Society’s mission.
Of course, the analogy between the line-drawing by the American Cancer Society and the Boys and Girls Club is faulty. It would be ridiculous to say that Hooters is to the Boys and Girls Club as Phillip Morris is to the American Cancer Society. Nevertheless, while not necessarily agreeing with the decision, I understand the presumed rationale. In a conservative community and/or one with strong beliefs in women’s rights, the affiliation with Hooters might negatively impact the donations coming from its traditional supporters. Acceptance of the $2,250 donation might consequently lead to an overall reduction in support and hurt the Club’s ability to further its mission.
On the other hand, what if Hooters had offered the Boys and Girls Club a $10 million donation? Would the board’s decision have been the same? Doubtful. And I don’t think that would necessary be hypocritical. The equation in terms of whether the donation would have a positive or negative impact on the mission would be different, both in the short-term and long-term.
With respect to the board’s fiduciary duties, the important thing is that the board consider the pros and cons and try to make a decision in the best interest of the organization. Making snap judgments or simply rubber-stamping the dominant member’s decision would not be consistent with this approach.