Lawyers as Social Innovators: Guest Lecture

Earlier today I had the wonderful opportunity to guest lecture at Scott Curran‘s  Lawyers as Social Innovators class at Chicago-Kent College of Law at the Illinois Institute of Technology. Here are my notes for the class:

If you want to do good, your best bet will be to work with, or for, a nonprofit.

That’s a statement I know will elicit some strong challenges, particularly in this class. And times have changed since I was in law school. Certainly, much good (and bad) can be accomplished in any sector. But I’ll try to justify some continued truths about my statement.

To start, there are some important things to know about the nonprofit sector:

  • It’s big – nearly 2M organizations that generate almost 5.5% of GDP (comparatively, retail generates about 6%); 9.2% of all wages and salaries (not including 8.7B volunteer-hours worth about $179B)
  • It’s pervasive – religious institutions, hospitals and health care systems, schools, after-school programs, bar associations, homeowners associations, the Academy of Motion Picture Arts & Sciences, until very recently the NFL.
  • It’s mostly, but not only, charitable organizations – there are also social welfare organizations, unions and labor organizations, trade and professional associations, social clubs, homeowners’ associations, and more

Why is working with, or for, a nonprofit important?

  • Nonprofits produce public goods that the government and marketplace either fail to produce or fail to produce in a manner that makes them trustworthy to a significant segment of the public (e.g., religious services, healthcare, social services, education, educational media like PBS and NPR, museums and zoos, arts, affordable housing, disaster relief, workers’ rights, promotion of specific lines of business)
  • Nonprofits have been the principal driving force of big social changes – civil rights, women’s rights, children’s rights, LGBTQ rights, environmental protection, animal rights, reductions in poverty/hunger in certain areas
  • Nonprofits continue to be the most trusted of sectors in part because of the laws that –
    • dedicate charitable assets to charitable purposes,
    • penalize certain transactions benefiting insiders (like directors),
    • prohibit excessive compensation, and,
    • for 501(c)(3) organizations, prohibit political campaign intervention (though that may be subject to change)

So what is nonprofit law?

  • Nonprofit corporate law – formation, governance provisions, corporate actions, board actions, membership actions, creation of subsidiaries, mergers, dissolution
  • Tax law related to tax-exempt status – purposes, operations, lobbying, political campaign intervention, grantmaking, investments, taxes, joint ventures with for-profits
  • Charitable trust laws – restrictions on use of charitable assets, registration requirements, fundraising regulations

What do you do as a nonprofit lawyer?

We create nonprofits; help structure their governance models; guide their operations (including when they want to engage in new activities like criticizing a governmental leader, supporting international efforts, running a new business, or partnering with a for-profit); structure corporate transactions like mergers and partnerships; provide opinions on planned transactions; draft and review contracts; and advise boards and management. We also regularly speak and write on nonprofit legal issues, advocate for the sector, and continually try to learn, not only the laws, which are definitely not static, but also the needs and challenges of nonprofits as their internal and external environments rapidly evolve. See also Attorney for Nonprofits.

Here are a few substantial parts of our practice:

Trends and Thoughts

  • Blurring between sectors – nonprofit and for-profit (philanthrocapitalism; hybrid organizations); nonprofit and government
  • Collaborations across sectors
  • Blurring between organizations (movements like Black Lives Matter)
  • Reactionary legislation and regulation – reacting to highly publicized scandals and/or to limited budgets (1023-EZ; property taxes and PILOTs)