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Thursday, Aug. 7, 2014 05:12 pm

When non-profit means non-professional

 Imagine this scene: Having recognized that they share a common need, a group of well-intended parents gather and decide to found a Montessori school. They lease classroom space, they buy the necessary materials and furniture, they hire an experienced Montessorian to do the teaching, and they contract with other specialty firms to keep the place clean and in good repair. 

Then one of the parents, says, "Wait. You know what we really need to make this work? We need to find a bunch of people who know nothing about Montessori or running small private schools and put them in charge!"  

If you’ve ever been involved with a church, a social agency or a school of any kind, you are likely to you are likely to have seen up close that most misbegotten creature, the non-profit board of directors. Their roles are unclear, their powers arbitrary, their expertise usually nonexistent.

 Boards that seek to serve as a mini-congress can, like our real Congress, be held hostage by disaffected minorities, obstructionists or single-issue fanatics. In most private schools, for instance, boards can’t find a majority, much less consensus fundamental questions. Which is the customer – the parent or the child? is the business model of organization even appropriate? What is the product provided? To do for the parent what the parent would do if she had the time? To produce a responsible, able adult? A happy, popular child? Good test scores?

It is the level of government that affects most people most intimately. After all, raising a city sales tax by a half of a percent doesn’t actually change your life much; a coup at your church that results in the sacking of an incumbent minister on which you have come to rely for counsel affect your life great deal. Yet the non-profit board is the level of government over which you have the least control.

They exist because of state government fiat. It is hopeless to try to eliminate the requirement that non-profits be overseen by directors. But could we not at least replace amateur boards with professional ones? A couple of bright lights,  Stephen M. Bainbridge of the UCLA School of Law and M. Todd Henderson

 of the University of Chicago Law School -- have proposed allowing specialized governance firms offering expert versions of the same kinds of services to take the seats now kept warm by human directors. (I owe Tyler Cowen for alerting me to the article.)

 I would go farther, and replace whole boards, jobbing out governance to professionals whose specialize in helping run such organizations. Unlike their human counterparts, these corporate elves would be disinterested (the worst board member is one who has an ax to grind), informed (the second worst board member is usually the one who thinks the school/church/agency ought to be run the way he runs his business) and informed about accounting and managerial best practices.

 Ah, but would they care? No, but they could be competent, and offer a way to deal with the inevitable disputes that doesn’t involve back-biting, plotting and politicking. I’d vote for it.

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