ADVISING NON- PROFIT-SEEKING VERSUS PROFIT- SEEKING ORGANIZATIONS
Most people think nowadays the only hopeful way of serving your neighbor is to make a profit out of him; whereas in my opinion, the hopefulest way of serving him is to let him make a profit out of me.
-- John Ruskin ( 1819-1900)
The great majority of nonprofits have no stockholders. What the full responsibility of being a trustee of a nonprofit institution means is often ambiguous. This complicates the role of an advisory board unless the scope is specifically focused on one or more definable elements of the institution's affairs. The general fiduciary obligation of the trustees is clear. The problem, in the event of alleged dereliction of duty by trustees, is how to determine precisely who the injured party is. "One of the outstanding characteristics of a charity . . . is that there is no beneficiary in a comparable position (comparable to the beneficiaries of a private trust or the shareholders of a business corporation) who is sufficiently interested to call the charitable fiduciary to account." 1
This does not mean that trustees of a nonprofit institution are free from liability for negligent conduct. Nonprofit corporations' directors frequently have a much larger constituency and may be sued by donors, beneficiaries, alumni, and states' attorneys general. In this regard, advisors from such constituencies can be of great help.
Another difference between profit-seeking and non-profit-seeking organizations, according to the late Charles C. Abbott, former Con
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Publication information: Book title: The Director's & Officer's Guide to Advisory Boards. Contributors: Robert K. Mueller - Author. Publisher: Quorum Books. Place of publication: Westport, CT. Publication year: 1990. Page number: 103.