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Mission: Not-Profitable

"Whatever you do, don't get the lawyers involved."

I'm sure you've heard such comments. You hear them at for-profit companies too, but my guess is they are less frequent. The lure of revenue has a way of focusing everybody's attention on the task at hand. Corporate in-house counsel give advice with an eye toward preserving the project, whatever it is, so that it doesn't unravel later due to legal issues--if, that is, they don't kill it early on because it can't pass the legal smell test. The board, the stockholders and the management would go ballistic if their lawyers failed to

take care of the legal end of things. They are not kind to staff who effectively take money out of their pockets.

The bottom line's disciplinary effect is largely absent within non-profits. It is not wholly absent, of course, especially if the organization is well-managed and has good financial controls. But when a clear measure of results is absent in a transaction, lots of funny business occurs.

An odd effect of having a mission motive rather than a profit motive is that the non-profit lawyer's training, experience and judgment are often second-guessed if not ignored altogether. You might hear the dreaded request: "Don't make it too legal." Say you are asked to write an agreement spelling out the details of a relationship between your organization and another and the project manager adds, "and keep it to two pages so we don't scare 'em." What are you supposed to do with this advice? Make it only a little bit legal? Ignore half the issues you spotted? Use one-syllable words? If you take pride in protecting your client's interests, it is difficult not to take such advice as an insult.

To be fair, your non-lawyer colleagues are often unaware of the many legal aspects of a proposed deal and think the instruction to "run it past legal" is a mere formality. You, on the other hand, have very specific legal training and clearly enumerated fiduciary duties that you bring to each assignment. Indeed, you likely chose your career path in part because you sought out the very professional duties and intellectual challenges somebody else is effectively dismissing with "don't make it too legal." Unlike a businessman with quarterly revenue projections to meet, shareholders to satisfy and the SEC breathing down his neck, the non-profit staffer thinks he can afford to be indifferent to the lawyer's role. He or she thinks that way only because the discipline of the dollar is largely absent. Instead, the emphasis tends to be on making everybody feel good.

Feeling good is a powerful force in non-profits, especially in the charities. Who in his right mind, for example, would niggle over details with large donors? They're giving their money to you, after all. Unfortunately for the feel-good crowd, the lawyer's job description says, in effect, look all gift horses in the mouth. It is the lawyer's job to ask the hard questions about a proposed alliance that might reveal unlawful political activity, unlawful private benefit or even a conflict with the charity's mission. The first two could result in sanctions, the latter deep embarrassment and bad publicity.

The smart in-house lawyer always tries to make things work and would rather make deals than break them. Still, every "no" from the legal department, no matter how infrequent, disappoints somebody immediately. And later, when it becomes obvious the non-profit dodged a bullet because it had good legal counsel up front, the pats on the back are rare.

The solution is not to introduce the profit motive into non-profits but to listen to counsel. Then feel good about the outcome as you give him (or her) a hug.

Bruce Collins is the corporate vice president and general counsel of C-SPAN, based in Washington, D.C.

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Bruce D. Collins

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