Douglas Y. Park, Principal of DYP Advisors, a corporate attorney and strategist in Silicon Valley, will teach Gain a Business Advantage Through the Law for the Stanford University Continuing Studies Program during Summer 2012. The course provides an introduction to business law concepts and offers practical ways to use the law strategically.

Some of the topics the class will cover are:

•     Understand how legal moves can support your company’s strategy
•     Identify, understand, and negotiate contract terms that can help you create value and manage risk
•     Use compliance efforts to strengthen the company’s operations and culture
•     Protect intellectual property that is valuable to your business
•     Leverage better governance practices to obtain better results

The class is intended for business owners and managers who want to learn how to proactively and thoughtfully use the law not only to stay out of trouble, but also to achieve their business goals. Participants will learn how to better work with their attorneys and utilize their expertise. Classes will consist of lectures, discussions, and applications to situations which companies of all sizes and industries face.

Mr. Park explains the purpose of the course: “Your legal decisions should promote your strategic, financial, and operational objectives, not just reduce legal risk. This approach helps business people intelligently use the law to their advantage.”

Beginning on June 26, 2012, classes will be held on eight consecutive Tuesday evenings from 6:45 pm to 9:00 pm on the Stanford campus. Further details, including registration information, are available on the class page on the Stanford University Continuing Studies website.

About Douglas Y. Park and DYP Advisors:

Douglas Y. Park of DYP Advisors, located in Palo Alto, California, has nearly twenty years of experience helping business leaders succeed with integrity. He specializes in solving problems that cut across strategy, corporate governance, and corporate and securities law. Prior to becoming an attorney, Mr. Park taught at the School of Business and Management, Hong Kong University of Science and Technology in strategy, entrepreneurship, and organizational behavior. He received an AB magna cum laude with highest honors in Sociology from Harvard College, a PhD in Business from Stanford Graduate School of Business, and a JD from the University of Michigan Law School. For more information, please visit http://www.dypadvisors.com.

Palo Alto Business Attorney Douglas Y. Park, Principal of DYP Advisors, announces that his firm is a sponsor of the 2012 Harvard Club of Silicon Valley Annual Dinner on May 16, 2012. The dinner, which serves as the annual meeting of the club’s membership, will be held at the University Club of Palo Alto.

The annual dinner will feature an election of directors and officers, a review of the previous year, and announcements about the club’s new initiatives and programs. Randi Zuckerberg, former director of marketing at Facebook and founder of R to Z Studios, Inc., is the featured speaker. Ms. Zuckerberg will speak on The Top 10 Trends in Social Media. The general public is welcome to attend the dinner, and tickets can be purchased at http://hcsvannualdinner.eventbrite.com/.

The Harvard Club of Silicon Valley is a tax-exempt 501(c)(3) organization that serves the alumni of Harvard University who reside in Silicon Valley. The club organizes professional, social, and educational activities. In addition, the club recruits alumni to interview candidates for admission to the College and promotes the interests of the University in the region.

Mr. Park is completing his second term as President of the Harvard Club of Silicon Valley. The Board of Directors has nominated Mr. Park to serve as President during the 2012-13 term.

“As a graduate of Harvard College, I am proud to have my firm as a sponsor of the Harvard Club of Silicon Valley’s annual dinner. I strongly support the club’s activities,” said Mr. Park.

Mr. Park helps solves business problems for executives, board members, investors, and legal counsel. He specializes in corporate governance and corporate and securities law issues that impact the company's operations and strategy. He brings a background in both business and law to address these issues. Mr. Park has been mentioned on corporate governance and compliance issues in TheWallStreetJournal.com, Time.com, Corporate Secretary, Reuters, and other leading publications.

ABOUT DYP ADVISORS:

DYP Advisors help executives, boards of directors, and investors solve business problems not just reduce legal risk. The firm focuses on corporate governance, corporate and securities law, and intellectual property matters. The firm applies its unique experience in business and law to these central challenges. More information about the firm is available at http://www.dypadvisors.com.

The answer to this question lies in the distinction between who the nonprofit serves and to whom the board has a fiduciary duty. Who the nonprofit serves is about who benefits from the organization's activities. To whom the board owes fiduciary duties is about a legal obligation.

While a nonprofit does serve the community, the board does not have a direct fiduciary duty to serve the community it serves. The board has a fiduciary duty to ensure that the nonprofit upholds the mission and honors the intent of donors, and in doing so serves the target community. If the board fulfills its duties to the mission and the donors, then the target community should benefit from the organization's programs. Another way to think about it is that the board's relationship to the mission is more direct than its relationship to the intended beneficiaries.

What About The Philanthropic Organization?

One interesting variation is the philanthropy. A philanthropy that raises money and allocates it to other nonprofits has a duty to the donors to ensure that the money is being used as the donors intended. Although the philanthropy serves those other nonprofits, it does not have a fiduciary duty to them. In fact, it's the other way around. The nonprofits who receive the funds have a fiduciary duty to the philanthropy because the philanthropy plays the role of donor in that situation.

Conclusion

Nonprofit directors who have a clear understanding of their fiduciary duties can better fulfill their corporate governance responsibilities.

Douglas Y. Park

Twitter: @DougYPark

If you enjoyed this post, please subscribe to the blog by RSS feed or email. You can find the subscription option on the sidebar to the immediate right. Also, share this post and +1 it on Google+.

Douglas Y. Park, Principal of DYP Advisors and a corporate governance authority in Palo Alto, California, has been named to the Program Evaluation Committee of the BlackRock and National Association of Corporate Directors (NACD) challenge on innovation in corporate governance and responsible investment.

BlackRock and NACD invite undergraduate and graduate students, PhD researchers and university faculty to participate in a global challenge to apply the latest in academic theory to develop innovative corporate governance practices. The contest encourages thought leadership and facilitates the development of the next generation of corporate leaders.

Papers should promote the practical application of academic research and theory regarding the relationship between shareholders and boards of directors on issues facing these constituencies. Leading practitioners and academics will choose the winners based on how effectively the ideas can be implemented to enhance corporate governance and responsible investment business practices.

Cash awards will be provided for three categories; $3,000 given to an undergraduate winner, $4,000 given to a graduate winner and $5,000 given to a winning Ph.D. or faculty submission. In addition to cash awards, winners will be recognized at NACD’s 2013 Spring Forum where they will have an opportunity to present their winning ideas to corporate directors and other business leaders. BlackRock and the NACD will commit to implement the winning ideas into practice.

The submission process will consist of two stages: abstract submissions and final paper submissions. Abstracts are due by June 1, 2012 to corporategovernance(at)blackrock(dot)com. Those selected to submit a full paper will be notified by July 1, 2012, and final paper submissions are due by September 30, 2012.

“The call for papers gives students and faculty a rare opportunity to directly reach corporate leaders in developing innovative business practices and shaping the future of corporate governance,” said Myron T. Steele, Chief Justice of the Delaware Supreme Court, who is chairing the evaluation committee.

Mr. Park explained his involvement on the evaluation committee: “I am honored to serve with esteemed colleagues who care about improving corporate governance. I have a deep interest in helping companies and investors use corporate governance to create value through competitive strategy, to establish more effective risk oversight, and to achieve better performance over time.”

BlackRock is one of the world’s largest independent investment managers, with over $3.5 trillion of assets under management. The firm has a team of over twenty professionals dedicated to corporate governance and responsible investing issues.

NACD, with over 11,000 members, is the preeminent organization for company directors in the United States. NACD’s mission is to advance exemplary leadership by members of boards of directors.

Additional details are contained in the attached call for papers. Questions regarding the contest may be directed to corporategovernance(at)blackrock(dot)com.

About DYP Advisors:

Douglas Y. Park, Principal of DYP Advisors located in Palo Alto, California, has nearly twenty years of experience helping companies, board members, and investors achieve their strategic goals. He specializes in solving problems in corporate governance, corporate and securities law, and strategy. Mr. Park has been quoted in Time.com, Corporate Secretary, Agenda, a Financial Times service for corporate directors, Reuters, and other leading publications. Prior to becoming an attorney, Mr. Park taught at the School of Business and Management, Hong Kong University of Science and Technology in strategy, entrepreneurship, and organizational behavior. He received an AB magna cum laude with highest honors in Sociology from Harvard College, a PhD in Strategy and Organization from Stanford Graduate School of Business, and a JD from University of Michigan Law School. For more information, please visit http://www.dypadvisors.com.

To whom does the nonprofit board owe its fiduciary duties (Source: randommization.com)

What fiduciary duties does the nonprofit's board of directors have? And to whom does the nonprofit board owe fiduciary duties? The answers impact the corporate governance and fundraising activities of charitable organizations and their directors.

The Fiduciary Duties of The Nonprofit Board of Directors

If the nonprofit organization is organized as a corporation, the nonprofit's board of directors has the same two basic fiduciary responsibilities as any other corporate board: the duty of care, and the duty of loyalty. Both duties flow to the corporation; that is, decisions must be made in the best interest of the company.

The duty of obedience holds that directors must uphold the nonprofit's purpose. The legal status of the duty of obedience varies from state to state, and its status has been in flux in recent years. As discussed herein, the duty of obedience is understood as a statement about to whom the board has fiduciary obligations.

To Whom Does the Nonprofit Board Owe Fiduciary Duties?

In a for-profit corporation, the directors have responsibilities to the corporation and its shareholders. However, because a nonprofit has no shareholders, it is less clear to whom the fiduciary responsibilities are owed in addition to the organization. The following possibilities are often mentioned:

• The nonprofit's purpose as stated in its Articles of Incorporation, Bylaws, and Mission
• Donors
• Members
• Employees

1. The nonprofit's purpose.

The nonprofit's board has the duty to uphold the charitable purpose as stated in the Articles of Incorporation and Bylaws. What about the organization's mission? The mission and charitable purpose are the same, and the mission statement should be found in the Articles and/or the Bylaws.The corporate charter and the Bylaws are legally binding. These documents are difficult to modify. Amending the Articles or Bylaws usually requires a supermajority vote of the board.

Because the purpose forms the foundation of the organization, the board must fulfill its duty of care and carefully consider any changes to the Articles, bylaws, or mission. Not only do these statements provide the direction to which a board member must focus her actions, they also provide the roadmap for the nonprofit's activities and fundraising.

Public facing statements about the purpose should conform to what is contained in the Articles and Bylaws. Otherwise, the nonprofit may inadvertently or deceptively receive and use funds in a way that are inconsistent with the organization's actual purpose. That type of inconsistency invites legal and reputational trouble for the board members and the organization, including lawsuits and the potential revocation of both nonprofit and 501(c)(3) tax exempt status.

2. Donors

Donors to nonprofits are also owed fiduciary duties. Where the donor earmarks her funds for a specific activity, the board must ensure that the funds be used in that particular way. A few examples illustrate the point:

• Country singer Garth Brooks won a lawsuit to have his $500,000 donation to an Oklahoma hospital returned because the hospital did not use the money for the  specific purpose of building and naming a women's center after his mother. Brooks was also awarded $500,000 in damages.

• The California Attorney General sued directors and officers of the Monterey County AIDS Project (MCAP) for alleged misappropriation and misapplication of a $2.8 million donation and also breach of the duty of care for failure to properly oversee the use of funds. The settlement created a $1 million fund dedicated to the original earmark of the donation -- to provide housing for individuals with HIV/AIDS -- and barred 16 former MCAP officers and directors from serving as a fiduciary of any California charity for at least 5 years.

To avoid problems, the audit committee, or the board as a whole, should make sure that the intended uses of donations align with the organization's charitable purpose. That also means determining whether a source of funds is a good fit with the organization's mission. If either the earmark of the source is a poor match with the nonprofit's mission, then the donation should be declined.

Where the donor does not specify the particular uses for the funds, the nonprofit might not be obligated to apply the money to a specific activity. In this case, the object of the fiduciary duties is the organization's purpose.

3. Members

The board is not a direct fiduciary of the members of the nonprofit. Members of a nonprofit are not the same as shareholders of corporation, as members do not own or have residual rights to the nonprofit corporation. However, to the extent that the members donate and volunteer toward the charitable mission, the board members have the responsibility to affirm the mission in a clear and consistent manner.

4. Employees

The board does not owe fiduciary duties to the nonprofit's employees.

Conclusion

The issues surrounding the nonprofit board's fiduciary duties are much more complex than what this overview can cover. As a starting point, however, every nonprofit board of directors must understand its fiduciary duties to the organization and its purpose. That understanding will clarify what is important in making decisions.

Douglas Y. Park

Twitter: @DougYPark

If you enjoyed this post, please subscribe to the blog by RSS feed or email. You can find the subscription option on the sidebar to the immediate right. Also, share this post and +1 it on Google+.