Corporate Governance: Indeterminate or Schizophrenic Choices in the Form and Operation of Legal Entities
Posted: 30 Jun 2006 Last revised: 20 Mar 2009
Date Written: June 26, 2006
Business, mutual benefit and charitable entities often choose a sub-optimal legal form. Alternatively, entities choose one form, only to operate as another, often running afoul of the law, at least historically. A trust may operate as if it were a partnership when, in reality, a corporate governance structure would suit it better. At the extreme, corporations under the Alaska Native Claims Settlement Act, for example, have acted as corporations, charities, political subdivisions, trusts, or tribes of Native Americans, as time passes and their needs change. Prompted by a book (SAMUEL KING & RANDALL W. ROTH BROKEN TRUST (2006)) chronicling mismanagement at the United States's largest charitable trust, the Bishop Estate, whose trustees acted as though they were partners of a small firm, this article inquires into this common but overlooked matter. One conclusion is that differences in the law applicable to differing legal forms have narrowed. Another is that corporate governance best practices may in reality be governance best practices, as suitable for a large trust, charity, or mutual benefit corporation as for a business entity.
Keywords: corporate governance, corporation, nonprofit, charity, not-for-profit, partnership
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