Tackling the Evils of Interlocking Directorates in Healthcare Nonprofits
University of Kentucky College of Law
Nebraska Law Review, March 2007
Though they are sometimes regarded as corrupt, the complete cessation of existing interlocking boards in healthcare nonprofits is not immediately attainable and arguably not always desirable. This article comments that the doctrine of fiduciary duties should be modified to encompass the reality of overlapping boards; to recognize the trend toward more global, comprehensive, and proactive governance in the healthcare sector; and to enable directors to decipher, document, and resolve conflicts at a more meaningful point in their decision-making processes by expanding the doctrine of the duty of obedience.
To facilitate the discussion, the article draws on three examples of overlap in nonprofit boards of directors that help to illustrate the possible outcomes that could result from a shift in the doctrine of fiduciary duties. The article then discusses the deficiencies in the doctrine of fiduciary duties as traditionally understood and seeks to redefine the duty of obedience by bifurcating the guiding mission of the organization into "charter mission" and "licensure mission." The article then briefly addresses the reasons that the traditional corporate approach is insufficient for healthcare nonprofits. Finally, the article sets forth a proposal that includes procedural and substantive modifications to achieve the level of guidance and doctrinal consistency that directors and their organizations so clearly need.
Number of Pages in PDF File: 47
Keywords: healthcare, nonprofit, corporation, board, director, fiduciary
Date posted: July 12, 2006