Avoiding Evil

During the business session of the Southern Baptist Convention today one of the main issues was over sole membership. All of the seminaries of the SBC have adopted the sole membership policy except for New Orleans Baptist Theological Seminary. Last year the convention voted to tell NOBTS that we wanted them to adopt sole membership. The president of the seminary said that if the convention told them to do it, they would do it. This year NOBTS decided that the convention did not have enough information on this issue and they passed out a full page sheet giving 10 freqently asked questions on Sole Membership. The convention responded by also passing out a full page sheet with answers or responses to the 10 questions. For your convenience I am going to list NOBTS’s questions and response and then the SBC Counsel response to each question.

1. What is the issue about sole membership?

NOBTS: The central issue: What is the best way for an SBC entity in Louisiana to protect its relationship with the Southern Baptist Convention? The discussion is about finding the best strategy to achieve this end for a Louisiana-based institution.

SBC: There is no issue about it except from this Seminary.

2. Is there any danger of the relationship between the Seminary and the SBC changing?

NOBTS: No. Both the legal counsel of the Seminary and an independent legal consultant have reviewed the Seminary’s charter and Louisiana law, and have concluded it is not possible for the Trustees of the Seminary to change the school charter without prior approval from the SBC.

SBC: We hear this question asked more often, more ominously and more to the point: “Could the Seminary leave the control of the Southern Baptist Convention?” The answer to that question is, “We want to make certain that it cannot.” It is a waste of energy to speculate about the level of that danger; let’s just fix it for certain. Litigation in Missouri and Georgia has swirled in part around whether the state convention is the sole member of its entity corporations. Except for NOBTS, the SBC entities each declare up front and boldly in their charters that the SBC is indeed the member and the only member of the entity corporation.

3. What is sole membership?

NOBTS: Sole membership is a legal approach to the organization of a non-profit corporation making one person or organized body the only member of that corporation, giving the sole member authority to control completely the affairs of the corporation.

SBC: It is a widely used nonprofit corporate structure by which a parent corporation is the only member of a subsidiary corporation. The SBC is a corporation; there are twelve corporations subsidiary to the SBC. By being the sole member of these subsidiary corporations, the Convention corporation shares in explicit ways in the governance of the subsidiary corporations which are otherwise governed by their boards of trustees. There are no ifs, ands or buts about the Convention’s rights; nor is there any ambiguity about the responsibilities of the boards of trustees. Good fences make good neighbors. When legal instruments are clear, courts will more likely understand them.

4. Who proposed the sole membership strategy?

NOBTS: The staff of the SBC Exucutive Committee made the original recommendation to the Seminary. It was suggested to the Executive Committee staff by the Tennessee-based law firm representing the SBC.

SBC: Our law firm proposed it. The creation of the North American Mission Board in 1995 offered us the first opportunity in recent history to state in a subsidiary charter, in modern statutory language, the Southern Baptist way by which governance over an institution is shared between the messengers and the institution’s board. The sole member structure was (and remains) the hands-down best way to declare that division in the SBC tradition.

5. What is the legal basis of the sole membership strategy?

NOBTS: The sole membership proposal was crafted specifically on the basis of a law known as the Revised Model Non-profit Corporation Act (Model Act) which allows the sole member to share some of its control and authority with the directors or Trustees of a corporation. Louisiana is one of 41 states that never adopted the Model Act.

SBC: The legal basis is the nonprofit acts in the nine states in which our subsidiaries are incorporated. The legal basis is not the Model Act, as the Seminary suggests. The Model Act is a document of the American Bar Association. Dwelling on the Model Act, and fretting that it has not been adopted in Louisiana, leads to confusion. The better question is, “Does the Louisiana nonprofit corporation act provide a basis for the sole membership structure in that state?” The answer is, “Yes.”

6. What benefits does sole membership appear to offer in Model Act states?

NOBTS: Under the Model Act the rights of SBC ownership and the rights of Trustee operational control can each be protected. This legal seperation of rights and responsibilities also seperates liability, so that the sole member cannot be held liable for the actions of the entity.

SBC: This is an irrelevant question. Sole membership offers the same benefits in every state in which our subsidiaries are incorporated, including Louisiana.

7. Why do the benefits of sole membership under the Model Act not apply to NOBTS?

NOBTS: The Model Act is a state law, not a federal law. Since Louisiana does not have the Model Act, the benefits it offers in other states do not apply in the case of NOBTS.

SBC: The benefits of sole membership do most certainly apply to NOBTS. Worrying about the Model Act obfuscates that fact.

8. What are the legal problems with sole membership in Louisiana?

NOBTS: Unlike states with the Model Act, Louisiana law does not specifically give the sole member the power to transfer some of its controls and liabilities to the Trustees of the entity. In the opinion of numerous Louisiana attorneys we have consulted, under Louisiana law the sole member always has complete control and therefore may assume the risk of liability for entity actions. The Trustees of New Orleans Baptist Theological Seminary are concerned that in our litigious society, if the sole membership strategy were adopted, the Cooperative Program could be held hostage to lawsuits involving the seminary.

SBC: We believe there are none. That is our opinion and it is the opinion of the Louisiana law firm we retained to consult with us on this subject. Before the Seminary began to say it was worried about the Model Act which Louisiana did not have, the Seminary said it was worried about the Napoleonic Code which Louisiana used to have. Sole-member nonprofit corporations exist in Louisiana. NAMB created one there last year.

9. What are the polity problems with sole membership?

NOBTS: Sole membership is a step toward the centralization of control in Southern Baptist life. It is not the size of the step, but the direction of the step that conserns us. Historically Southern Baptists have embraced the principle of cooperation and rejected the principle of centralized denominational control. We believe that authority over Convention entities belongs to local Southern Baptst churches alone. These churches exercise this authority by sending messengers to the Convention, who elect Trustees to represent them in directing the entities. These Trustees are accountable to the messengers of the Convention. This is the Baptist way of doing the work of the Convention. This is the process used in the Conservative Resurgence.

SBC: There are none. The Seminary sounds the alarm of “centralization of control.” That is an alarm guaranteed to frighten Southern Baptists. It is a false alarm.

10. What about the action of the other SBC entities to adopt sole membership?

NOBTS: Ten of the other entities that have adopted sole membership are in states that have the Model Act. Sole membership thus functions differently in these states than in Louisiana. Also, some of the other entity heads have had second thoughts about sole membership.

SBC: They all adopted sole member charters and did so with little commotion. The structure passed muster with every law firm of every entity. It has worked for ten years. No “centralization of control” has occurred, no polity has been violated, no legal problems have been encoutered, and the Convention has not paid one cent for the liabilities of its entities.

The SBC responses came from the firm of Guenther, Jordan & Prince, General Counsel to the SBC and i’m not sure about where the responses came from on the NOBTS side of things.