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"There should be an 'Abstract of Principles', or careful statement of theological belief, which every professor in such an institution must sign when inaugurated, so as to guard against the rise of erroneous and injurious instruction in such a seat of sacred learning."

James P. Boyce
from "Three Changes in
Theological Institutions"
- summarized by John Broadus, 1856



Response to Inquiries from the Trustees of NOBTS regarding Sole Membership
by D. August Boto & James P. Guenther
October 13, 2003

(Distributed to the NOBTS Trustee Executive Committee on June 10, 2003) 


For additional information on Sole Membership, click here. 

This paper is an attempt to adequately address questions posed in a letter dated April 8, 2003 from T.C. French, Jr., Chairman of the NOBTS Board of Trustees, to Morris H. Chapman, President of the Executive Committee.  Those questions are:

1.   Who is asking the entities to adopt sole membership?

2.   Why is sole membership the best strategy for Southern Baptist entities to adopt?

3.   What other options were considered prior to the decision to recommend sole membership, and why were they rejected?

4.   What is the process that the SBC Executive Committee and its staff intend to use to ask the entities to address issues of concern?

Each question will be answered below in the order in which they were presented, but first allow us to present historical context against which the answers may be better understood.

A Brief History regarding Sole Membership

Over the years, the Executive Committee has been observing and assessing the various legal methods employed by Baptist general bodies, other denominations, and other nonprofit associations by which others maintained fundamental control and struggled with unintended assumption of liability.  These “various legal methods” included trust law concepts, contractual agreements, "covenants," and an assortment of corporate structures.  Since the Convention had decided to engage in its ministries through separately incorporated entities, and the Convention had established a mode by which the Convention shared governance over those corporations with the boards of trustees the Convention elected, it was deemed most effective and most compatible to the Convention's polity to utilize the shared governance arrangement made possible under modern nonprofit corporation statutes.  No governance method so lent itself to, or seemed so congruent with, Southern Baptist polity as did the method permitted under these statutes and the corporate model upon which they were based.

To be more specific, the Executive Committee followed the development of the Model Nonprofit Corporation Act in 1965 and the adoption of all or significant parts of that model act by many of the state legislatures in the subsequent years.  This model act contained the Member concept.  It provided several clear mechanisms by which nonprofit corporations could relate to one another. These were mechanisms by which one corporation could share in the governance of another corporation in explicit ways while maintaining the legal separation of the two corporations. 

The Executive Committee watched as other religious bodies and nonprofits confronted affiliational issues generally.  For example, the Executive Committee studied the case against the United Methodist Church in 1979 in which that denomination's general body was sued because of the bankruptcy of an affiliated corporation.  That suit cost the UMC twenty-one million dollars in damages plus four million dollars in attorney's fees.

In 1981, the Executive Committee created a Legal Affairs Committee to help inform the Executive Committee, the entities, and the Convention on ascending liability and other legal issues relevant to the Convention's relationships with its entities.  In that study, the Executive Committee was advised of the advantages of the Member role under the nonprofit corporation statutes which had been and were continuing to be enacted in the various states. 

The Convention was sued that same year by an employee of the Brotherhood Commission.  In that suit the plaintiff undertook to impute to the Convention liability for the wrongs of the Brotherhood Commission and of its employees.  While the Convention was successful in the Federal District Court in convincing the Court of the division of governance between the Convention and the Commission's Board, and in showing the lack of control by the Convention over employment at the Commission, the experience brought home to the Executive Committee matters which previously had been seen by some as primarily hypothetical.  The benefits of sole membership became more apparent. 

Over this same period, the Executive Committee also monitored the strategies by which entities of the state conventions acted to distance themselves from the state convention which fostered them, and the strategies by which institutions of other denominations had fled the control of those bodies.  Those strategies included: amending the entity's articles of incorporation without state convention approval to give the entity's board the power to elect trustees, depriving the state convention of that right; dissolving the corporation and conveying the entity's assets to a new corporation not controlled by the state convention; merging the convention-controlled entity into an entity not controlled by the convention; and selling the assets of the convention-controlled entity to an entity not controlled by the convention.  It was apparent that the Southern Baptist Convention needed to find a role, recognized in the state nonprofit acts, by which the Convention could play out its limited governance role in the separately incorporated entities and be assured that its role would be legally recognized.  The “member role” was the most obvious role. 

Some state statutes allowed for one, not the member, to have the kind of governance roles which the Convention has exercised over its entities.  South Carolina is such a state.  The South Carolina state convention worked with its entities post-Furman and each entity amended its articles to give the state convention the shared governance role of "another" named in the entities' articles.  The Executive Committee of the Southern Baptist Convention explored this "another" role but it was not available in each of the states in which the Convention's entities are incorporated, and uniformity would thus be unobtainable. 

In 1995, the Convention's attorneys recommended that the Convention utilize the role of the Member as the means by which the Convention's limited governance role could be achieved in the creation of the North American Mission Board.  That advice was given to the Implementation Task Force (ITF).  That committee had the responsibility of implementing the reorganization which had been adopted by the Convention upon the recommendation of the SBC Program and Structure Study Committee.  The ITF plan called for the creation of a new corporate entity, the North American Mission Board of the Southern Baptist Convention.  This afforded an opportunity unique in the recent history of the Convention, the opportunity to create a new corporation, utilizing modern nonprofit corporation law models. 

The ITF concluded that the most appropriate way for the Convention to perpetuate its traditional governance role in this new entity, NAMB, was by utilizing the role of corporate Member, that is, sole membership.   The Convention accepted that model and approved the NAMB charter.  That charter enumerated the Convention's control rights, declaring both what those rights are, and what they are not, making it clear that in all other matters the Board manages and controls the corporation.  Following the Convention's adoption of this model in the NAMB incorporation, the model has come to be accepted and approved by the Convention and put into effect by all the other entities of the Convention, with NOBTS being the last entity to consider the issue.

Sole membership, then, has effectively satisfied the need for uniformity by forming the basis upon which the Convention can relate in the same fashion to all its entities.  It represents a "common denominator" plan which works in every state in which SBC entities are incorporated.  It tracks what has come to be a widely accepted model in nonprofit corporate structures.  It is a ‘known factor” among civil judges, and is immediately recognized as well as being fully understood as to its effects and capabilities.

In moving to the Member role, it has been the Convention's intent to simply recast present understandings into this Member role, neither to enlarge nor diminish the Convention's governance rights. Certainly, nothing in this new model affects the role of the Executive Committee.  The Executive Committee's role vis-à-vis the Convention, and its role vis-à-vis the institutions, remains as declared in the Convention's instruments.  Nothing is changed. 

So we do not perceive the Member construct to be anything which changed or threatens to change our polity or our present system of governance.  It has been the subject of study now for nearly forty years.  There has been no intent to modify polity, nor has experience indicated any polity shifts.  To the contrary, what the Executive Committee has tried to do is to preserve SBC polity and ecclesiology, and to find a way in the present law of corporations to express SBC polity in terms understood by the law.  Sole membership accomplishes the preservation of our intended relationships, and makes it unlikely that a court will declare those relationships to be different from what the Convention says they are.  Sole membership also perpetuates the entities as truly and permanently Southern Baptist, and at the same time reduces ascending liability risks.  With this historical backdrop, then, let us specifically address the questions posed.

1.         Who is asking the entities to adopt sole membership?

Following the adoption by the Convention of the NAMB sole member model, Executive Committee staff began proposing adoption of the model to the various SBC entities.  The Shorter College and Missouri situations are the most recent evidence of the need to take advantage of the benefits the model obviously would afford.  Each entity has now moved to that model, with New Orleans Baptist Theological Seminary being the only remaining exception.  The Convention has indicated its approval of the concept now on each of the occasions when the other entities embraced it. 

The Convention has not "mandated" the change.  Certainly, the Executive Committee did not "order" the change.  The Executive Committee commended the change to the other entities, explained the virtues of the model, and each agreed that the change served the interests of both the Convention and the entities.  For the last several years, Executive Committee staff has employed a fraternal, informal motif in requesting NOBTS to recognize the advantages of sole membership.

The change must be accomplished by an amendment of the articles of incorporation of each entity.  Under our polity, and under the articles of incorporation of the entities, the Convention does not declare an amendment of an entity's articles of incorporation; the entity's board adopts an amendment and the Convention approves the amendment.  Thus, the Executive Committee of the SBC suggested that each entity amend its articles in this fashion, the entities' boards acted, the Executive Committee recommended that the Convention approve the amendments, and the Convention accepted that recommendation and approved the amendments.

2.         Why is sole membership the best strategy for Southern Baptist entities to adopt?

The sole membership role is a natural, obvious, polity-consistent, commonly available role in corporation law through which the Southern Baptist Convention, a corporation, can play out its system of shared governance in regard to the Convention's incorporated entities.  The member role enables the Convention's authority to be enumerated in the entity's articles of incorporation, and enables the entity corporation to be governed and managed in all other ways by the board of trustees elected by the Convention.  It is a simple means by which the Convention can maintain ultimate control while avoiding inappropriate liability.

3.         What other options were considered prior to the decision to recommend sole membership, and why were they rejected.

Other options, including trust concepts, contracts, covenants, and the utilization of other strategies available in some nonprofit acts, were considered but were rejected because they were not so consistent with polity, they were not so effective, and not so precise, not commonly available in all the relevant states, and not so simple.

4.         What is the process that the SBC Executive Committee and its staff intend to use to ask the entities to address issues of concern?

If the term “issues of concern” used in the question was intended to be limited to sole membership, the answer is that the same process used in originally raising the issue would be used to ameliorate any perceived difficulties, whenever they might arise.  This process would be described as one where senior staff communicate, discussions by Board officers ensue, and normal corporate board processes are followed to effect a solution.  If there are other issues of concern to the NOBTS board, the Executive Committee would be happy, as always, to hear what these may be and work fraternally toward understanding and continued cooperation.

 

Some Other Questions and Answers

5.         What governance rights will the SBC enjoy as the Member of the NOBTS corporation?

The Convention will have the right to, and only the right to:

            (1)        establish the qualifications of directors, who may also be referred to as trustees;

(2)        determine the term of office of trustees;

(3)        determine the number of persons constituting the board of trustees;

(4)        elect and remove trustees, by vote of the messengers to the Southern Baptist Convention in its annual meeting.  Vacancies occurring in the board of trustees may be declared only by the Southern Baptist Convention, or by its Executive Committee, in case of the death, resignation, or disqualification of a trustee.

(5)       approve an amendment of the articles of incorporation adopted by the board of trustees, but to refrain from exercising any right to unilaterally amend the articles of incorporation;

(6)       approve any merger, consolidation or dissolution, or a change in the corporation's state of incorporation; 

(7)       approve the sale, lease or other disposition of all, or substantially all, of the corporation's assets; 

(8)       approve, by action of the Southern Baptist Convention or its Executive Committee, the establishment of a subsidiary corporation or any other legal entity or form for conducting its affairs, or the acquisition by the corporation of a controlling interest, or greater than a 25% interest, in any other corporation or business enterprise.

6.         Once the SBC becomes the Member, what is to prevent the Member from giving itself additional governance rights?

The Articles of Incorporation enumerate the Member's rights.[1]  In all respects not enumerated, the board of trustees govern the corporation.[2]  The Articles provide that the "corporation shall be managed and controlled by its board of trustees except to the extent of the Member's rights."[3]  Thus, an increase in the Member's governance rights would require an amendment to the Articles.  The Articles may be amended only by the vote of the board of trustees.[4] Therefore, the Member rights may only be increased if the board of trustees vote to do so.

7.         May the Executive Committee of the Southern Baptist Convention act for the Convention when it comes to exercising the Convention's Member rights?[5]

No.  The Member is the Southern Baptist Convention, a Georgia corporation.  The Executive Committee of the Southern Baptist Convention is a Tennessee corporation.  The Tennessee corporation will not be the Member of the Seminary corporation.

8.         But could the Executive Committee act for the Convention as the Member under the Executive Committee's "ad interim" authority?

No.  Ecclesiastically, the Executive Committee's ad interim authority to act for the Convention is limited to those matters "not otherwise provided for."[6]  Governance of NOBTS is "otherwise provided for" when the Convention approves the Seminary's articles of incorporation which vests governance in the board elected by the Convention in all matters except for those powers which are enumerated and reserved for the Convention itself.[7]

9.         But could the SBC change its constitution and bylaws and give the Executive Committee the right to act as the Convention in its role as Member between annual sessions of the Convention?

 

No.  Under the law, the Member casts its vote only in a meeting of the Member.[8]  Under the proposed Seminary articles, the meeting of the Member is the annual meeting of the SBC and any specially called meeting of the SBC.[9]  The Seminary's articles would have to be amended to make it possible for a meeting of the Member to occur otherwise, and the board of trustees must consent to an amendment of the Seminary's articles.  

 



Appendix Addressing Additional Current Issues and Inquiries
Prepared October 10, 2003 

The following questions and answers are presented to address statements made and questions raised by news accounts and press releases issued since the original foregoing paper was distributed. 

 

10.       Should Southern Baptists worry that sole membership might lead to a sort of “connectionalism” or allow our churches to be somehow controlled?  Wouldn’t sole membership be a step in the wrong direction, threatening local church autonomy? 

No. “Connectionalism” and “autonomy” are among those words that naturally prick the ears of every Southern Baptist because they have to do with our core beliefs in the area of church governance. Neither concept, however, relates to the current, and rather simple, process of amending corporate subsidiary documents. They relate instead to our strong aversion to outside control over any local church. The Southern Baptist Convention’s use of sole membership is only for the purpose of affirming the legal relationship between the SBC and its entities. It is a corporate law concept. As such, it has no bearing on the authority or autonomy of the local church.

There is nothing “un-Baptistic” about the Convention wanting the documents of its entities to reflect that the SBC is the sole member of their corporations, entitled to pick their trustees, etc.  None of these entities profess to hold sway over any local church - quite the contrary.  Sole membership is merely a restatement, in corporate law language, of subsidiary governing principles our Convention has always used.  The non-profit corporate law language suggested to amend the SBC entities’ governing documents doesn’t include any reference to local churches.  And even if it did, the reference could have absolutely no force or effect.  Why?  Because the SBC and its entities are prohibited from ever dictating to local churches how they should align, practice, be constituted or govern themselves.  The SBC’s governing documents state these prohibitions explicitly.

11.       Isn’t this just a power play?

No. One can certainly see how the word “power” invokes a visceral and automatically negative reaction among members of the family of faith, but the fact of the matter is that the SBC has always had the “power” to pick its entities’ trustees, to approve changes to its entities’ charters, to approve liquidations of its entities’ assets, and to make its entities report at each year’s annual meeting, etc. Sole membership does not create any new “power.” It merely re-establishes existing powers in terms of corporate governance language modern courts understand. As discussed in the main paper above, the Executive Committee obtains no new responsibility or power through sole membership.

12.       But doesn’t the fact that Louisiana’s law is based on the Napoleonic Code present special obstacles?

No.  The footnoted provisions of law in the main paper above cite Louisiana law.  It is written in English and easily understood and applied by lawyers and judges.  Its nonprofit corporation laws are substantially the same as the other states where our SBC entities reside, though there are always slight variations in laws from state to state.  For that reason, and just as was done in all those other states, the Louisiana nonprofit corporation law was researched to determine whether it provided the same sort of safeguards allowing our Southern Baptist polity to remain intact and unaltered, and it does.  Significantly, in incorporating a subsidiary ministry in New Orleans just this year (Fall, 2003) the North American Mission Board chose on its own to employ the sole membership model, clearly showing that the Napoleonic Code, while being an interesting historical fact, presents no real barriers to the use of established and generally recognized corporate law principles.

It may also be interesting to note that in all the seven years during which the other entities deliberated over and accepted sole membership, no provision of law or specific language in any of the tendered documents has been identified by anyone as causing anything to happen differently than it already does under our present documents and within our system.

13.       If sole membership doesn’t really change our relationships, why adopt it?

The difference under sole membership is that it will cause something different to happen outside our system – in the judicial system. Courts will more quickly and clearly understand two things: 1) The SBC is not liable for things the entities do or don’t do, and 2) its entities cannot “stray away.”

14.       Was sole membership proposed due to any sense of disloyalty among our entities?

No.  That is why expressions of allegiance, though welcome, do not really address the problem.  Our entities were asked to adopt sole membership because, at this point in the history of the denomination, the SBC subsidiary entities were at a high point of loyalty to their parent corporation.  But it is well known that “those who ignore history are doomed to repeat it.”  Therefore, sole membership was proposed as a preventative measure to better address the two historical snares repeatedly experienced: namely, ascending liability and future subsidiary allegiance.

For further information, contact the office of the vice president for convention policy, Executive Committee of the Southern Baptist Convention, 901 Commerce Street, Nashville, TN 37203-3699


[1] R.S.12:203 C "The articles may also contain provisions dealing generally with . . . rights and privileges of . . . members."

[2] R.S.12:2224 B. "Subject to any limitations, restrictions or reservation in the articles, . . . the affairs of the corporation shall be managed by a by a board of directors . . . ."

[3] Article VI.

[4] Article IX says the Articles may be amended only by the vote of the board and the consent of the Convention. This method of amending the Articles is permissible under 12:237 A, to wit: "A corporation may amend its articles in compliance with any method stipulated in its articles."

[5] After the original dissemination of this paper, it was asked whether the Executive had some rights “co-equal” with the member. While the Executive Committee is not and can never be or act as the Member, it does possess the ability to act as specified in items 4 and 8 under question 5 on the prior page. In both these cases, obtaining Executive Committee approval instead of SBC approval is an option rather than a requirement, thus benefiting the entities.

[6] SBC Bylaw 18E(1).

[7] This is consistent with SBC Constitution Articles VI and VII; SBC Bylaw 18 E (9): "The Executive Committee shall not have the authority to control or direct the several boards, entities, and institutions of the Convention. This is the responsibility of trustees elected by the Convention and accountable directly to the Convention."

[8] 12:232.

[9] Final paragraph of Article V.

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