Preview

• Lore Rather Than Law
• A Litany of Lore and Myth
• The Inversion
• Why Missouri Law Is Church Business
• What Missouri Corporation Law Says
• Closing

Lore Rather Than Law

After the triennial synodical convention of the LCMS, the President of Synod hosts an orientation for newly elected members of boards and commissions. This month I attended the orientation for a third time. The schedule was familiar. One emphasis was different: a thorough debunking of governance folklore.

Thomas Lee Hazen[1] and Lisa Love Hazen,[2] in their comprehensive look at the fiduciary duties of nonprofit directors, say, “Most of the discussion over the years is lore rather than law based on commentators’ suggestions for best practices.”[3]

Lore rather than law. In other words, myths.

A Litany of Lore and Myth

Here is a list of some of the corrections that were presented at the President’s orientation. These are from my notes, not a transcript or projection slides.

• Despite the claim that yours is a “policy board,” your duty is to direct management.
• Your fiduciary duty to the corporation of whose board you are a member does not exist in a vacuum. If you do not act with loyalty also to the synod and its congregations, you are not fulfilling your entire duty.
• Information is the lifeblood of decisions.
• You need information sufficiently in advance to make decisions.
• You need full relevant information to make decisions.
• If you do not have full information, you should demand it.
• You should give push back where needed.
• Don’t be a rubber stamp.
• Don’t just go along.
• Don’t fall into groupthink.
• You will hear it said that a board does not have the authority to micromanage. On the issue of authority, which is distinct from whether a given micromanagement would be wise, the presenter said, “I categorically reject that.” The board does have authority. Whether to use it in a given case is a separate question. Albeit rarely, there will be times when it is needed.
• The asserted duty of all directors to “speak with one voice” does not prevent a minority director from saying publicly that he or she disagreed with, opposed, or voted against an action.

The Inversion

Much of the mythology of the corporate-governance consulting industry revolves around a single authority inversion: instead of directors directing management, management manages directors. Among the tools of the inversion are control of information and social manipulation. What director, having a legitimate issue, wants to be “that guy”? What director, having done the work of a deeper study of a matter, wants to swim against the current of conventional wisdom?

But duty remains, and so does liability.

The law is not ambiguous about which way authority runs. A board may organize itself as it likes, but it cannot organize away what it is. “When a nonprofit adopts a governing board, nonprofit corporation acts typically require a board of directors and that board of directors by definition has a monitoring function.”[4] Note the phrase “by definition.” The monitoring function follows from the statutory form, not from what the board calls itself. A board that acts as “a rubber stamp for the executive director’s or management’s recommendations” is not practicing a lighter, more modern form of governance. That “blind allegiance to management clearly does not satisfy even the most minimal due diligence obligations.”[5]

Nor does the law leave the deferential director any cover. “To avoid being a rubber stamp, a director must not have an overdeveloped sense of collegiality or fear being viewed as not a team player.”[6] Indeed, “a director’s obligation to do what he or she reasonably believes is in the best interest of the organization may lead him or her to voice disagreement rather than remain silent in order to fit in as a team player.”[7] “The business judgment rule [which, up to a point, protects directors from liability for bad decisions] is conditioned on the directors’ informing themselves and uninformed directors will not get the rule’s protection.”[8] “Directors can no longer afford to be merely passive or honorary, but must be involved and informed to mitigate the risk to themselves and the organization.”[9]

As to the asserted duty to speak with one voice after a vote, consider what a dissenting trustee was permitted to do in Holt v. College of Osteopathic Physicians and Surgeons. A minority of trustees opposed a change from one charitable mission to another. The attorney general, who had statutory authority to sue to enforce the original mission, declined, reasoning that the new purpose was at least charitable. The college, the majority trustees, and the attorney general all opposed letting the minority sue to enforce the original purpose. The Supreme Court of California rejected their position and held that the attorney general was not the exclusive party to bring suit.[10] The court allowed the minority to judicially challenge the change, an effort Hazen and Hazen describe as an attempt “to enforce the duty of obedience.”[11] With the Holt decision, “California is now in line with the general view that the attorney general’s role in challenging nonprofit corporations is not exclusive.”[12] If a minority trustee or director[13] may publicly sue the corporation over a disagreement voted upon, it follows a fortiori that an asserted rule generally forbidding him to say he disagreed cannot stand.[14] To say is less than to sue. If one can sue, one can say. Muzzling practically invites suit.

Why Missouri Law Is Church Business

The duty of obedience “requires that a director act with fidelity, within the bounds of the law generally, to the organization’s ‘mission,’ as expressed in its charter and by-laws.”[15] After the Synod President’s orientation, a director of a synodical corporation told me about what he considered a glaring omission from the orientation his own board had received at its first meeting of the triennium. No reference whatsoever was made to the charter or bylaws of the corporation, nor to those of the synod, nor to the duties of the corporation and its directors that those documents set forth.

The notion that those documents can be ignored is the principle of the unfaithful regents writ large in the Concordia University Texas case.[16] Principle, not scale, is decisive. The principle remains when writ small. A director who violates it in a small way should take no comfort in the small scale of his disobedience.

The driving element in the Fifth Circuit’s decision is easily missed. When it is missed, we fail to see how it governs us too. The court started with the synod’s classic Lutheran two-kingdom theology in which God rules in his kingdom of his right hand over spiritual matters and He rules in his kingdom of his left hand over temporal matters.[17] Under this theology:

1. The decision to discharge duties, exercise rights, and answer responsibilities in the kingdom of God’s left hand through a corporation was a religious decision.
2. The decision to do so by incorporating in Missouri instead of some other jurisdiction was a religious decision.

That is why the First Amendment to the United States Constitution forbade the federal district court from ranging through the synod’s policy manuals and bylaws to impose its idea rather than the church’s idea of what kind of entity the plaintiff is. That is why Becket appeared in the case to defend religious liberty, and why the Attorney General of Missouri appeared to defend the State of Missouri’s interest in the religious liberty of its corporations.

The consequence for the rest of us is easy to state and easy to forget. Missouri corporation law is not an alien imposition on the church’s life. It is part of how we ourselves chose to order that life in the left-hand kingdom. So, when a director asks what he is entitled to know before he votes, he is not inappropriately stepping off churchly ground onto secular ground. He is asking about a body of law the synod adopted as a religious act. If we want to talk about governance in the LCMS without forking our tongues, we must move not only from lore to law generally, but for many purposes specifically to Missouri corporation law.

What Missouri Corporation Law Says

No one in the church wants to talk about suing, and what follows is not an invitation to it. But the shape of a legal remedy tells you the weight of the duty behind it. If we want to be conscientious and faithful stewards, this is worth knowing even if the courthouse never enters the picture.

Say, for example, that the board on which you serve faces a decision about issuing a Divine Call to an office in the corporation, and that your corporation is incorporated in Missouri or in a state with similar law. What are you entitled to see before you carry the burden of your vote? Can management or a majority of your colleagues keep relevant information from you?

In Missouri the answer is well settled. The right to information is unqualified and absolute.

Directors of a corporation are just what the title implies. They are the directors and managers of the corporation. . . . Theirs is a fiduciary relationship. Charged with these responsibilities, they must perform them based upon informed judgment. It becomes therefore axiomatic that a director have access to information contained in the corporate books and records. A director, therefore, at common law, has been held to have an absolute and unqualified right to examine such records.[18]

Directors direct management. Management does not manage directors. In fact, directors “are the . . . managers.” Their fiduciary duties make access to information axiomatic, not a nicety, not a courtesy, and not a technicality.

Missouri courts have been saying so for seventy years: Watkins in 1956, Moore in 1978, Kennedy in 1991.[19] That a rule this plain needed restating in three separate decades tells you how stubbornly it gets resisted. The Moore court described corporations pursuing such denials “with an amazing and persistent vigor and resolve.”[20] In Moore the bank tried a nuanced version of obstruction: it let the director see records from the date of his election forward and withheld everything earlier. The attempt at nuance ran into the axiom.

The remedy in each of these cases was mandamus, a writ so exceptional that the Kennedy court called it the most “drastic” relief a court can give, with “no exercise of raw judicial power that is more awesome.”[21] It is not available as of right; a court may withhold it even from a petitioner who has made his case. And yet “the writ of mandamus has been the remedy of choice in those cases where a shareholder or director has been denied the right to inspect,” and its use to compel inspection “is well settled law in Missouri.”[22] The most extraordinary remedy in the law is the ordinary remedy for this.

When the writ issues, it mandates. Disobedience is contempt of court,[23] punishable “by fine or imprisonment in the jail of the county where the court may be sitting, or both, in the discretion of the court.”[24] The petitioner may also recover his damages and costs, levied by execution as in other cases.[25]

Someone might try to distinguish Watkins, Moore, and Kennedy because they involved business corporations: a manufacturer, a bank, a boiler works. That is a distinction without a difference. The reasoning of the courts did not run on profit. It ran on office. The office of director has heavy obligations and that, not profit or shareholders, makes access to information axiomatic.

Closing

Whether or not you would ever invoke the law described above, it registers something: the magnitude of the duty being breached, and the degree of misbehavior involved in depriving directors of information. Courts do not reserve their most drastic remedy for trifles.

If what one court called “an amazing and persistent vigor and resolve” to keep directors uninformed persists for years on end, matter after matter, the questions fairly arise:

• Who is not the team player?
• Who is not a good fit?

How can you expect a director with a conscience and an ecclesiastical sense of stewardship to go on defaulting on his duties — repeatedly and knowingly acting without the information he needs — merely to avoid social disapprobation? Luther wrote, “A Christian is an utterly dutiful man, servant of all, subject to all.”[26] Notice the word “all.” That embraces not only those in the room. It includes the many outside the room whose affairs are being transacted there. Integrity does right by them even when they do not see what you are doing. Integrity does not elevate a director’s self-interest of being accepted in the director-management group above stewardship to those outside of the room.

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[1] Distinguished Professor of Law, the University of North Carolina at Chapel Hill.

[2] Veteran of multiple nonprofit and charitable boards of directors.

[3] Thomas Lee Hazen and Lisa Love Hazen, Punctilios and Nonprofit Corporate Governance — A Comprehensive Look at Nonprofit Directors’ Fiduciary Duties, 14 U. Pa. J. Bus. L. 347 (2012).

[4] Hazen and Hazen, A Comprehensive Look, 398–99, emphasis added.

[5] Hazen and Hazen, A Comprehensive Look, 398–99.

[6] Hazen and Hazen, A Comprehensive Look, 400–01, emphasis added.

[7] Hazen and Hazen, A Comprehensive Look, 407, emphasis added.

[8] Hazen and Hazen, A Comprehensive Look, 377.

[9] Hazen and Hazen, A Comprehensive Look, 400.

[10] Holt v. College of Osteopathic Physicians and Surgeons, 61 Cal. 2d 750, 757, 40 Cal. Rptr. 244, 249, 394 P.2d 932, 937 (1964).

[11] Hazen and Hazen, A Comprehensive Look, 390 n.217, describing the trustees in Holt as “allowed to challenge a change in the charity’s mission and to attempt to enforce the duty of obedience even though the state attorney general was not concerned since the funds were still being used for the public good.”

[12] Hazen and Hazen, A Comprehensive Look, 404.

[13] “There is no sound reason why minority directors or ‘trustees’ of a charitable corporation cannot maintain an action against majority trustees when minority trustees of a charitable trust are so empowered.” Holt, 61 Cal. 2d at 757, 40 Cal. Rptr. at 249, 394 P.2d at 937 (emphasis added).

[14] The qualification about “generally” forbidding is significant. Of course, there are specific, exceptonal areas of privilege, privacy, and confidentiality.

[15] Harvey J. Goldschmid, The Fiduciary Duties of Nonprofit Directors and Officers: Paradoxes, Problems, and Proposed Reforms, 23 Iowa J. Corp. L. 631, 641 n.55 (1998) (quoting Daniel L. Kurtz, Board Liability: Guide for Nonprofit Directors 21 (1988)).

[16] For those with no familiarity, background essays may be found here and here. The suit seeks a judicial declaration voiding a set of 2022 governance changes that CTX made without authority and in rebellion against the authority of The LCMS as its parent organization to sever its formal ties to the Synod or, failing that, actual damages of more than $111 million, a figure LCMS says represents the university’s net asset value.

[17] Lutheran Church—Missouri Synod v. Concordia University Texas, 178 F.4th 193, 197, 201, 204 (5th Cir. 2026).

[18] State ex rel. Moore v. State Bank of Hallsville, 561 S.W.2d 722, 724–25 (Mo. Ct. App. 1978).

[19] State ex rel. Watkins v. Cassell, 294 S.W.2d 647, 654–55 (Mo. Ct. App. 1956); Moore, 561 S.W.2d 722; State ex rel. Kennedy v. Continental Boiler Works, Inc., 807 S.W.2d 164 (Mo. Ct. App. 1991).

[20] Moore, 561 S.W.2d at 724.

[21] Kennedy, 807 S.W.2d at 167 (quoting State ex rel. Kelly v. Mitchell, 595 S.W.2d 261, 266 (Mo. banc 1980)).

[22] Kennedy, 807 S.W.2d at 167–68.

[23] Mo. Rev. Stat. § 476.110(3).

[24] Mo. Rev. Stat. § 476.120.

[25] Mo. Rev. Stat. § 529.060.

[26] Martin Luther, The Freedom of a Christian (1520). “Christianus homo omnium dominus est liberrimus, nulli subiectus. Christianus homo omnium servus est officiosissimus, omnibus subiectus.” (WA VII:49).