June 2004 Issue
What Is It, And Why Are
We Talking About It?
by D. August Boto & James P.
"Sole Membership" issue addresses the orderly adoption
by the Southern Baptist entities of certain amendments to their
governing documents (specifically, their articles of incorporation)
over the past several years. These amendments restate the traditional
relationships historically enjoyed between the entities and the
Southern Baptist Convention. These amendments use modern corporate
law language, which is better understood by courts than the former
language. The amendments did not, however, alter any of the relationships,
rights, powers, or duties.
An appropriate analogy would be that of using a modern English
version of the Bible for witnessing rather than one in Hebrew
and Greek the English is much more effective. In the same
way, almost all of our SBC entities have adopted modern corporate-law
language to better apprise courts of our structure in the SBC.
The goal is to have better success over two major problems that
surfaced in recent years: "ascending liability" and
"future subsidiary allegiance."
Protecting the Entities'
"Ascending liability" is the term church groups coined
for the legal term, "vicarious liability." It occurs
when one organization is held responsible for the liabilities
of another. The term came into Southern Baptist vocabulary following
a court case in which it was alleged that the United Methodist
Church (the denomination) was responsible for the liabilities
of a Methodist nursing home. Ascending liability occurs when a
court determines that there is excessive control. For example,
if the United Methodist Church was found to dominate the management
of the nursing home, then the United Methodist church stood to
be held responsible for the nursing home's contracts.
Therefore, it is important for the legal documents that describe
the SBC's relationship to its entities to state very clearly that
the SBC does not control the management of its fostered entities.
The SBC's bylaws said this already. The new language would get
it clearly said in the entity's charters.
For example, the Convention elects the trustees who manage
the International Mission Board. If it is clear in the entity's
charter (in addition to the SBC's bylaws) that the IMB's board,
not the SBC, manages the IMB's affairs, then the Convention has
helped make it clear that the SBC is not responsible for the IMB's
Thus, the sole member model allows the entities' instruments
to describe how the trustees, not the Convention, control the
operations of the entity corporations, and it helps show that
the Convention ought not be held liable for what the entities
do or do not do.
Protecting the Convention's
The sole member model also allows the Convention, as the corporation's
only voting or "sole" member to perpetuate
its historic and fundamental control rights over its entities,
assuring that those entities will remain Southern Baptist. So
while the governing documents spell out the right of the board
to govern the entities, they also spell out that the Convention,
as the entity corporation's member, has certain unalienable rights.
These Convention rights are enumerated in the entities' governing
documents and are repeated in the following discussion. They are
not new or greater rights. They include only fundamental matters,
such as the right to determine who sits on the board of trustees,
the right to approve charter amendment, and to approve the dissolution,
merger, or sale of the institution.
The new language being utilized in the governing documents
of the Convention's entities describes the relationship between
the entity and the Convention. It clearly indicates that the Convention
does not control the entities in those ways that would cause the
entities' liabilities to "ascend" to the Convention;
and, at the same time, the relationship is described so that the
Convention clearly can prevent an entity from ceasing to be Southern
Baptist. The new language does not give the SBC or the boards
of the entities any more or less control rights over the entity.
The present and historic division of control between the Convention
and the various boards is simply being described in modern corporate
law terms, and the Convention is exercising its traditional rights
in its capacity as the entity's only voting member.
What Does "Sole Membership"
Mean, and Have Others Adopted It?
"Sole membership" describes a corporation which has
only one member. Corporate laws allow nonprofit corporations to
have members, or even just a single member, in addition to the
corporation's board of trustees. In nonprofit corporations with
members, the members' rights and the board's rights regarding
governance are specifically recited in the corporation's articles
of incorporation or bylaws. All Southern Baptist Convention entities
except one have amended their articles so that they are written
in this more up-to-date corporate law terminology which will better
apprise judges and others that the SBC is the only member (the
sole member) of each of the various SBC entities, and as such
has the right, as it has always had the right, to approve certain
things, such as who will serve as trustees, as discussed above.
All of the boards of the SBC entities, except for one, have
deliberated over and adopted sole membership amendments between
1996 and 2000. The reason sole membership is becoming more widely
discussed currently is because the last SBC entity to consider
adopting the more modern language of sole membership, New Orleans
Baptist Theological Seminary (NOBTS), decided in its October 2003
board meeting not to adopt the necessary amendments. After two
meetings in spring, 2004, the same board decided to attempt to
craft an acceptable alternative to sole membership to submit for
ultimate consideration by the SBC messengers, agreeing also to
submit sole membership in case the messengers decided to stay
with the course they have earlier approved for the other entities.
As a result of these board meetings, state papers reported various
accounts, and discussions among Southern Baptists naturally followed.
A Brief History of SBC Interest
in Sole Membership
Over the years, the SBC's Executive Committee has observed
and assessed the various legal methods employed by Baptist general
bodies, other denominations, and other nonprofit associations
by which they 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.
Long ago the Convention decided to coordinate related ministries
through separately incorporated entities. The Convention established
a mode by which the Convention shared governance over those corporations
with the boards of trustees the Convention elected. For these
reasons 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. It
became obvious that no other governance method, except the method
permitted under these statutes and the corporate model upon which
they were based, would allow the Convention to maintain its historic
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 methods 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 mentioned earlier against
the United Methodist Church (UMC) in 1979, in which that denomination's
general body was sued because of the bankruptcy of an affiliated
corporation. That suit cost the UMC $21 million in damages plus
$4 million 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 that 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 liability
to the Convention for alleged wrongdoings 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 obvious.
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 institutions of other denominations used
to flee the control of those bodies. Those strategies included:
amending the entity's articles of incorporation to give the entity's
board the power to elect trustees without state convention approval,
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 a person or organization other
than the member to have the kind of governance roles that 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
SBC Executive Committee explored this "another" role
but it was not available in each of the states in which the Convention's
entities are incorporated, so uniformity would not be obtainable.
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 that 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 that 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
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 in
relation to the Convention, and its role in relation to the institutions,
remains as declared in the Convention's instruments. Nothing is
So implementing the sole membership model should not be perceived
to be anything that changes 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.
D. August Boto is an attorney and serves
as vice president for convention policy, SBC Executive Committee.
James P. Guenther has served as an attorney for Southern Baptists
for forty-six years six years as in-house counsel for the
Baptist Sunday School Board, and then as outside counsel for the
Southern Baptist Convention since 1964.
Sole Membership in a Nutshell
It creates a uniform basis upon which the Convention
can relate to all its entities in a similar fashion.
It is a legal arrangement that operates in every state
where SBC entities are incorporated and is a widely accepted non-profit
It is immediately recognized and understood by civil
judges and current legal systems.
It makes the SBC immune from its entities' obligations
and assures future entity allegiance.
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