Millot: Imagine's Bakke - CMO CEO Behaving Badly

I suggest that Imagine boards and board members have two significant roles. The first is to "affirm" (vote FOR if legally required) significant items like our selection of the Principal and the budget.... The second and most important role of board members is to advise (Millot emphasis)us on all matters of employment, policies, school climate, shared values, growth, building, academics and financial.

Denis Bakke, President, to Imagine Schools' developers, directors and principals (Sep. 4, 2008)

Memos like this are not intended for the public. It takes a rare combination of stupidity and arrogance for any CEO to explain attitudes and operating policies to staff that are clearly contrary to the law and public policies governing their market. Nevertheless, we have to thank Denis Bakke for providing his extreme views of charter school boards to help readers understand both Imagines' violations of law and more fundamental business problems faced by "E" and "C" MOs.

Legal Matters

Some basic legal principles governing an organization's board of directors, and especially the boards of charter schools. For and nonprofit corporations are creatures of state law, so there are variations, but not much at the level discussed here.

• In any corporation, every member of the board of directors owes a duty of loyalty to the corporation. This takes precedence over their own personal interests or of any other organization in which they have an interest.

• The test of loyalty is what a judge, jury or administrative fact-finder determines a reasonable person without potential conflicts would do in the circumstances.

• In for-profit firms where ownership is closely-held, the few owners determine the best interest of the corporation among themselves.

• Where a corporation's shares are traded in public, very large shareholders may hold seats on the board, but there are also members who represent the interests of the average stockholder.

• As EdSector co-founder Toch and Rotherham have discovered, no one has legal ownership of any nonprofit. Nonprofit board members hold a public trust. They might have found their way to the board because they are employees of the foundations that funded the nonprofit. Nevertheless, as board members they owe the same duty of loyalty to the nonprofit corporation as the director of a for-profit.

• With the exception of Arizona, state charter school laws prohibit for-profit firms from holding charters.

• All charter school statutes are written so as to emphasize the local, independent nature of each individual school. The board is expected to arise from the community where the school is located. Once granted, the "charter" (the combination of rights and obligations permitting the school to operate) is not subject to sale or transfer to another entity. The board alone is responsible for the school and accountable to the chartering agency for performance under the charter

It's simply impossible to reconcile the law with Bakke's position that the power of charter school boards should be restricted to advising Imagine headquarters and then affirming a budget developed by Imagine. A charter school board must be local, its members must be independent of potentially conflicting relationships or recuse themselves from decision involving those interests, and it cannot outsource so much control of the school that it has constructively transferred ownership to another party. 

The legal principles and analysis presented here may be news to TWIE readers. Still, knowing them is a fundamental obligation of every E/CMO CEO.  Denis Bakke is not only leads Imagine, he founded and led a major for profit corporation. It is hard for him to plead ignorance, and harder still to argue around the rules.

Next: The challenges that drive every E/CMO CEO to sympathize with Bakke.

Comments

[Indiana]

"independent of potentially conflicting relationships "? Does this mean that Dacia Michael (Don Willis' daughter) should probably NOT be a board member of Imagine Master Academy given that her father is chairman of the board? Seems to me that it may be difficult to vote against daddy.
http://www.journalgazette.net/article/20091103/LOCAL10/311039976/1002/LOCAL
...oh wait, that's right! They don't really vote! They all smile and nod after the decision has already been made.