1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 1. Purpose of this policy.

Policy on Board Independence in Seventh-day Adventist Institutions of Higher Learning
(Discussion draft)

The purpose of this policy is to provide information and guidelines concerning the role of governing boards in Seventh-day Adventist institutions of higher education (i.e. colleges and universities). The policy will describe how boards of trustees can practice independent decision-making within the framework of denominational objectives, oversight and policies pertaining to higher education as well as the fiduciary obligations of trustees. The policy recognizes that boards of trustees are accountable to many different interest groups including: Church, government, communities served by the institution, needs of society, expectations of students/donors/business. 2. Definition of Board independence in Seventh-day Adventist educational system. Seventh-day Adventist educational institutions are an expression of the Church in action. Education, the transmission and discovery of knowledge, is an essential part of the Church‟s mission and must not be viewed as merely an adjunct business endeavor of the denomination. Therefore constituencies of Seventh-day Adventist educational institutions will proactively embrace their role on behalf of the entire Church. The Board of Trustees, established in harmony with relevant institutional governance documents1, is the group responsible for linking the institution to the interests and educational objectives of the Church. Boards of trustees function as stewards of the institution and are given authority to govern within the context of Seventh-day Adventist identity, doctrine, and educational purpose. Board independence therefore must not be interpreted as freedom to disregard denominational interests, policies or goals for higher education. Nor is it the liberty to lead the institution in a direction that runs counter to what the Church intends through its educational institutions. For Seventh-day Adventists, board independence functions within rather than outside of a prior commitment to the Church and its mission. Broadly stated, board independence is the constituency‟s confidence and expectation that the board, relying upon its own processes and commitments to the Seventh-day Adventist Church and to quality education, will ensure that the operations of the institution serve the educational mission of the Church and provide practical benefit to the community and the world. Boards must earn and maintain the respect and trust of their constituencies by demonstrating accountability to denominational identity in education, to quality in student learning outcomes, to regulatory agencies and to the needs of society.

Articles and Bylaws, Government Charter, etc.
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Constituencies of educational institutions protect and preserve board independence by the election of boards of trustees with competency-based membership, by respecting the board‟s authority to govern the affairs of the institution between constituency meetings without interference, and by holding the board accountable through reports provided to periodic constituency meetings. Members (individuals or groups) who may be part of institutional constituencies will recognize that constituency authority is expressed through constituency sessions. 3. Definition of trustee independence. Trustee independence is a specific term in governance to describe a trustee‟s relationship to the institution. It is not required that all trustees meet the conditions for trustee independence as described below. However, regulatory and/or funding agencies may require a certain proportion of the board membership to qualify as independent trustees. Subject to revisions in applicable law and regulations, a member of the Board of Trustees of the institution shall be deemed to be “independent” if all of the following circumstances applied at all times during the institution‟s tax year: a. The trustee has not been employed by the institution or any of its subsidiaries, nor does the trustee have a family member2 who is or has been an executive officer of the institution or a subsidiary, within the last two years. b. The trustee or a family member has not been a recipient of more than $____________ in direct compensation from the institution or its subsidiaries, excluding any pension or other deferred compensation for prior services, during any 12-month period within the last two years. (The amount of compensation may vary depending on local laws or expectations of regulatory agencies. The intention is that the trustee or family member shall have minimal reliance for livelihood upon any direct compensation from the institution.) c. The trustee has not been in any of the past two years, a Board member, partner, executive officer, or employee, or have a family member who is a Board member, partner, or executive officer of another organization that makes payments3 to, or receives payments from the institution or its subsidiaries, or for property or services in an amount that exceeds $____________. (Monetary amounts may be different for each entity depending on applicable law. In the event that no such law exists the Board may determine the amount that shall be considered the threshold for determining trustee independence.)

For purposes of this policy ‘family member’ shall mean: a person’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers- and sisters-in-law, anyone (other than domestic employees) who shares such person’s home, and an estate or trust of which the interested person or any of the above is a beneficiary, personal representative or board member. 3 In this definition ‘payments’ refers to compensation for services rendered or interest on investment. The use of the term here does not include the forwarding of appropriations from a parent organization for the support of the institution or its programs because the trustee has no personal claim on such funds.
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d. The trustee has no other direct or indirect relationship with the institution, a subsidiary, a vendor, another charitable organization or government agency, or a competitor that could reasonably be perceived as a conflict of interest. The Seventh-day Adventist Church recognizes, with certain limitations, that a trustee may serve simultaneously on more than one board. General Conference policy outlines the following framework for persons serving on multiple boards: “Because of the common objectives embraced by the various organizational units and institutions of the Seventh-day Adventist Church, membership held concurrently on more than one denominational committee or board does not of itself constitute a conflict of interest provided that all the other requirements of the policy are met. However, an officer, trustee, or director serving on an organization‟s board is expected to act in the best interest of that organization and its role in denominational structure.”4 Whether or not a trustee qualifies under the requirements for an “independent trustee” all trustees are required to complete the institution‟s Conflict of Interest and/or Commitment declaration and to remain in compliance with its conditions. The board of trustees is charged with the responsibility of managing any disclosed or apparent conflicts of interest. (GCWP E 85 25 and E 85 30.) 4. Practices and procedures respecting board independence. The following list of best practices contributes to but does not necessarily guarantee that a board functions within the definition of independence outlined above. Ultimately, the test of independence is whether or not the board demonstrates its ability to make decisions in the best interest of the institution and its role in denominational structure and, in doing so, is free from the influence or control of persons or parties with competing or divided loyalties. a. The organization‟s Articles and Bylaws clearly identify the institution‟s relationship with the Seventh-day Adventist Church and its commitment to furthering the mission and values of the Seventh-day Adventist Church. b. The organization‟s Articles and Bylaws clearly define the constituency and/or membership of the institution. (GCWP BA 50 05 expresses certain requirements for the constituency composition of General Conference institutions. Comparable provisions should be considered by other parent organizations for their institutions.) Constituency or membership meetings are held regularly and not less than once per quinquennium. One of the responsibilities of such meetings is the election of the board of trustees. (GCWP BA 50 10) A Seventh-day Adventist educational institution shall not have a selfperpetuating board. In addition, amendments to the Articles and Bylaws shall require constituency or membership approval. c. Persons selected for membership on the board of trustees shall be capable of reflecting Seventh-day Adventist Church interests in education. Subject to applicable civil laws

General Conference Working Policy 2011-2012, E 85 05.
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and regulations, members of the governing boards of Seventh-day Adventist colleges and universities shall be members of the Seventh-day Adventist Church in regular standing. Others may serve in advisory capacities. (GCWP FE 20 10) d. The governing board has a competency-based membership appropriate to the level and scope of education offered and the nature of any related business enterprise. Board membership shall include gender and ethnic diversity in order to represent the constituency being served. Trustees shall be informed regarding their fiduciary obligations and shall participate in on-going board education activities. e. The organization‟s Bylaws define the authority of the board with respect to the removal of individual trustees and the process for selection of new trustees to fill any board vacancies between constituency or membership meetings. f. A majority of the trustees shall qualify as „independent” trustees—persons who 1) are not employed by the institution, 2) who receive no compensation, other than modest stipends, from the institution, 3) who receive no non-economic benefit from the institution, and 4) whose immediate family members are not employed by or conduct business with the institution. (See also Section 3 above.) g. The board of trustees is granted, by governance documents, full authority to govern the institution in harmony with established denominational working policies. (GCWP BA 55 15) Extraordinary decisions, such as the sale of a significant portion of assets or dissolution of the entity, may be reserved to the constituency. h. The board demonstrates its trustee role by consistently making policy and operational decisions in reference to the institution‟s mission as an expression of the Seventh-day Adventist Church‟s purpose in operating educational institutions. i. The Bylaws of the institution empower the board with authority to retain, evaluate, and discharge the administrator(s) of the institution. (GCWP BA 50 15) j. Within the context of the institution‟s denominational identity and purpose, the board serves as the policy-making body for the institution. In particular, the board subscribes to the denominational policy on academic freedom5, defends the principles of academic freedom in the interest of advancing knowledge, and rigorously follows due process in the protection of faculty, staff, and students. k. The board has a published conflict of interest and/or commitment policy, including disabling guidelines, and adheres to a transparent process of conflict of interest disclosures, management and documentation of situations where conflict of interest is present.

“A Statement on Theological and Academic Freedom and Accountability” can be found at www.adventist.org/beliefs/statements/main-stat36.html
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l. The board governs as a body. Although vigorous discussion and dissent is welcome in the journey to a decision, once the decision is made all trustees shall respect it as the decision of the group. m. The board empowers committees to address focused attention on various aspects of the board‟s responsibilities. However, no committee is given so much authority as to subvert the authority of the board. Board committee charges shall require the committee to report in sufficient detail to the board so that all trustees are well informed and statutorilyrequired items are addressed by the entire board for final determination. n. The board has a process for contemporaneous documentation of its decisions. o. The board demonstrates commitment to ethical conduct on the part of all trustees and, between constituency meetings, holds trustees accountable for always acting in the best interests of the institution, including the preservation of confidentiality on matters so identified by the board. 5. Powers of Related Entities. Boards of trustees govern their institutions as part of the Seventh-day Adventist Church and thus carry very significant responsibility for knowing and assuring that institutional strategies/policies/practices are consistent with established denominational policy and mission purposes. A board is not free to disregard established denominational policy6 by claiming that the organization setting denominational policy is an external party (i.e. not the formal constituency or membership) and therefore limited in its ability to influence the operations of the institution. 6. External influences on the board of trustees. Governing boards of educational institutions must take into account the interests of many other stakeholders including governments, regulatory bodies, faculty, students, donors and alumni. Boards must demonstrate the ability to engage in active dialogue with these stakeholders. —30—


Denominational policy here refers to policies established by sponsoring entities such as unions, divisions, or the General Conference.
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