[MSN] Conference report: How to handle executive pay, donors and the press - Legal Issues in Museum Administration

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Conference report: How to handle executive pay, donors and the press

Museum lawyers and employees met to discuss the most pressing legal 
issues faced by US institutions

By Martha Lufkin | Posted 09 May 2007

The 35th annual conference on Legal Issues in Museum Administration, 
attended by museum staff, lawyers and others, was held in Philadelphia 
on 14-16 March.

Targeting recent prickly issues that have made US museum officials 
sweat, the course gave top billing to stolen antiquities claims: what to 
ask to conduct due diligence before acquisition, whether to settle or 
fight a claim, and how to draft your legal agreement with a foreign 
government to “transfer” (do not say “return”) the antiquities it seeks.

The course tackled other problems, including legal and public relations 
crises, the use of donors’ names to recognise large gifts, tax 
compliance, museum mergers, and copyright. The conference was 
co-sponsored by the Smithsonian Institution with the cooperation of the 
American Association of Museums.

*Pay your top people“reasonably”*
Tax laws impose a costly excise tax on public charity executives who 
receive excess compensation, and on board members who knowingly approve 
it, says Celia Roady, a lawyer at the firm Morgan, Lewis & Bockius LLP, 
Washington, DC. Bad press about executive pay can lead to a drop in 
public contributions, she warns. Ms Roady advises that museums follow 
IRS rules to ensure that executive pay is presumed to be reasonable: the 
compensation decision must be made by an independent board or committee; 
the board or compensation committee must rely on market data on 
comparable pay for the position; and the board or committee must 
document its compensation decision in the minutes. In addition, says Ms 
Roady, the board should be “fully engaged” in the compensation decision, 
all elements of compensation should be disclosed to the board, and the 
board should play a role in setting expenses and privileges.

*Sell everything, from the fountain to the new wing*
Many museums have minimum donation policies for the use of donor names. 
Larry Dubinski, Vice President of Development and General Counsel of the 
Franklin Institute, Philadelphia, suggests an inventory of new 
opportunities: “Start with everything possible that can be named, from 
the water fountain to the stairs to the new wing.” Museums should 
“benchmark gift levels with peer institutions”, such as the local 
symphony orchestra, to make sure that the minimum donations required for 
name use are realistic, Mr Dubinski says. One you have secured a gift, 
invite the donor to a “meaningful” public ceremony which includes the 
donor’s family, to encourage continued giving.

But what about deviating from an agreement to use a donor’s name? This 
may be desirable when circumstances change, says Elizabeth R. Salasko, 
Associate General Counsel of the University of Pennsylvania, 
Philadelphia. The gift agreement should allow a change if use of the 
name becomes detrimental. For example, Seton Hall University’s 
“Kozlowski Hall” was renamed Jubilee Hall after the donor, L. Dennis 
Kozlowski, was convicted of grand larceny; Mr Kozlowski asked that his 
name be removed to avoid distraction. But after former Sotheby’s chief 
A. Alfred Taubman was convicted of auction house anti-trust violations, 
Brown University kept his name and money for its Center for Public 
Policy and American Institutions, because the gift was given before the 
criminal allegations. Other future changes in circumstance could include 
a need to rebuild or renovate; in such cases, some donors will want 
joint recognition with a future donor.

*When the crisis hits, call your lawyer*
Lawyers from the Smithsonian Institution (SI), Getty Museum and 
Metropolitan Museum, which have withstood significant recent negative 
press, gave tips on handling crises. John Huerta, General Counsel at SI, 
described a public firestorm over its 2005 agreement with Showtime 
Networks, intended to disseminate more information about SI activities. 
When press reports wrongly claimed that the deal would cut access to SI 
collections, Congress slashed the SI’s budget and called for hearings. 
While the SI was able to correct the wrong impression, Huerta advises 
creating a strategic communications plan to anticipate negative 
responses from constituencies and head them off. A separate crisis 
management plan should also be created, to make clear who will respond 
to criticism in a disaster.

The J. Paul Getty Trust has faced a barrage of bad press over its 
antiquities collection and the conduct of its executives. Former 
antiquities curator Marion True is currently on trial in Rome, accused 
of conspiring to receive illicitly excavated artefacts and former Getty 
Trust President Barry Munitz resigned in February 2006 after the Los 
Angeles Times reported a misuse of trust funds including lavish spending 
and other improprieties, later confirmed by an investigation by the 
California State Attorney General. Peter C. Erichsen, General Counsel 
and Secretary of the Getty Trust, noted that any chief executive or 
board member could conceivably “misbehave or be subject to allegations 
of misbehaviour”. In dealing with the press and public in a museum 
crisis, lawyers should recognise that “you may in fact be only at the 
beginning of a bad story”, which may unfold unpredictably. When pressure 
builds for a quick response, take your time, Mr Erichsen says, “and 
stick to the facts”. He added that a new model is emerging for the 
general counsel as a whistleblower, “who divorces himself from the 
organisation and becomes a truth teller”. But the lawyer should also be 
fair to the organisation, and guide the governing board, he says.

Sharon H. Cott, Secretary and General Counsel at the Metropolitan, 
described the press coverage surrounding the Metropolitan’s return in 
2006 of antiquities sought by Italy as “obsessive”. She said legal 
counsel should be “joined at the hip with the press office” during a 
crisis, and should communicate with the governing board and press team 
as the situation unfolds, to avoid surprises. Until an answer is clear, 
the lawyer’s role may be to advise a response of “no comment” to a press 
question.

*Controlling copyright*
Can a museum control reproductions of objects in its collection which 
are not protected by copyright because they are in the public domain? To 
reproduce such an object, the user must have access to it, which public 
domain status does not guarantee, says Lauryn H. Guttenplan, associate 
general counsel of the Smithsonian Institution. When a museum grants a 
license limiting reproduction of an object in the public domain, are the 
restrictions enforceable? No court decisions directly address this 
question, says copyright lawyer Simon J. Frankel of the firm Covington & 
Burling LLP, San Francisco. But the general rule is that reproduction 
limits under a contract are enforceable, even if exceeding any 
reproduction limits under the copyright law, he says.

But even if they are legal, Mr Frankel asks, are limits on reproducing 
consistent with the museum’s mission to educate and disseminate 
information?

/ Written materials for the March 2007 course “Legal Issues in Museum 
Administration” can be ordered from ALI-ABA: tel +1 215 243 1630; 
www.ali-aba.org <http://www.ali-aba.org>

http://www.theartnewspaper.com/

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