Separation of NGO and State: A Comment on The Office of Government Ethics’ Proposed Rule Allowing Government Employees to Serve on Nonprofit Boards
According to the Preamble to Proposed Rule 5 CFR 2640.203(M) (May 3, 2011)(relating to ethics in government),
a number of [federal] agencies had a practice of assigning employees to participate on the boards of directors of certain outside nonprofit organizations, where such service was deemed to further the statutory mission and/or personnel development interests of the agency . . . However, in 1996, the Office of Legal Counsel (OLC) at the Department of Justice issued an opinion concluding that section 208 generally prohibits an employee from serving, in an official capacity, as an officer, director or trustee of a private nonprofit organization . . . This conclusion was premised in large part on the fact that officers, directors and trustees of an outside organization owe certain fiduciary duties to the organization under state law, which may conflict with the primary duty of loyalty that all Federal employees owe to the United States.
The Preamble continues by articulating a list of negative consequences arising from what I will call the “separation between NGO and State,” including the following:
Since the 1996 OLC opinion, some agencies have continued to assign employees to serve on such outside boards by granting the employees individual waivers under 18 U.S.C. 208(b)(1). Other agencies have declined to issue individual waivers (or have done so rarely), often because of discomfort about waiving the application of a criminal statute. OGE has fielded numerous inquiries and has held many meetings with agencies and nonprofit organizations, mostly professional and scientific societies, concerning the application of section 208 to prevent official participation on outside boards. Several of the agencies and nonprofit organizations have argued that the application of section 208 has created unfortunate barriers to professional development and meaningful exchange between Federal and non-Federal experts in certain professions and areas of expertise. Moreover, some of the organizations have pointed out that there is a lack of uniformity within the Executive Branch, owing to the willingness of some agencies to grant waivers and the unwillingness of other agencies to do so, often with respect to participation in the same organization. Additionally, the Office of Government Ethics has noted the potential for confusion in some instances when employees are permitted to serve only in a private, rather than official, capacity. Especially where the agency has policy interests that overlap with those of the nonprofit organization, it can be very difficult for the employee to avoid the mistaken impression that he or she is acting in an official capacity when participating in the organization. Employees may be uncertain about the extent to which they are permitted to make reference to their official position or to use official time or agency resources.
Later, the Preamble makes the point that the current prohibition discourages scientist and other professionals from accepting federal employment. The Preamble suggests that federal employees become isolated from the “exchange of ideas” amongst their peers as a result of the prohibition and then concludes that the conflicting duties to the nonprofit and the government are more “theoretical than real.” The isolation argument actually seems more theoretical than real since scientists and professionals need not be in a leadership position to participate in a nonprofit organization’s discussion of ideas. Anyway, for these reasons, the Office of Government Ethics proposes to allow federal employees to participate in leadership positions on behalf of nonprofit organizations:
§ 2640.203 Miscellaneous exemptions.
* * * * *
(m) Official participation in nonprofitorganizations. An employee may participate in any particular matter where the disqualifying financial interest is that of a nonprofit organization in which the employee serves, solely in an official capacity, as an officer, director or trustee.
All the reasons given for the proposed rule seem sensible but I have one or two concerns. As a general matter, I am in favor of a clear clean delineation between the independent sector and government. Yes, I know that as a tax policy matter the independent sector is justified in part because it relieves the government of some of its burdens and therefore it might be inevitable that there be some coordination. But it is deeper than that, it seems to me. The independent sector also exists to offer alternative means and ideas to government. I worry when government and the independent sector get too cozy, as, for example, when the independent sector becomes too dependent on government for financial capital. Under the proposed rule we might very well have government officials also directing nonprofit organizations active in the same area of social betterment. This might be a small issue but I am not so sure. The other issue conspicuously absent from the Preamble discussion involves political activity. It seems to me that there is an emerging consensus, particularly after Citizens United that tax exempt nonprofit organizations have a right to participate in the political process. It seems certain that if the matter were decided today or in the next two years, the High Court might even say so clearly if it hasn’t already. The proposal was made only last May so the Office of Government Ethics should have been aware of Citizens United and should have addressed it. Suppose a high ranking federal employee in EPA, for example, also serves on the board of an organization actively concerned with global warming; or an FCC official serves on the board of an organization concerned with some media regulatory issue that happens to be supported or opposed by the current administration? I haven’t thought it through enough to have a firm opinion but I wonder if the issue is being discussed as the rule moves to final stages — the comment period closed, by the way, on July 5, 2011.
dkj