Exploring the Link between Non-Profit Law and the Internal Governance of Non-Profit Membership Organisations: Legal Forms and Maintaining Indirect Benefits in the UK and the Netherlands

Abstract

Scholars of non-profit law and policy have mainly focused on understanding the regulatory frameworks in which organisations operate with limited interest in the intra-organisational consequences of legal regulation. Simultaneously, third sector and interest group researchers whilst recognizing the impact of external factors on organisational form and behaviour, have not explored the impact of non-profit law related to legal forms and maintaining indirect benefits such as legal personality and tax beneficial status on the internal governance of organisations. To address this gap, the main research question of this study is whether and how does non-profit law related to legal forms and indirect benefits affect - or fail to affect - the internal governance of non-profit membership organisations in developed democracies? This thesis draws on resource dependence and institutional isomorphism theory. My main argument is that non-profit law affects organisations’ internal governance by shaping two of its central aspects: members’ formal voting rights and their usage on the one hand, and board professionalisation on the other. These aspects of internal governance are important because they outline the governing model of an organisation that can range from membership centred - where members engage in rule-based participation, meaning that they actively use the formal rights granted to them by organisational statutes and are represented on the boards - to a leadership centred model where members do not engage in rule-based participation and boards are dominated by external professionals. Furthermore, I argue that organisations with leadership centred models offer many opportunities for consultative participation, whilst organisations with membership centred models offer significantly fewer opportunities for consultative participation. Analytically, the study bridges legal analysis of regulatory requirements with organisational-level research on changes in internal governance in ten systematically selected non-profit membership organisations operating in the UK and the Netherlands - two contrasting regulatory regimes, representative of common law and the civil law non-profit tradition respectively. This exploratory qualitative comparative study utilised multiple sources of evidence including statutory regulation, secondary sources, organisational documentation, semi-structured interviews and email correspondence with legal experts and organisational actors. The findings suggest that in the UK, where non-profit law does not regulate the powers of organisational members, non-profit membership organisations vary in terms of who is granted formal voting rights: the wider members or the executive board. In contrast, non-profit membership organisations in the Netherlands provide a central role to organisational members and, in turn have a strong predisposition for rule-based participation. Furthermore, organisations operating under lower regulatory constraints across different legal regimes have executive boards filled in with organisational members as opposed to externally recruited professionals. Organisations that operate under high regulatory constraints in the UK have executive boards replete with professionals recruited from outside of the organisation. Finally, differences in consultative participation across organisations can be better explained by country and policy specific dynamics and organisational mission than by the governing model of the organisations.