THE CHICAGO LITERARY CLUB

Monday, February 19, 1990

John K. Notz, Jr.

“SAUSAGE OR LEGISLATION?”

KNACKWURSTE YACHTWURSTE

POLNISCHEWURSTE BOLOGNA

BRATWURSTE GOTHAER CERVELAT

SALAMI METTWURSTE/KOCHWURSTEL

THUERINGER LANDJAEGER

STRASSBURGERWURSTE MORTADELLA

HILDESHEIMER LEBERWURSTE PASTROMA

BEERWURSTE FRANKFURTERWURSTE

HESSICHE LANDLEBERWURSTE HOLSTEINER

BRAUNSCHWEIGER LEBERWURSTE KIELBASA

CHORIZOS KONIGSWURSTE

AUGSBURGERWURSTE NURNBERGERWURSTE

GEHIRNWURSTE RINDFLEISCHKOCHWURSTE

GRUTZWURSTE KNOBLAUCHWURSTE

These names provoke memories of my childhood and the stop, every time we came home from my Milwaukee grandmother’s home, at USINGER’s, where, a sausage lover, such as I am, can luxuriate in the odors of sausages that are, to the initiated, as pleasant as a fine “eau de vie”.

What goes into sausage that produces such fine odors? Not the beef or pork, but some mix of:

GARLIC ALLSPICE

PEPPER CORIANDER

MARJORAM NUTMEG

THYME SAGE

SUMMER SAVORY SWEET MARJORAM

BAY LEAF

The precise mix of these seasonings is one of the best-kept of family secrets.

Another childhood memory consists of a visit to the back room of a Door County store front that bore a hand lettered sign:

“HOME MADE SAUSAGE”

Sausage, here, was made to order, and I could see the simple machine, consisting of a meat grinder, somewhat larger than what I recall in our home kitchen, with a tube at the exit point, from which hung a length of translucent material - the sausage casing. We gave our order, and the proprietor mixed his ingredients in a simple mixing bowl, ran them through the grinder, tied the casing at the sausage length we wanted, and we went home for the grilling, which always was went best if the sausages were precooked in a frying pan containing a little beer.

What pleasant memories!

Yet, for all the thirty-odd years I have been a lawyer, I have heard:

“There are two things you will never wish to watch: the making of sausage and the making of legislation.”

I have found the following sentence attributed to German Chancellor Otto von Bismarck in sources as disparate as the Drake University Law Journal (1983) and The Chicago Sun-Times (1979):

“The less people know about how sausages and laws are made, the better they will sleep at night.”

In my old Webster’s Collegiate Dictionary, I find these definitions:

For Sausage: “Meat . . . minced and highly seasoned, and commonly enclosed in a prepared intestine of some animal.”

For Law: “The binding custom or practice of a community; rules of conduct enforced by a controlling authority; . . .”

In my almost equally ancient Black’s Law Dictionary, I find, not surprisingly, no definition for “sausage”, but a bewildering variety of definitions of “law”. The only consistency in the definitions is the use of “enclosed” for a sausage and “binding” for a law.

My love for sausage has taken me to examine several cookbooks, as my wife has an excellent library.

I started with what I thought was the top of the line: M.F.K. Fisher’s 1949 translation of BRILLAT-SAVARIN’S “The Physiology of Taste”. It has no Index - only a rather detailed Table of Contents. I was interested to find that this famous book is neither a book of recipes nor instructions on the preparation of food, but the articulation of a philosophy of food. Regrettably, I found no mention of “sausage”.

I then went to the famous Encyclopedia of Food, Wine & Cookery, the LAROUSSE GASTRONOMIQUE, and found, under SAUCISSON and SAUSAGES, several pages of useful descriptions. I thought that for “household or home-made sausage” adequately descriptive:

“ . . . pig’s intestines with a forcemeat composed of lean . . . meat, minced or chopped with a knife, seasoned with . . . pepper, . . . saltpetre and . . . garlic . . .”

Once filled, sausages are hung in a “drying place” for weeks or months, to ripen. I began to understand what Chancellor von Bismarck had in mind.

Then, I went to Julia Child, who gave me useful descriptions of the use, in sausage, of nitrites, nitrates and saltpeter; citations to better sources not available to me in my wife’s collection (Julia’s “Mastering the Art of Cooking”. Volume II, and Grigson’s “The Art of Charcuterie”, Knopf, 1968); and tips on how to secure the necessary hog and sheep casings. She (at p. 361) jogged my memory, again, with a reference to “fresh sausages hanging in the window” and, of von Bismarck, with a reference to the dire consequences of use of meat scraps of “uncertain vintage”.

Bombauer and Becker’s “Joy of Cooking” (Bobbs-Merrill, 1964 ed., at pp. 436ff), given to my wife by my mother at the time we were married, made me feel quite comfortable:

“One of our early European memories was the rapt stance of the citizenry as they gazed at window displays of sausage. It made us aware for the first time of their wealth of choice and, on a considerably more limited scale, of our own. . . .”

The impression I had had that sausage would be made up of “variety meats” was dispelled, as there were separate non-sausage recipes for:

Sweetbreads Heart

Brains Tongue

Liver Tripe

Kidneys Tails

Marrow Knucklebones

But there is a whiff, again, of the cynicism of von Bismarck in:

“Be sure that any kind of sausage you buy or make involves good quality meats. . . .”

I was left convinced that it was not the ingredients of sausage to which Von Bismarck had referred, but to the sausage-making process itself.

I am reminded of a song learned in childhood about a little Dutch boy who, though carelessness or misbehavior, fell into a sausage-making machine. I recall nothing, now, of it, other than something of a refrain of “POOR JOHNNY VERMINCK”.

* * * * *

In 1984, this JOHNNY fell into a sausage machine: the law-making organization located in Springfield, Illinois, known as the Illinois Legislature.

While I left my study of sausage, convinced that it is neither the ingredients of sausage, nor the end product, to which von Bismarck referred, but to the sausage-making process, I am equally convinced that von Bismarck had in mind, less the individual representatives or the laws that they are create, than the legislative process, itself. Put another way, the experiences I have had with the law-making process have left me admiring virtually all of the individual representatives - the ingredients - that we have, dismayed by the process of law-making, and pleasantly surprised by the quality of the result.

Starting in January, 1984, I came to know several of our elected representatives, as I sought legislative action on a proposed “blue ribbon” statute: what has become the General Not-for-Profit Corporation Act of 1986.

While I have no reason whatever to believe that what I experienced was a result of the personal conduct of any Illinois legislator such as that that has contributed so to the current disastrous state of our savings and loan industry, I learned much of the interest group pressures that are a natural part of any American legislative process.

I have to agree with the famous Chancellor:

“The less you know about how our laws are made, the better you will sleep at night.”

I am writing both from the perspective of an officer/director of any classic small charitable organization such as is our club - the Chicago Literary Club - and as a citizen interested in many civic and political causes.

In 1982, because of committee work I had done for The Chicago Bar Association, I was one of some 30 men appointed by Secretary of State Jim Edgar to his then new Business Corporation Act Advisory Committee. In 1981, shortly after he had taken office, Secretary - now Gubernatorial candidate - Edgar had had noteworthy success, over little opposition, in obtaining a badly needed modernization of the Illinois Securities Act. When he involved me, he wanted to do the same with the Illinois Business Corporation Act, which had, years before, become obsolete, superceded by, most notably, Delaware’s General Corporation Laws. My committee’s first mission had been accomplished by late 1983, as a result of some skillful work by the Secretary of State’s Legislative Staff, led by the current Chief Judge of Chicago’s Traffic Court, Wayne Andersen. When Wayne and I met to plan the signing ceremony of January 5, 1984 (coincidentally my birthday), someone said, “We should do the same with the Illinois General Not-for-Profit Corporation Act,” and they looked at me, because of the large amount of work for charities that is done by my law firm. Within a few weeks, Secretary Edgar, also, looked to me. Wayne Andersen and I developed a list of committee members and located a “Reporter”, Phil Hablutzel, a corporate law professor at IIT/Chicago-Kent College of Law, who had worked in on related matters the past for The American Bar Foundation.

For obvious political reasons, we sought significant downstate representation. For this purpose, “downstate” is anyone from outside Cook County. For obvious political reasons, we sought a significant number of Democrats, as any Bill sponsored by a Republican Secretary of State is, in the Legislature, naturally suspect. The Secretary’s selection process was not apolitical, as the voting registration record of each committee member was checked by the Secretary’s Staff. Please don’t be surprised; that is readily available public information. Had I not been a long-registered Republican, I would not have been my committee’s chairman. Our Reporter had the same - unusual for a Chicago resident - record.

While my new committee was formally known as Secretary of State Jim Edgar’s Not-For-Profit Act Advisory Subcommittee, it was informally known as “the Secretary’s NFPCA committee”.

While I had suggested to Wayne Andersen virtually all of its members that were, ultimately, appointed from Cook County, few appointees from “Downstate” had been previously known to me. The identity of some of those committee members who had special influence on our work product could be useful to you. (There is no order in those I, here, name.)

John Satter, of Dwight and Pontiac, Illinois, and a partner of Republican Representative Tom Ewing, a House Assistant Minority Leader. John had long served the Lutheran Social Services organizations. (I understand that Secretary Edgar is a Lutheran.)

Joel Carp, the Chicago-based “governmental affairs” representative of The Jewish Federation of Metropolitan Chicago. While Joel is not a lawyer, he, quite naturally, has, directly or through the Jewish Federation’s Springfield “governmental affairs” representative, Len Lieberman, the ear of the many legislators of that faith. Jim Serritella, originally with the Rueben & Proctor law firm and, later, with Mayer, Brown & Platt. Jim had long represented the Catholic Charities and other Roman Catholic organizations; he is a member of our Club.

I, a Protestant Episcopalian, found the ecumenicism of this legislative effort refreshing.

Wes Walton, a lawyer of Chicago’s Keck, Mahin & Cate, who has written often and well on governance issues arising in the operation of charitable entities.

Tucker Olson, a lawyer then employed by the Retail Merchants’ Association who was quite familiar with the practical problems of getting any professional malpractice legislation through the Springfield strength of the Illinois Trial Lawyer’s Association (“ITLA” or the “Plaintiffs’ Bar”). (“Corporate officer and director indemnification” is deemed by the Plaintiffs’ Bar within the scope of “professional malpractice”.) Issues closely-related thereto are the rights of stockholders of business corporations and of members of nonprofit corporations other than charities - such as condominiums and other homeowner associations, private clubs (such as The Cliff Dwellers) and professional and trade associations.

Jim Anderson and Paul Harmon, of the Illinois Farm Bureau (also known as the Illinois Agricultural Association) of Bloomington, both lawyers. It goes without saying how influential in Springfield the Illinois Farm Bureau can be.

Mark Kramp, a lawyer employed by the Illinois Association of Electrical Cooperatives, and its governmental affairs representative, Earl Struck. Those of us here in Chicago who have Commonwealth Edison as our source of electricity have no appreciation of the political power, “Downstate”, of the local electrical cooperatives.

Sandy Boyd, a lawyer, a former President of the University of Iowa, now President and Chief Executive Officer of Chicago’s Field Museum of Natural History and a nonprofit seminar conductor at Northwestern University’s Law School.

John McDonough, a lawyer of Chicago’s Sidley & Austin, and counsel to The Chicago Community Trust. (John has succeeded me, as chairman of my committee.)

There were some 20 others, and we were given all necessary technical support by the staff of the Office of the Secretary of State, led by Phil Howe, the Secretary’s Counsel; Bud Hall, the Director of the Secretary’s Department of Business Services; and his two most senior career personnel, Norm Crane and Dale Reynolds. I use the term “career personnel”, because their positions require such expertise that, whoever succeeds Jim Edgar as a result of the election of November, 1990, will wish to keep such competent personnel - whether the successor is Republican or Democrat.

My committee first met on May 1, 1984. As the State of Illinois Building had not yet been completed, we used the private dining room in The Bismarck Hotel that had been the Swiss Chalet of my teens - a favorite place for my parents to take us for an anniversary, or the like. (Until my writing of this paper, I had not realized the coincidence of the name of our meeting place and my theme: Chancellor von Bismarck’s famous remark.) As we did not know each other well, I resorted to a technique that has served me well in meetings of peers. To encourage contributions from all present, I, methodically, call upon each person present, in rotation, going around the table to my left or to my right, at random. No one could escape me. A consequence was that everyone obtained an “ownership interest” in our work product.

Conceptually, the most difficult substantive issue we met was our effort to identify the core difference between a nonprofit corporation - an entity that is favored by our Federal and State statutes - and a business corporation - an entity that is a creature of our laws designed to protect the investor from personal liability beyond the capital that the investor intends to put at risk, in hopes of earning more than an interest return on his investment. Once one recognizes that trade and professional associations have a profit motive - albeit indirect - and agricultural and business cooperatives have a direct profit motive, one can appreciate the difficulty inherent in drawing a line between nonprofit corporations and business corporations. Those of you who are in the practice of medicine will recognize that even hospitals that are charities contribute to making the distinction difficult, because of the many operations hospitals now conduct that are intended to be profitable, and because hospital personnel can now be compensated by “profit sharing plans” that are substantially similar to those used by business corporations. We came to refer to our search for the dividing line as our search for “The Holy Grail”.

Ultimately, we agreed on a concept. Nonprofit corporations, to obtain the favored status that our laws have come to accord, may make neither distributions, in the nature of dividends, to their members nor partial liquidations. We left to the Federal tax laws the rules for distinguishing charitable corporations from other nonprofit corporations. Special definitions of permitted distributions were necessary for cooperatives of all types - residential, agricultural, business.

We were acutely aware of the legislative practice of requesting favored nonprofit treatment of new classifications of social services. A recent example known to us had been the addition of HMO’s to the long list of permitted “affairs” that Illinois nonprofit corporations may conduct. A nonprofit corporation is never to conduct a “business”; it may only conduct “affairs”. We had been approached by a representative of PPO’s, and we expected others. Effective lobbyists (i.e. “governmental representatives”) can, relatively easily, obtain from our Legislature such favored status, as long as the income and sales tax revenues of the State will not, thereby, be substantially adversely affected. We feared that, once our “blue ribbon” product was completed and placed in the legislative process, it would become what is known as a “Christmas Tree”, on which any influential law-maker would place an ornament for a constituency that he or she chose to favor. We needed a coherent concept that was easy to explain to any lay person. When we finished, I came away believing that we had found our Holy Grail, and I remain convinced, today, that we were right. To the observer, the line we agreed upon may seem to be dross, but, to us, it was gold.

We worked through the Summer and the Fall of 1984. Our Reporter faithfully ran down whether ideas of which we conceived were in use elsewhere, as we, consciously, avoided untested concepts, in order to be able to say to the Legislature that any new language we offered had been previously used in a jurisdiction a legislator would acknowledge to be sound. For instance, concepts from Massachusetts are, often, too “prosecution-oriented”; concepts from California are, often, too “avant-garde”; concepts from Florida are, usually, “untested”; concepts from New York or Pennsylvania are, usually, deemed “sound”; concepts from Delaware are deemed too “business-oriented”. Also, one has to be careful of the biases in available written commentary. There is much available that contains the enforcement point of view of the State Attorneys General, and the available academic writings are inconsistent in their logic and irreconcilable in their recommendations. We had to be prepared to argue to the Legislature why we had not accepted a point of view that had been advanced by any seemingly reputable expert.

One would have thought that we could, simply, have used any available “Model Act”. Those of you who are lawyers appreciate that there are Model Acts available on a multitude of subjects, and great care has been given to the creation of their content. In fact, there existed, when we started, a Model Nonprofit Corporation Act, sponsored by the American Bar Association. However, that “model” act had been a work product of the 1960’s that the world had passed by, just as the world had passed by the then Illinois General Not for-Profit Corporation Act (of 1946). Because this obsolete state was, Prior to 1984, well-recognized, the American Bar Association had appointed a committee to create a “Revised Model Nonprofit Corporation Act”. That ABA committee’s work was well along. One would expect that Professor Hablutzel and I could obtain the work product of that committee. To our astonishment, “No; that committee’s meetings were closed, even to ABA members with a special, relevant interest such as ours.” However, I called a member of that ABA committee and asked for an opportunity to read his copies of his committee’s drafts. To my pleasure, he went an extra mile, saying, “John, if you undertake not to copy what I give you, and not to tell anyone that you have my copies, you can have them, as is.” I gave the undertaking, which, now, I breach, but I preserve my friend’s anonymity. What I read was a great relief to Professor Hablutzel and me. The ABA Committee had not only adopted the same approach that we had adopted, to most of the issues we had met, but, also, they had decided upon the same format. Professor Hablutzel and I concluded that we could go to the Illinois Legislature saying, in good faith, that what we were proposing would not become obsolete by work product soon to be published by a drafting committee as reputable as that of the American Bar Association.

By November, 1984, we were confident that we would have our work product in Legislative Bill form in time to meet the normal schedule of the 1985 Legislature. (Bills were to be filed by the end of February.) We could arrange for Bill sponsors; we could work out strategy as to whether to move, first, in the House or the Senate, or simultaneously; and we could start to line up the normal support that is necessary for any legislative effort.

Presentations were made to the appropriate committees of the Illinois State Bar Association (its Corporation and Securities Law Council) and of The Chicago Bar Association (its Corporation Law and Trade Association Committees). Each member of my committee was to see that his organization provided the necessary support letters and made the natural Springfield contacts. The formal approval of the Secretary of State’s full Corporation Acts Advisory Committee was sought and obtained. The Secretary’s personal approval and assignment of appropriate Legislative Staff support was sought and obtained - all in January, 1985. All seemed on track.

My calendar tells me that on February 5, 1985, I received a call from a prominent member of the Staff of the Attorney General of the State of Illinois. Then, as now, the Attorney General was a Democrat; my appointing authority, the Secretary of State, was then, as now, a Republican. (That each is his respective party’s candidate for Governor in 1990 was considered likely, even before 1985.) That AG Staff person asked for a copy of the draft Bill; I sent one; and, some weeks later, I received several pages of requested changes, most of which provided for additional powers for the Attorney General, relating to activities of all nonprofit corporations, not only relating to the charities over which the Attorney General has common law and statutory responsibilities. (The statutes are The Illinois Charitable Solicitations Act and The Illinois Charitable Trusts Act about which I write, later.)

The Attorney General appointed a committee. I heard nothing of that committee’s activities until I received a call from Springfield on April 29, 1985, to the effect that, the next day, there was to be a Hearing before “Senate Judiciary I”, one of the Senate Committees to which legislation such as ours would, normally, be sent. I was asked to be present and present a statement in support of the Bill. I had, and pled, a prior commitment, to no avail. I was not present. I was called the next day and was told that the Bill had been sent to “Study Committee”. (This action is usually the equivalent of oblivion.) I was told that, were I to resolve the Attorney General’s concerns, the Bill would move forward. My calendar tells me that on June 4, 1985, representatives of my committee and I met with the Attorney General’s Staff person. It became clear to me that the concessions necessary to obtain that Staff person’s agreement could not be acceptable to even one member of my committee, and I recognized that a successful negotiation before the adjournment of the Legislature on June 30, 1985, was impossible. That meeting was the end of our 1985 legislative effort.

In July, however, I was encouraged by an action by the Illinois State Bar Association (ISBA), giving unqualified support. To me, this meant that even the representatives of ITLA (the Plaintiff’s Bar), that so heavily influence ISBA positions, recognized that their own organizations, ISBA, itself, and ITLA, itself, could operate substantially better under what my committee was proposing than they could under existing law.

By October, 1985, the most interested members of my committee were meeting and planning strategy for the 1986 Legislative Session. My calendar for November 18, 1985, reflects a meeting with Alban “Stormy” Weber, former counsel to Northwestern University and well-known in Springfield, as the governmental affairs representative of the Illinois Association of Colleges and Universities, and Senator Leroy Lemke, then chairman of Senate Judiciary I and known to be as faithful a “ball carrier” for Senate President Phil Rock (Democrat) as Senator Dave Barkhausen (Republican) and Representative Tom Ewing were for Secretary Edgar. While I don’t remember what Senator Lemke and I talked about that day, we got to know each other, and, from what happened later, he came to believe that I would not “curve ball” him.

In February and March, 1986, a few members of my committee and I met with the Attorney General’s Staff person, to explore our differences. Soon, it seemed that, for each concession we made, that staff person asked for more than ever before. An impasse resulted, and I so advised Senator Barkhausen, the Senate Sponsor of our Bill.

On April 5, 1986, I advised the American Bar Association’s drafting committee what my committee had, thus far, done. On April 16, 1986, Senate Judiciary I met in Springfield. I made sure that I was present, but I learned that our Bill could not proceed unless we satisfied the requests of the Illinois Recorders (of Deeds), who, quite correctly, recognized that our Bill would result in a lower level of recording fee receipts.

Late that afternoon, after doing the drafting called for by the Recorders’ position and preparing an explanation that any lay person would understand, I sat with my feet up in a conference room in the Business Services Division of the Secretary of State’s Office and, wryly, observed that, while I had carefully not worn a LaSalle Street suit that day, I had gotten nowhere, drawing from Bud Hall, “John, if you came down here naked, they would know you for what you are.”

On April 23, 1986 (my anniversary), there was another hearing in Springfield, and, instead of celebrating, I was there. I organized statements from the Illinois State Bar Association which sent a, then green, but bright, young Springfield lawyer named Don Tracy. Don has, since, become a significant member of both the Illinois State Bar Association’s Corporation and Securities Law Section Council and of the Secretary of State’s Corporation Laws Advisory Committee. The Illinois Hospital Association sent a smart young lawyer named Kay Pinkus, who now does “governmental affairs” work for the American Institute of Real Estate Appraisers. The Jewish Federation sent Len Lieberman, who has, in spite of our political and religious differences, been my most reliable and forthcoming source of information on the many Springfield matters in which The Jewish Federation takes an interest.

I was on time for the Hearing and found a television crew setting up. I learned that, while my committee’s Bill would be the first to be called, television was present for another Bill. The Hearing was called to order, and Senator Lemke asked me for the status of my negotiations with the Attorney General’s Staff person. I said that, while we had made some progress, I could not report agreement. Then, oral statements were taken from all present interested in providing them. Senator Lemke said that there would be a short recess. While I sat back, prepared to wait, I was, immediately, asked into the hallway, outside, where I found the Legislative Liaison from the Attorney General’s Office and the governmental affairs representatives of the Roman Catholic organizations huddled around a telephone booth, on the line to Jim Seritella, legal counsel for the Catholic Charities. One asked, “What should our position be?” I said, “I don’t see why your position should be any different than that of The Jewish Federation; and you are getting this from an Episcopalian.” I was told to go back into the Hearing Room. I did, and I found that virtually all of the Democrat senators had left, leaving a bare committee quorum. Senator Lemke astonished me by saying, “John, what do I do now?” I said, “Senator, I have an amendment to our Bill that gives the AG all that I am authorized to give.” Lemke said, “Give it to me.” Without decision, he put it to a vote, and it passed out of committee by the vote of only the Republicans.

The Bill went through the Senate without significant additional difficulty and was sent on to the House. On June 12, 1986, there was a House Judiciary Committee Hearing in Springfield. I learned that its Chairman, Representative John Dunn, Democrat of Decatur, had agreed with Representative Tom Ewing to co-Sponsor. I recalled a visit that Len Lieberman, weeks before, and I had paid on Dunn, in which he quizzed me closely on whether Little League Organizations would be covered (“Yes”) and whether any nonprofit corporation would have to go to the expense of changing its charter or bylaws (“No”). (On solving such small issues rests the success of so much work effort!)

At the Hearing, I was prepared for changes that Representative Ellis Levin, the guardian angel of all members of homeowners’ associations, would suggest, but I was not prepared for what took place. Again, the Hearing was very well-attended - again, not for my Bill, but because a Tort Reform Bill was up for committee consideration. We waited, interminably, well past the time of my return plane to Chicago. Finally, my Bill was called, and I joined co-Sponsor Ewing in one of the “witness” chairs. With co-Sponsor Dunn being the Committee Chair, I expected no problem. It became my turn:

“I am John Notz, I am a Chicago lawyer and I live in Chicago in the 43rd Ward. . . .”

From Democrat Representative John Cullerton, a few feet directly in front of me:

“East of Clark Street or West of Clark Street?”

Notz: “East of Clark Street.”

Cullerton: “North of Fullerton or South of Fullerton.”

Notz: “South of Fullerton.”

Cullerton: “Who is your Representative?”

Notz: (Feeling quite foolish; having always voted in Republican primaries; having seen Representative Jesse White working my bus stop just a few days before; but believing that my Representative could not be White) - “I don’t know.”

Cullerton: “I am. How well are you represented here today?”

Notz: (Still feeling quite foolish, but trying to make the best of a bad situation): “It depends, Mr. Cullerton, on how you vote on this Bill.”

(Long laughter throughout.)

On June 23, 1986, the Bill cleared the House and was sent to Governor Thompson, who signed it on September 24, 1986, (creating Public Act No. 84-1423), and the new statute governing virtually all of the nonprofit corporations organized or operating in Illinois - The Illinois General Not-for-Profit Corporation Act of 1986 - became effective January 1, 1987.

In the normal course, this tale of legislation-making would end at this point; however, there is postscript:

In December, 1986, even before the effective date of the new General Not-For-Profit Corporation Act, I had a telephone call from the governmental affairs representative for the Illinois Association of Electrical Cooperatives, Earl Struck, saying that his organization, the Illinois Farm Bureau, the Illinois Hospital Association and the Illinois Association of Colleges and Universities wished to change what we had just accomplished. My first reaction was dismay. (Struck explained that they had seen to the filing of a new Bill, for the benefit of uncompensated directors and officers of nonprofit corporations. They wished to give public-spirited citizens willing to serve as such the benefit of the same standard of performance that an existing statute already accorded officials of municipalities and other local governmental agencies to wit: personal liability only for “wilful or wanton (mis)conduct”.

I pointed out that the Plaintiffs’ Bar and the Attorney General would vehemently object. He said, “They need not be told.” He asked for my committee’s support or our silence. I reflected and said that, as my committee’s support could be detrimental to his cause, his chances would be improved by our silence. We proceeded on that basis, and, without any Legislative Hearing, and without any publicity, uncompensated and “lightly” compensated (up to $5,000 per year) officers or directors of Illinois corporations that are organized consistent with § 501(c) of the Federal Internal Revenue Code are, now, by statute (albeit untested) to be held liable only for willful or wanton (mis)conduct. The $5,000 cut-off is the result of the inability of the Illinois electrical cooperatives to get their directors to attend meetings unless, in addition to expenses, they are paid a small fee.

There is an argument that this statute applies only to Illinois nonprofit corporations organized since December 31, 1986, and the insurance carriers offering directors’ and officers’ liability insurance still take the position that, as this statute remains untested, it has no effect on the level of premiums for this type of insurance.

* * * * *

The legislative mill, just as does the sausage machine, grinds on. 1989 brought draft Bills from the Office of the Attorney General that, for charities, such as The Chicago Literary Club, the standard for liability of directors and officers would become that of common law trustees: “negligent misconduct”. While, as recently as January 12, just past, those Bills died, a variation is virtually certain to be resurrected within the next 60 days, and the variation will be put through the process I have described to you.

* * * * *

This “Johnny Verminck” fell into a sausage machine in 1984 and came out in 1986. He found that, while the Legislature added seasonings and spices to the beef and pork he contributed, his original contribution was still recognizable.

-END-

Note: Attached is a cartoon from The New Yorker of December 3, 1989, that, coincidentally, was published during the writing of this paper.