Case Study on Redeveloping - Corporate Governance Structures

929

“REDEVELOPING” CORPORATE
GOVERNANCE STRUCTURES:
NOT-FOR-PROFIT GOVERNANCE DURING
MAJOR CAPITAL PROJECTS
A CASE STUDY AT LINCOLN CENTER
FOR THE PERFORMING ARTS
Lesley Friedman Rosenthal*
INTRODUCTION
The nation’s great not-for-profit institutions are in a growth mode.
1

Recently, The New York Times devoted an entire section to the construction
of new museums around the world, including those in New York, Denver,
Columbus, Minneapolis, and Abu Dhabi.
2
Existing cultural facilities are
sprouting new or expanded wings, including majestic new galleries at the
Metropolitan Museum of Art in New York
3
and a dramatic expansion at the
* J .D., Harvard Law School, 1989; A.B., Harvard College, 1986; Vice President, General
Counsel, and Secretary, Lincoln Center for the Performing Arts, Inc. Ms. Rosenthal plays a
lead role in fashioning the legal context for the ongoing redevelopment projects on the
Lincoln Center campus. She is also part of the management committee team that is
modernizing how Lincoln Center manages retail sales, restaurant and catering transactions,
and parking. In her role as secretary, Ms. Rosenthal regularly interacts with the board of
directors, drafting corporate resolutions and advising on corporate governance matters. This
essay benefited from helpful commentary on earlier drafts and at the March 30, 2007,
Symposium by panelists Victoria Bjorklund, Esq., Simpson Thacher & Bartlett LLP; Harvey
Goldschmidt, Professor, Columbia University School of Law and former Commissioner and
General Counsel to the Securities and Exchange Commission; and Margaret S. Morton,
Deputy Commissioner, Department of Cultural Affairs, City of New York; and also from
comments on earlier drafts by Reynold Levy, President, Lincoln Center for the Performing
Arts, and Linda Sugin, Professor, Fordham University School of Law. Perrine Meistrell,
J .D., New York University School of Law School, 2005, and B.A., Princeton College, 2002,
assisted in the preparation of this essay. Thanks to Cecelia Gilchriest, Assistant Corporate
Secretary of Lincoln Center for the Performing Arts, for gathering, organizing, and
reviewing source material, and to Caroline Barnard, Harvard Law School, 2008, who also
prepared early materials for this essay.
1. E.g., The Great Buildup, N.Y. Times, Mar. 28, 2007, at H1 (a special pull-out
section devoted to new construction in the museum sector).
2. Id. at H1–2, H18.
3. The Metropolitan Museum of Art opened new Greek and Roman galleries on April
20, 2007.

930 FORDHAM LAW REVIEW [Vol. 76

Museum of Modern Art in New York that nearly doubled its size.
4
Great
institutions of higher learning—Fordham, Harvard, Columbia, and many
others—are expanding their facilities and operations. New or refreshed
sports stadiums have recently opened or are in the works in New York;
New J ersey; Dallas; Washington, D.C.; St. Louis; and elsewhere, often with
significant investment of public as well as private dollars. In the
performing arts sector, too, major building projects are underway or
recently completed, including at Lincoln Center for the Performing Arts in
New York; the Kennedy Center in Washington, D.C.; and performing arts
centers in Orange County, California, and in Orlando and Miami, Florida,
among others.
The reasons for this explosive growth are many: the evolution of new
artistic dreams and the opportunity to realize them; the promise of applying
twenty-first-century technology to enhance both access and content; and, on
a less lofty plane, the need to address deferred maintenance and aging
infrastructure.
Major capital projects often signify turning points in the life of a not-for-
profit organization. More money is likely to flow into and out of the
organization during a major capital project than at any other time during the
organization’s life cycle.
5
Accordingly, once-in-a-generation capital
projects—much like other critical moments in the life cycle of a charitable
organization, such as creation, merger, and dissolution—require heightened
involvement by trustees, meaning greater involvement and greater oversight
than would otherwise required.
Because capital projects impose unusual legal, financial, risk
management, and other obligations on charitable organizations, the familiar
principles of not-for-profit good governance become amplified and require
even greater attention. What special obligations do trustees have to help
their organizations manage such an undertaking? What are the broader
impacts of the project on the organization as a whole—on its balance sheet,
on its institutional identity, on its program and its future plans? If the
project is funded in part or in whole with public funds, or if the project
involves acquisition of or changes to publicly owned or accessible spaces,
how might trustees facilitate needed communications with the public and
with government officials? How should trustees, staff, and government
work together to see the project matters through to successful completion
and operation?
At the same time, as a result of highly visible corporate scandals in both
the for-profit and not-for-profit sectors, good governance practices are
undergoing a significant climate change, including redefinition of the duty
of care, new statutory requirements, and a shifting landscape of checks and
4. MoMA.org, About MoMA: The New MoMA,http://www.moma.org/about_moma/newmoma.html (last visited Sept. 5, 2007).
5. See Robin Pogrebin, Grand Plans and Huge Spending, N.Y. Times, Mar. 28, 2007,
at H24 (discussing the cost of expansion plans for major cultural institutions).

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 931

balances. For entities receiving public funding, both operational and
capital, there is the prospect of making a portion of such funding contingent
on the funding recipients’ adherence to governance standards.
This complex new array of duties and expectations is challenging enough
to adapt to during “normal” times in an institution’s life span. What special
duties and expectations apply when the organization, or indeed the whole
sector, is going through a “revolutionary” period of expansion or
transition?
6
This essay studies the current governance practices of a major
institution in transition, and compares these governance practices to a prior
generation’s handling of an earlier transitional moment. It is hoped that a
comparison of governance practices during a time of heightened attention to
such matters can help clarify what may be expected, and what is achievable
by others, in both normal and transitional times.
Because of the dearth of study materials pertaining to governance of
mature not-for-profit institutions in a time of growth and transition, it is
exciting to have access to documents and individuals that detail how
governance matters were handled during a major capital project. Even
more engaging is the prospect of comparing that same institution’s handling
of governance practices a generation later, when a new series of major
capital projects are undertaken during this time of heightened scrutiny of
governance practices. What, if any, different approaches is the institution
taking in light of the current evolution in best practices? How, if at all, did
the earlier work presage what has come to pass later on, and how has that
learning been retained and transmitted? How are current practices
becoming enshrined for future reference, and what do they suggest about
what future standards should be?
Part I of this essay describes the shifting corporate governance landscape,
and sets forth the ways in which major capital undertakings may impact
not-for-profit corporate governance structures and practices. Part II
discusses in detail how from 1980 to 1990 the board of directors of Lincoln
Center for the Performing Arts, Inc., (LCPA) a not-for-profit organization
in New York City, rose to the challenges of its first major capital
construction project—a student dormitory and additional administrative and
performing arts facilities—some twenty years after the original campus was
constructed. Part III discusses the current series of redevelopment projects
6. See generally Thomas S. Kuhn, The Structure of Scientific Revolutions (2d ed.
1970) (observing that the history of science is marked by periods of “normal” science, in
which most research and activity takes place within a standard set of beliefs or procedures,
and “revolutionary” periods, or paradigm shifts, in which new discoveries call for the
discarding of standard beliefs or procedures, replacing those components of the previous
paradigm with others). The arc of Kuhn’s model—the “fits-and-starts” nature of scientific
progress, where periods of intense progress are followed by plateau periods—seems to fit in
many respects the arc of growth for mature not-for-profits. On this model, institutions may
go through plateau periods of “normal” programmatic activity for many years, punctuated by
once-in-a-generation periods of “revolutionary” growth and change: a major new
acquisition, merger with another organization, or a significant refurbishment, enhancement
and/or enlargement of physical premises.

932 FORDHAM LAW REVIEW [Vol. 76

at Lincoln Center, which are expected to last into the next decade, and the
contemporaneous introduction of new and enhanced governance practices.
Part IV assesses the performance of the organization’s governance practices
under evolving standards, with special attention to how those standards play
out during a time of institutional transition. Part V concludes with some
observations about whether and how practices being developed today may
serve this and other organizations in later years and projects to come.
7
I. GENERAL PRINCIPLES OF NOT-FOR-PROFIT CORPORATE GOVERNANCE
A. Good Governance Practices Are in Transition
Some of the familiar hallmarks of good governance in not-for-profit
corporations are strong internal controls,

external accountability, transparent
financial management,

regular and effective communications,

effective and
ethical fund-raising and development,

and a management structure that uses
its human and other resources to advance the charitable purpose of the
organization.
8
These characteristics provide a culture of checks and
balances among trustees and staff.
Directors and officers are legally bound to exercise fiduciary duties to the
organization:
9
(1) the duty of care, which requires familiarity with the
organization’s finances and activities and regular participation in its
governance; (2) the duty of loyalty, which requires directors and officers to
act in the interest of the corporation and to avoid or disclose conflicts of
interest or transactions that might appear to create conflicts of interest; and
(3) the duty of obedience, which requires directors and officers to insure
that the organization complies with the applicable laws and regulations and
its internal governance documents and policies.
In the wake of recent notable scandals in both the for-profit and not-for-
profit sectors, these well-established duties have been revisited. The not-
for-profit governance recommendations that New York’s then–Attorney
7. Of course, the approach to governance during multiyear, multifaceted, hundred-plus
million-dollar projects may or may not be applicable to smaller or less mature not-for-profit
organizations, or even comparable organizations undertaking less sizable projects. The goal
of this essay is not to overgeneralize Lincoln Center’s experience, but rather to provide one
example of an approach to corporate governance during a particularly dramatic time in
which major institutional transition coincides with a paradigm shift in the standards of
governance being applied to it.
8. N.Y. Att’y Gen. Andrew M. Cuomo, Charities Bureau, Internal Controls and
Financial Accountability for Not-for-Profit Boards (2005), available at,http://www.oag.state.ny.us/charities/internal_controls.pdf; see also N.Y. Times, Cmty.
Affairs, Nonprofit Excellence Awards,http://www.nytimes.whsites.net/communityaffairs/programs/nonprofit.html (last visited Oct.
28, 2007) (describing criteria under which awards are presented to New York City–area
nonprofit organizations for excellence in organizational management).
9. N.Y. Att’y Gen. Andrew M. Cuomo, Charities Bureau, Right from the Start:
Responsibilities of Directors and Officers of Not-for-Profit Corporations (2005), available athttp://www.oag.state.ny.us/charities/not_for_profit_booklet.pdf.

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 933

General Eliot Spitzer proposed in 2004, in the form of amendments to the
New York Not-For-Profit Corporation Law,
10
would have sought to ensure
that directors and officers upheld these duties by making them subject to
Sarbanes-Oxley-like provisions. Such provisions would have required
corporate officers to sign the corporation’s annual report, would have
mandated the appointment of audit committees, and would have sought to
prevent “self-dealing” transactions. In essence, Spitzer wanted to prevent
fraud in nonprofit corporations in addition to for-profit corporations.
Although this bill was ultimately withdrawn, the governance guidelines
Spitzer outlined are nonetheless regarded by many as valuable guideposts.
These include establishing an audit committee, an executive committee, and
a comprehensive conflicts of interest policy; requiring verification of annual
reports; authorizing the removal of directors and officers who engage in
willful or persistent failure to file accurate annual reports; and limiting the
scope of indemnification for directors and officers.
11
Additional Sarbanes-
Oxley–type practices that are becoming common among nonprofits are
whistle-blower policies and codes of ethics.
12
In recent times, private sector commentators have also begun articulating
additional aspects of the traditional duty of care: a duty of attention
(encompassing, among other things, regular attendance at board and
committee meetings, careful review of meeting minutes and notation to
secretary of any error or misinterpretation, regular monitoring of delegated
responsibilities, periodic meetings with or visits to management personnel
and other employees to inquire about corporate entities’ activities within
their purview, and access to and the opportunity to ask questions of outside
experts such as lawyers, accountants, and investment advisors); a duty of
informed decision making (including the opportunity to hear detailed
presentation by management, the advice and recommendation of outside
experts, including legal counsel, the opportunity to debate and deliberate
proposals and allow time for consideration, the gathering of information on
how comparable institutions dealt with similar problems, and the
opportunity to request additional information deemed relevant by outside
experts); careful delegation of management and oversight responsibilities
(including the ability to make investments pursuant to sections 512 and 514
of the Not-for-Profit Corporation Law); and compliance with the business
judgment rule.
13
While it is unclear whether these proposed new facets of
10. Press Release, N.Y. Att’y Gen. Eliot Spitzer, Proposed Reforms to State Corporate
Accountability Laws (Mar. 12, 2003),http://www.oag.state.ny.us/press/2003/mar/mar12a_03.html.
11. N.Y. State Bar Ass’n, Special Comm. on Sarbanes-Oxley Issues, Report and
Recommendations to the Executive Committee on Sarbanes-Oxley Issues 17–18 (2006) (on
file with author).
12. Paul Macari et al., Best Practices in the Ongoing Operation of the Not for Profit
Organization: Organizational Issues (2006).
13. Anita Pelletier & Scott R. Simpson, Best Practices in the Ongoing Operation of the
Not-for-Profit Organization: Board Functions (2006).

934 FORDHAM LAW REVIEW [Vol. 76

the traditional duty of care will gain traction, they do appear to be in tune
with general trends.
Simultaneously, economic forces are requiring not-for-profits to expand
their commercial activities, creating new streams of revenue and
diversifying the traditional bases of earned and contributed income. And
demographic forces are driving many not-for-profits, particularly in the
cultural sector, to be more inclusive, broadening and diversifying the
communities to which they historically appealed. Accordingly, not-for-
profit board members are increasingly being asked to play more of an
ambassadorial and business-oriented role, not only to uphold the
institution’s mission, but also to help shape or reshape it; not only to “give
or get” financial contributions, but also to think strategically and help build
alternative resources; not only to share knowledge, but also to continuously
learn and revitalize; not only to participate, but also to diversify, reaching
out to include those who may have been historically underrepresented by
race, ethnicity, gender, geography, age, industry, and viewpoint.
14
This complex new array of duties and expectations is challenging enough
to adapt to during “normal” times in an institution’s life span, but what
special duties and expectations apply when the organization is going
through a period of expansion or transition?
B. Special Governance Challenges During Major Capital Projects
Commentators have noted that not-for-profit organizations go through
life cycle stages, including start-up, adolescence, maturity, and decline.
15

Little has been written, however, about important inflection points within
organizations enjoying extended periods of maturity. Such inflection points
are pivotal moments of growth or change, such as an expansion of
operations, a merger, or a major capital project, each of which requires
strong management, vision, and board oversight. While not-for-profit
corporations and their constituents must always adhere to the core
principles of corporate governance, doing so is especially critical when the
not-for-profit is in a period of such change.
A major construction project is a milestone for any organization, but
particularly a not-for-profit corporation. A major capital project that
includes expanded or reconfigured facilities is often triggered by
enrichment of programmatic offerings and ancillary services. Such
activities are a welcome sign of institutional growth, but like any transition,
may entail new and unfamiliar roles. For example, the corporation
becomes, in addition to the operator of its ordinary and expanded
programmatic activities, the “owner” of a construction job site, responsible
14. The Source #12: Twelve Principles of Governance That Power Exceptional Boards
(BoardSource ed. 2005).
15. See, e.g., Paul M. Connolly, Navigating the Organizational Lifecycle: A Capacity-
Building Guide for Nonprofit Leaders (2006).

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 935

for initiating, managing, and paying for the project.
16
Construction work
by its nature imposes special burdens, including legal, regulatory, financial,
community relations, and risk management concerns.
• Legal: Construction projects require compliance with a set of
laws, building codes, permit applications, and other regulations
that may be unfamiliar to the organization. Additionally, if the
project receives public funds, it may be subject to strict bidding
requirements, “buy local” rules, labor laws such as New York’s
Wicks Law,
17
prompt payment laws, minority- and women-
owned business guidelines, and other regulations that may be
conceptually distant from the organization’s normal
programmatic activities.
18
Further underscoring the importance
of real estate related transactions by not-for-profits, the New
York Not-for-Profit Law requires a supermajority of the board to
vote on the acquisition, disposition, mortgage, or leasing of real
property.
19

• Financial: Construction projects, and the capital campaigns that
are often necessary to execute them, may cause more money to
flow through the corporation than at any other time in the life
cycle of the organization. As a result of its heightened fund-
raising and spending activities, the organization may borrow,
enter the public debt markets, mortgage or otherwise encumber
its real property, make covenants on future income, revisit its
investments and spending policies, and engage in more fund-
raising-related activity than ever before.
• Community and government relations: In addition, construction
projects will inevitably cause the organization to engage to an
even greater extent than before with local neighbors, community,
and government. Landmarks groups, community organizations,
business improvement districts, and other official, quasi-official,
and unofficial groups of neighbors and other stakeholders will
inevitably weigh in.
• Risk management/insurance: Major capital projects may also
require an organization to revisit risk management strategies.
Construction is an inherently risky venture:
20
Workers may
strike; weather may be unseasonable; needed supplies may
suddenly become unavailable or prohibitively expensive;
subsurface conditions may significantly differ from what parties
expected; and the plans and specifications may be inaccurate or
16. Robert A. Rubin et al., New York Construction Law Manual § 1:8 (Thomson West
2d ed. 2006).
17. N.Y. Gen. Mun. Law § 101 (McKinney 2007); N.Y. State Fin. Law § 135
(McKinney 2007). Together, these statutes are commonly referred to as “Wicks Law.”
18. Rubin et al., supra note 16, § 1:8.
19. N.Y. Not-for-Profit Corp. Law § 509 (McKinney 2007).
20. Rubin et al., supra note 16, § 2:36.

936 FORDHAM LAW REVIEW [Vol. 76

incomplete.
21
Any of these circumstances, and others—scope
changes, disagreements among stakeholders, unavailability of
expected sources of funding or financing, unforeseen logistical
issues, presence of toxic or hazardous materials—may delay the
project, or increase its cost and/or risk. Construction projects
require a not-for-profit to make special arrangements for
insurance, indemnification, and other risk allocation and
distribution strategies, and then monitor those strategies on an
ongoing basis.
In short, what may be regarded as virtually inevitable for those in the
building trades may come as an unwelcome surprise for charitable
organizations undertaking once-in-a-generation construction projects. A
leading textbook in construction law asserts that “t is probably safe to say
that there has never been a building built exactly as envisioned,”
22
and
“[r]are is the construction project that is complete by the date specified in
the contract.”
23
What, if any, special obligations do trustees have to help
their organizations manage the impacts of such an undertaking?
Because of the unusual legal, financial, community relations, and risk
management aspects of construction projects, among others, the core
principles of not-for-profit good governance, set forth above, become
amplified and require even greater attention. The administration and board
must effectively manage the project through the establishment and
maintenance of internal controls.
24
The board should make sure that
requisite management infrastructure is in place, and that the board is in a
position to adequately oversee the administration of the project.
Assembling a management team with the expertise necessary to guide such
growth is a key factor. Demanding and achieving accountability is another.
In addition, the board should organize committees or subcommittees that
can effectively allocate the institution’s resources, execute the
responsibilities delegated to them, and keep the full board aware, through
regular and special presentations, reports, and updates, of how the project is
proceeding against overall project goals.
25
The board, after reasoned
deliberation duly recorded in the minutes of meetings, should provide
corporate resolutions for authorization of major decisions regarding budget,
spending authorizations, financing, fund-raising, key staffing decisions,
design plans, and schedule and logistics.
Such record keeping is not just a matter of good form; it sets the stage for
internal and external accountability and controls, and ensures that board
members fulfill their fiduciary duties by active and ethical participation in
21. Id.
22. Id. § 6:1.
23. Id. § 7:1.
24. U.S. Gen. Accounting Office, GAO-05-516T, Kennedy Center: Stronger Oversight
of Fire Safety Issues, Construction Projects, and Financial Management Needed 16–18
(2005) (statement of Mark L. Goldstein, Dir., Physical Infrastructure Issues), available athttp://www.gao.gov/new.items/d05516t.pdf.
25. Id. at 30–31.

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 937

the decision-making process. It also provides a historical record for later
generations of trustees and administrators to study, emulate, or improve.
It is instructive to study the experience of one large, institutional
nonprofit organization as it has progressed through two generations of
major capital work: one in the pre-Sarbanes-Oxley days, and now, more
contemporaneously. The experiences of LCPA, a New York not-for-profit
and leading cultural institution, prove instructive. What governance
procedures did it follow while carrying out a $100 million capital project—
the construction of the Rose Building—from 1980 to 1990, and what
differences can be observed today, as it works through a more complex
$700 million renovation of major facilities at a time of generally heightened
attention to governance matters?
II. CASE STUDY: LINCOLN CENTER’S ROSE BUILDING, 1980–90
A. Lincoln Center Prior to 1980
LCPA is the world’s largest performing arts complex, hosting twelve
resident arts organizations that represent the entire span of performing art
forms: opera, symphonic music, film, theater and dance, and more. LCPA
manages this complex and also presents its own artistic programming. In
addition, LCPA is a leader in arts education and community relations.
LCPA was incorporated on J une 22, 1956, as a nonprofit institution
to sustain and encourage the musical and performing arts. . . . It was
authorized to own real estate in the Lincoln Square project, to erect
buildings on that site, . . . and, to encourage, sponsor, or facilitate
performances and exhibitions, to commission the creation of new works,
and voluntarily assist the education of artists and students of these arts.
26
Several resident organizations formed the original group of Lincoln Center
constituents: the Metropolitan Opera, the New York Philharmonic, the
New York City Opera and New York City Ballet, and the J uilliard School.
The groundbreaking occurred in 1959, and Lincoln Center’s original
buildings were completed in 1969.
LCPA owns most of the 16.3 acres of the original campus, with the City
of New York owning the balance. Initially, LCPA’s primary role was
landlord and steward of the physical campus, playing a coordinating and
administrative role among the various resident organizations—each of
which was its own freestanding 501(c)(3) corporation
27
with its own
26. Edgar B. Young, Lincoln Center: The Building of an Institution 51 (1980).
27. By definition, 501(c)(3) organizations are charitable, religious, educational,
scientific, or literary; test for public safety; foster national or international amateur sports
competition; or prevent cruelty to children or animals. I.R.C. § 501(c)(3) (2000 & Supp.
2006). See generally Elizabeth Ardoin, Organizational Test—I.R.C. 501(c)(3), 2004 EO
CPE Text, available athttp://www.irs.gov/pub/irs-tege/eotopicd04.pdf (discussing the test to
determine whether an organization may be classified as a 501(c)(3)) (last visited Sept. 12,
2007).

938 FORDHAM LAW REVIEW [Vol. 76

balance sheets, boards, and administration—by virtue of a set of
constituency agreements that LCPA holds with each resident organization.
In addition, the LCPA board includes representatives designated by each of
the constituent organizations.
Over the years, LCPA has also taken on the role of presenter, serving
unmet artistic needs of the community, filling the concert halls that
otherwise would be dark during the off seasons, and providing arts
offerings in disciplines not otherwise regularly represented on the campus.
Several of these arts initiatives were so successful that LCPA spun them off
as separate, freestanding not-for-profit corporations of their own: the
Chamber Music Society of Lincoln Center in 1969, the Film Society of
Lincoln Center in 1987, and J azz at Lincoln Center in 1996. Other new
constituents were drawn by the rich ferment of arts activity, including the
Lincoln Center Theater in 1980 and the School of American Ballet in 1987.
In all, there are now thirteen constituents comprising Lincoln Center.
By the time the center was twenty years old, it was clear that these new
programs, new constituents, and new activities would require additional
space. Indeed, even when the original campus construction was completed,
Lincoln Center’s founders knew that future expansion was inevitable. For
instance, the founders had always planned on building dormitories for the
J uilliard School but did not initially have the funds to do so.
28
B. A Project Is Born and an Institution Is Remade
Beginning in the early 1980s, Chairman Martin E. Segal led Lincoln
Center to commence, and ultimately, in 1991, to complete, its first major
new building project since the opening of the center: the construction of the
Samuel B. and David Rose Building. In addition to providing safe,
convenient, and affordable housing for J uilliard conservatory students and
students of the School of American Ballet, the new building also provides
additional performance, administrative, and educational facilities for
constituents.
The project was a major undertaking by eleven resident organizations. In
the end, the ten-story, 235,000-square-foot institutional portion of the
building would contain a 268-seat theater for the Film Society of Lincoln
Center; a dining hall; television production facilities for the Live from
Lincoln Center telecasts; archival space; dance studios, classrooms, and
dressing rooms for the School of American Ballet; a workshop/studio
theater and a library for the Lincoln Center Institute; ballet rehearsal
studios, a costume shop, dressing rooms, an education department, and
dancers’ lounge for the New York City Ballet; rehearsal space for the
Chamber Music Society of Lincoln Center; office and management
facilities for eight of the campus organizations; the Riverside Branch of the
28. Stephen Stamas & Sharon Zane, Lincoln Center: A Promise Realized, 1979–2006,
at 112 (2007).

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 939

New York Public Library; and a new home for the New York City Fire
Department’s Engine Company 40 and Ladder Company 35. Above the
base building stands an eighteen-story residence hall tower for students of
J uilliard and the School of American Ballet,
29
and adjacent to it a privately
owned sixty-story condominium tower.
At the time the project was being planned, its purpose was to provide
space for existing and readily foreseeable needs.
30
But once the planning
was underway, the prospect of a new building inspired further
enhancements to Lincoln Center operations and activities, leading to scope
changes and a more ambitious project. As the scope of the project grew, so
did the budget, from an original estimate of $30 million to a final figure of
$100 million. The physical expansion was inspired by, and itself
necessitated, a broader institutional vision.
Executing the project required several complicated real estate
transactions, including a $6 million purchase of land from the City of New
York for the site of the new building. In addition, Lincoln Center
negotiated to sell the air rights from that property and adjacent Lincoln
Center property to a private condominium developer for $48 million, which
provided nearly half the funds for the construction effort. The project was
further complicated by the multiple uses to which the space would be put
and the eleven separate clients who would occupy it. These and other
complexities required deep and expert engagement by the board.
1. “Expertising” the Board and Assigning Roles
The board of directors and executive committee oversaw major aspects of
the capital project, with and through existing structures such as the audit
committee and general services committee, as well as through newly
formed committees such as the new building committee and an architectural
selection subcommittee. In addition, the constituent organizations were an
integral part of the negotiation and planning process,
31
and the LCPA board
played a coordinating role among the constituent organizations through
their designees to the board.
The Lincoln Center board is led by its chair. In the early stages of the
Rose Building project, Martin E. Segal served as chairman of the board. In
J une 1986, Segal was succeeded by George Weissman, who served for the
duration of the project and beyond. Nathan Leventhal, who had been the
deputy mayor of New York City from 1979 to 1984, after serving as the
commissioner of housing preservation and development in 1978 and
29. Id. at 127.
30. Interview with Nathan Leventhal, President Emeritus, Lincoln Center, in N.Y., N.Y.
(J an. 16, 2007).
31. See Lincoln Center for the Performing Arts, Inc., (LCPA) Board Meeting Minutes
4–7 (Oct. 30, 1980) (on file with author).

940 FORDHAM LAW REVIEW [Vol. 76

1979,
32
was elected president of the organization in J une 1984, and served
in that capacity until December 2000.
At the time of the Rose Building project, the board consisted of
approximately thirty-five to forty members. Although the board did not at
that time consciously seek to increase its size or add new members with
relevant expertise to the project,
33
there were several trustees who were
particularly knowledgeable in pertinent disciplines, and they were
instrumental in the Rose capital construction. Three of these trustees are
specifically worth mentioning.
The prominent real estate developer and philanthropist Frederick P. Rose,
initially a trustee of Lincoln Center constituent the New York Philharmonic
and later a member and vice chair of the LCPA board, was appointed to the
new building committee and eventually served as its chair. Rose was also
the principal donor and fund-raiser for the new facility, and the building
would ultimately bear the Rose family name.
Trustee Willard C. Butcher was the chairman and chief executive officer
of Chase Manhattan Corporation and its principal subsidiary, the Chase
Manhattan Bank. In addition to his advocacy of private enterprise and
involvement in civic and charitable activities, Butcher guided an extensive
international expansion plan for Chase, during which the bank added
numerous subsidiaries and services overseas.
Harry Helmsley, founder of one of the biggest property holding
companies in the United States, whose properties included at one time the
Empire State Building and the Helmsley Building in New York City, also
served as trustee to Lincoln Center during this time. Helmsley appointed
his special assistant to serve on the new building committee.
In the political arena, the board at that time also included J ohn Lindsay,
who was mayor of New York City from 1966 to 1974, and who joined the
board in 1984. Gordon Davis, who joined the board in 1982, had served as
a commissioner of the New York City Planning Commission and had
experience in the private sector as a real estate lawyer. Davis, in
conjunction with Lincoln Center President Nathan Leventhal, helped guide
the organization through the city’s complex Uniform Land Use Review
Procedure (ULURP). Their experience in city government was beneficial
as they dealt with the Community Board, the City Planning Commission,
and the Board of Estimate Hearings.
34
The board, in accordance with its
bylaws, includes the commissioner for cultural affairs and the Parks
Department commissioner, and also has ex officio members designated by
the mayor and the City Council speaker. A number of the Lincoln Center
trustees also served on boards of other major nonprofits, providing
32. Interview with Nathan Leventhal, supra note 30.
33. Id.
34. Stamas & Zane, supra note 28, at 121–22.

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 941

information about comparable circumstances that could inform board
members’ judgments.
35
Retaining consultants with experience on comparable projects also
enriched the pool of information available to the board and staff during the
project. For example, an attorney and planning consultant retained by the
new building committee had helped to devise an innovative strategy for the
Museum of Modern Art a few years earlier, involving the sale of air rights
to fund the museum’s tower expansion. The planning consultant suggested
that Lincoln Center could pursue a similar strategy, funding construction of
the Rose building in part through sale of air rights to a residential apartment
tower to be constructed nearby.
36
That transaction was ultimately
consummated, and it provided nearly half the funds for the construction of
the building.
37
2. Adjusting the Board’s Committee Structure to Meet Project Demands
Even as the new building structure took shape, new governance
infrastructure was put into place. The board of directors redefined the
responsibilities of its executive committee in connection with the new
building. In December 1983, the board approved and authorized the
executive committee to make final decisions on the scope of the new
building and gave it direction for new subcommittees.
Lincoln Center’s general services committee, in existence since 1966,
38

also took on new and expanded roles. The general services committee is
responsible for managing the costs and services of the Lincoln Center
complex. During the Rose Building project, the general services committee
worked in conjunction with the board and executive committee to prepare
for incorporating the new building into Lincoln Center, including taking
35. For example, Frederick P. Rose served at the Metropolitan Museum of Art, the Asia
Society, Mount Sinai Hospital, the Children’s Aid Society, the American Museum of Natural
History, and Rockefeller University. Chairman Martin E. Segal served on the board of the
Institute for Advanced Study at Princeton, Young Audiences, Inc., and Harvard School of
Public Health. Chairman George Weissman was a board member of the Whitney Museum
of American Art and the American Academy in Rome. Willard C. Butcher, cochair of the
building committee for the Rose Building served on the board of Brown University. Louis
V. Gerstner, J r., served as a board member of the New York Public Library. June Noble
Larkin served on the board of the Museum of Modern Art. Anthony D. Marshall served on
the boards of the Vincent Astor Foundation, Brown University, New York Zoological
Society, WNET/Channel 13, Metropolitan Museum of Art, Museum Trustees Association,
and Ocean Liner Museum and Seamen’s Church Institute. Many LCPA board members
were also members of constituent boards, in addition to those members designated by the
constituents.
36. Stamas & Zane, supra note 28, at 114.
37. In another example of the use of comparable institutions’ experiences, the executive
committee examined the Museum of Modern Art’s use of a transfer tax payment strategy to
effectuate new facility needs. LCPA Board Meeting Minutes 7 (Oct. 30, 1980) (on file with
author); LCPA Executive Committee Meeting Minutes 8 (Sept. 13, 1979) (on file with
author).
38. LCPA Board and Members Meeting Minutes 4 (J une 13, 1966) (on file with author).

942 FORDHAM LAW REVIEW [Vol. 76

account of potentially increased operating costs of the campus as a whole,
and anticipating how to manage its costs. In 1985, the board formally
expanded the mandate of the general services committee to include the new
building.
The following year, a new permanent committee, the building operations
committee, was established to take “responsibility for and authority to
direct the operation” of the Rose Building, including determining operating
and capital budgeting, establishing reserves, and electing representation to
the campus-wide general services committee.
39
The establishment of the
Rose Building operations committee and the delegation of a Rose Building
representative to the campus-wide general services committee were two
permanent governance changes brought about by the Rose Building project.
By contrast, the new building committee was dissolved in 1991 when its
work was complete.
40
An audit committee was first established in 1978 at the recommendation
of Lincoln Center’s outside auditors. The committee’s mandate was to
provide a formal review of the board for financial information distributed to
interested parties and the general public, to review decisions made by the
board, and to report to regulatory agencies. Its duties were (1) to review
significant financial information and give assurance that the information
was accurate and timely and that it included all appropriate disclosures; (2)
to ascertain the existence of an effective accounting and internal control
system; (3) to oversee the entire audit function, both independent and
internal; (4) to provide a communication link between the auditors and the
board of directors; and (5) such other duties and responsibilities as may be
assigned by the chairman.
41
The audit committee was to consist of at least
three directors to be appointed by the executive committee. The audit
committee was active throughout the construction and thereafter, and it was
the committee’s practice to meet with both internal and external auditors to
ensure that the fiscal affairs of Lincoln Center are “sound and in good
order.”
42
There was no finance committee at that time, nor was there an explicit
requirement that members of the audit committee be sophisticated in
financial matters or independent of the organization.
3. Regular Interactions Between Key Staff and Board Members
Consistently throughout the project, at regular meetings of the board and
executive committee, board leadership, key staff members, and outside
consultants updated the board on every aspect of the project.
39. The North Building at Lincoln Center Final Participants Agreement § 8.3 (1987) (on
file with author).
40. LCPA Annual and Regular Meeting of the Board and Members Minutes 8 (J une 17,
1991) (on file with author).
41. LCPA Board Meeting Minutes 12 (Feb. 27, 1978) (on file with author).
42. LCPA Board Meeting Minutes 7 (Oct. 5, 1981) (on file with author).

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 943

A core group of staff members at Lincoln Center guided the capital
construction, including senior executives with significant experience in
operations, facilities, finance, law, public affairs, and development. The
organization hired architects and contractors, and also brought in outside
specialists as consultants and subcontractors.
Approximately twenty board members, staff members, and outside
project consultants met regularly—at times, as often as once a week—to
discuss the details of the construction. Staff prepared weekly agendas for
each meeting.
43
In addition, the executive committee and the board as a whole were
briefed on the project at nearly every meeting from early 1984 until the
occupancy of the building in 1992.
44
Briefings covered technical matters
such as construction bidding, arcane governmental processes, and complex
legal agreements, as well as more traditional board fare, such as fund-
raising progress and comparisons of actual cost to budget. Other matters
pertaining to the construction were also brought before the board for
discussion and resolution, including the construction and financing of a
parking garage beneath the building.
Corporate records reflect that executive committee members also
received written memoranda updating them on the status of the project on
topics such as staff activities, revision in project costs and estimates, market
indications, tax issues, and surveys on topics such as transportation needs
and garage use.
45
The board of directors maintained responsibility and authority for the
fund-raising campaign. Regular access to accurate information about cost
increases helped the board plan the campaign more effectively, letting them
reach agreement upon increases to its fund-raising goals. The board,
recognizing that the organization lacked “the staff or the experience for a
major capital campaign fund drive,” retained a professional fund-raising
firm that provided clear guidelines on the solicitation and use of funds.
46

The board was involved in and regularly apprised about the progress of the
capital campaign, through early successes–including a $15 million lead gift
from Frederick P. Rose and his wife Sandra and a $10.1 million donation
from the City of New York–through the recessionary period of the late
1980s, and ultimately to completion of its $100 million goal.
47
There were also frequent communications to, from, and among the board
regarding the relationship of the project to the City of New York and the
local community. Records reveal that the executive committee became
43. Interview with Nathan Leventhal, supra note 30.
44. These meetings are held monthly except during J uly and August.
45. E.g., Memorandum from Richard H. Koch, LCPA Const. Project Consultant, on
Status of New Bldg. Project to the Members of the Bldg. Comm. (Nov. 9, 1981) (on file with
author). The new building program was distributed to the executive committee in April
1984. Id.
46. Stamas & Zane, supra note 28, at 119 (quoting then-Chairman George Weissman).
47. Id. at 119–21.

944 FORDHAM LAW REVIEW [Vol. 76

familiar with the ULURP process and schedule as well as the community
board process, and was briefed on the retaining of a community relations
firm. Lincoln Center decided that it was crucial for the planned new branch
of the New York Public Library to have its entrance to the Rose Building
on Amsterdam Avenue, facing the community. Responding to a frequently
lodged critique against the original Robert Moses plan, this entrance
reflected Lincoln Center’s commitment to the local community and desire
to embrace all visitors.
48
C. Special Challenges Demanding Intense Board Involvement and Activity
1. Allocations of Space, Resources, and Responsibilities
Among Resident Organizations
One of the most difficult issues Lincoln Center faced was “reaching a
satisfactory agreement with the participating resident organizations on how
to allocate annual operating costs for the new building and on deciding who
would own it.”
49
Inter-constituent negotiations led to the development of a
participants’ agreement for the new building which would serve as an
official documentation of Lincoln Center’s and the constituents’ financial
and institutional relationship with the new building. Under an agreement
initially reached in 1985 and confirmed in 1987, each participant accepted
responsibility for the management and maintenance of its own space, and
agreed that LCPA would manage the project and own the building,
providing each participating constituent with a ninety-nine-year lease.
50
Pursuant to the participants’ agreement, every one of the eventual
participants in the building shared pro ratain the economic benefits of the
air rights transfer, as gross proceeds of the sale were allocated by Lincoln
Center in a proportion equal to each participant’s respective building
participation ratio.
51
The proportionality was maintained as the building
transitioned from capital expenses to operating expenses: the resident
organizations now share the maintenance costs on the same proportionate
basis on which the proceeds from the sale of the air rights was allocated.
The executive committee and ultimately the board of Lincoln Center
discussed and then formally approved the start-up costs and the execution
of the interim agreements.
48. Id. at 121–26.
49. Id. at 117.
50. Id. at 117–19.
51. The North Building at Lincoln Center Final Participants’ Agreement § 5.1 (1987)
(on file with author).

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 945

2. Closing Out the Project and Reckoning with a
Substantial Increase in Cost
The project rose in cost from an initial estimate of $30 million to a total
of just over $100 million. Reasons for the increases in cost included
increased scope, changes in design, underestimates for certain costs, labor
and supply issues, schedule delays and associated logistics premiums, and
higher interest costs because of the extended schedule and some delays in
the capital campaign. Although cost overages are common in construction
projects, the increase in this case warranted—and received—frequent
attention from the new building committee and the board.
The board and executive committee were apprised of detailed
information on projected and actual costs and increases in costs in real time
as they arose. The minutes reveal detailed discussions of specific amounts
and percentages of change from prior estimates at seven or more meetings
during that period. In addition, the board—and/or executive committee—
was also briefed generally about increases in costs at five other meetings.
Written communications between meetings further kept trustees apprised of
escalating costs and other matters pertaining to the project. The board
received briefings on the general progress on the project at nearly every
board and executive committee meeting throughout the process.
Moreover, trustees and management anticipated and planned for the
operating costs of the building long before completion, establishing a
building endowment to capitalize the first few years of operating costs.
This endowment smoothed the transition from the capital phase to the
operating phase, easing the impact on operating budgets.
The building was fully occupied in the spring of 1991, to critical acclaim
by architecture critics
52
as well as to the satisfaction of eleven separate
clients. In February 1992, the executive committee made a preliminary
projection of final costs which represented a $6.7 million increase from the
previous projection. By March 16, 1992, the total net building costs were
determined to be approximately $102 million.
53
Although this figure
represented a significant increase from the originally anticipated $33
million, the constant exchange of financial data among the board of
directors, executive committee, audit committee, and new building
committee enabled Lincoln Center to accommodate these demands and
raise the funds necessary for successful completion of the project. In
keeping with the tradition of close oversight and collaboration with the
executive committee, there was a board resolution of financing approval the
next month as the project was closed out.
52. E.g., Paul Goldberger, A Shot of Cultural Adrenaline at Lincoln Center, N.Y. Times,
J uly 28, 1991, at H29.
53. Memorandum, Lincoln Center Rose Building—Construction and Endowment
Goals—as of March 16, 1992 (on file with author).

946 FORDHAM LAW REVIEW [Vol. 76
D. Further Observations of Governance Practices During the Rose
Building Capital Project
Lincoln Center’s board and executive committee exercised oversight over
the Rose Building construction project by thoughtfully considering
resolutions and authorizing action when appropriate. Their decisions were
based on their knowledge of the details of the project, including fund-
raising strategies, building schedules, construction bidding, governmental
approvals, complex legal agreements, community relations, and, of course,
the costs and funds available. Their adherence to the duty of care is
manifest in the paper trail of agendas, minutes, and corporate resolutions at
the committee and overall board level that demonstrates an engaged and
rigorous oversight of the project.
The board ensured that the requisite management infrastructure was in
place and fully engaged, both by including the existing team of seasoned
executives from the financial, legal, operational, public affairs,
development, and other disciplines, and by adding new members from the
architectural, construction, and project management fields. Those key
staffers were accountable to the board through both regular meetings with
certain trustees and frequent presentations to the executive committee and
the board.
The board adapted its infrastructure to accommodate the needs for
expertise and targeted oversight by establishing a new building committee
and staffing it with experts in construction and real estate development; by
using existing resources such as politically well-connected board members
for governmental relations tasks; and by putting legal skills to work to
consummate several complex real estate deals and facilitate requisite land
use planning approvals. The board also refreshed the mandate of the
existing general services committee to include the new building and created
a new building operations committee to ensure that the new building would
have a suitable governance infrastructure of its own. This new committee
would carry out the agreements in principle that were reached in the
participants’ agreement among the eleven participating resident
organizations. Some of the new infrastructure survived after the building
was opened—the updated mandate of the general services committee and
the new Rose Building operations committee—while other aspects of it,
such as the new building committee, were discontinued when no longer
needed.
Clearly the Lincoln Center board met and exceeded then current
practices. It is even likely that the board during the time frame of the Rose
Building project would be found to be in compliance with the heightened
formulation of the duty of care now being articulated in some quarters, even
though the project took place some fifteen to twenty-five years ago. A
“duty of attention” was certainly fulfilled through frequent meetings with
management and direct interaction with outside experts such as lawyers,
construction managers, and consultants. The professional fund-raiser

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 947

retained by the board to carry out the capital campaign worked in
conjunction with trustee fund-raising, and the board provided clear
guidelines on the solicitation and use of funds.
As a further example of a duty of attention, the quorum provisions in the
bylaws were enforced, ensuring a critical mass of attendance at board
meetings. Other bylaws permitting board members to designate proxies at
the annual meeting ensured that every board member had the opportunity to
be adequately represented.
While key staff members and subcommittees managed the capital
projects on a day-to-day basis, there was an appropriate degree of oversight
and involvement by key trustees and the board as a whole. The importance
of striking the right balance between trustee oversight and trustee
micromanagement cannot be overemphasized.
In a recent report reviewing a series of large, publicly funded capital
projects at the Kennedy Center in Washington, D.C., the U.S. Government
Accountability Office stated that, “[a]lthough a board can delegate
responsibilities to management, it remains responsible for overseeing
management’s work.”
54
The Lincoln Center board strived for a suitable
level of trustee involvement for the Rose Building project. As evidenced by
meeting agendas, minutes and resolutions, the board regularly discussed
strategy and policy issues and reviewed building plans. It established
committees with requisite expertise to provide detailed oversight, and then
the board or executive committee as a whole formally reviewed and
approved and/or ratified all significant decisions regarding the capital
construction.
The Sarbanes-Oxley–style updates to corporate governance arose
substantially after the Rose Building was completed. Accordingly, the most
visible manifestations of that new paradigm—whistle-blower policies,
updated conflict of interest policies, updated audit committee charters
calling for financially disinterested members with suitable expertise, and
the like—were not enacted by the Lincoln Center board at that time. Such
governance updates have, however, since been enacted by the institution.
55
54. U.S. Gen. Accounting Office, GAO-06-1025, Progress Made on GAO
Recommendations, but Oversight Challenges Still Exist 36 (2006), available athttp://www.gao.gov/new.items/d061025.pdf. The General Accounting Office found no
evidence that the Kennedy Center board “approves the annual updates to the [comprehensive
building plan], reviews management’s performance in implementing capital projects, or
approves the annual capital project budget.” Id. Another complaint that the GAO articulated
was that the Kennedy Center board did not review building plans, leaving such work
exclusively to the operations committee, and did not discuss policy issues at its meetings. Id.
at 37. The Kennedy Center rebutted many of the GAO’s critiques. Id. at 62–68.
55. LCPA Board and Members Meeting Minutes 6 (Dec. 16, 2002) (on file with author)
(establishing separate finance committee); LCPA Annual and Regular Meeting of the Board
and Members Minutes 21–22 (J une 26, 2006) (on file with author) (updating audit
committee charter, to require, among other things, disinterested members knowledgeable
about financial matters; updating conflict of interest policy; and enacting whistle-blower
policy).

948 FORDHAM LAW REVIEW [Vol. 76

III. A NEW GENERATION OF MAJ OR CAPITAL PROJ ECTS HERALDS
LINCOLN CENTER’S FIFTIETH ANNIVERSARY CELEBRATION
A. Planned Redevelopment Projects Center on 65th Street Corridor,
Columbus Avenue Entrance, Josie Robertson Plaza, Harmony Atrium,
and Central Mechanical Plant
In 1998, Lincoln Center’s board established a committee for the twenty-
first century to examine Lincoln Center’s future needs. Following a capital
needs study by an outside architectural firm, the board in 1999 established a
redevelopment committee, which was later incorporated as a freestanding
501(c)(3) organization known as the Lincoln Center Development Project,
Inc. (LCDP). LCDP’s members include the chairs of all the resident
organizations and has been chaired by trustees experienced in construction,
real estate development, and governance matters. In 2000, Lincoln Center
negotiated a $240 million contribution from the City of New York,
reportedly the largest sum ever given by the City to a cultural institution.
56

Professional management and consultants were brought on board to work
up plans for the campus’s public spaces and theater interiors.
Following a period of vigorous discussion and debate, some of which
erupted into the public sphere,
57
and after recovering from the devastating
effects of the 9/11 attacks and the subsequent economic downturn, plans for
redevelopment projects emerged. Under the leadership of Board Chairmen
Bruce Crawford (2002–05) and Frank A. Bennack, J r., (2005–present) and
President Reynold Levy (2002–present), the projects include:
• 65th Street Redevelopment Project: 65th Street between
Broadway and Amsterdam Avenue is being transformed into a
“Street of the Arts,” opening up Lincoln Center’s 65th Street
entrance to encourage the interaction of visitors, artists, teachers,
and students. The street, revitalized with natural sunlight through
the removal of the Milstein Plaza, will be lined on both sides with
new building facades, innovative visitor information systems,
dramatic lighting, and new indoor and outdoor facilities for dining
and refreshments. There will be major facility expansions and a
new destination restaurant with a public roof lawn on the North
Plaza, a new retail shop, and a dramatic new street-level identity
for six resident organizations: the J uilliard School, Film Society of
Lincoln Center, Lincoln Center Theater, Lincoln Center, Inc.,
Chamber Music Society of Lincoln Center, and School of
American Ballet. Alice Tully Hall, the 1095-seat theater, is
undergoing its first renovation since it opened in 1969. The
projected cost of the 65th Street Redevelopment Project, including
56. Stamas & Zane, supra note 28, at 185.
57. See, e.g., Ralph Blumenthal, Met Opera Rejects Plan for Renovation of Lincoln
Center, N.Y. Times, J an. 24, 2001, at A1; Robin Pogrebin, Met Is Rejoining the Project to
Renovate Lincoln Center, N.Y. Times, May 4, 2001, at E5.

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 949
constituent subprojects, is expected to exceed $600 million, and
the work is scheduled to be complete in 2009.
• Promenade Project: The Promenade Project is intended to redefine
the front entrance of Lincoln Center, incorporating new
architectural elements such as glass, travertine marble, new
landscape features, and integrated information technologies for
enhancing the visitor experience. The project will further unite
Lincoln Center with the surrounding cityscape, rebuilding Lincoln
Center’s primary entryway along Columbus Avenue and upgrading
and reenergizing the adjacent J osie Robertson Plaza. The project
will also reconfigure the vehicular and pedestrian approach to the
plaza from Columbus Avenue by sinking the existing service road
that leads up to the plaza below street level, and dramatically
expanding the current staircase to the plaza from the street. J osie
Robertson Plaza—the central public space that includes the iconic
Revson Fountain—also will be updated. The plaza pavement
masonry will be totally renovated, and the fountain will be
enhanced with new lighting, improved seating, and technical
upgrades. The projected cost is somewhat less than $200 million
and is also expected to be complete in 2009.
• Harmony Atrium Project: The Harmony Atrium, a privately
owned public space between Broadway and Columbus Avenues
and West 62nd and 63rd Streets, is being transformed by Lincoln
Center into a vibrant public community and cultural space offering
performances, information, and discounted and advance ticket
services. This work is expected to cost approximately $15 million
and should be complete in 2008–09.
• Central Mechanical Plant: Lincoln Center has also undertaken a
comprehensive upgrade of its central mechanical plant, which is
original to the center and has reached the end of its useful life.
This work will likely cost approximately $43 million and will be
complete later this year.
• Other projects: Future Lincoln Center redevelopment projects
anticipated over the balance of a decade will involve Avery Fisher
Hall, Damrosch Park, and the New York State Theater.
B. Redeveloping Corporate Governance Structures
As governance standards have evolved and plans for redeveloping the
Lincoln Center campus have taken shape, so too have new governance
structures and practices evolved at Lincoln Center.
Bucking the trend toward smaller boards—occasioned, some say, by the
heightened duties imposed on volunteer trustees by the new post–Sarbanes-
Oxley regime—the Lincoln Center board has undergone dramatic growth.
Under a succession of three energetic chairmen—Beverly Sills, Bruce
Crawford, and Frank Bennack—and the leadership of Lincoln Center

950 FORDHAM LAW REVIEW [Vol. 76
President Reynold Levy, working with the nominating and governance
committee chaired at present by Thomas H. Lee, the board added a net of
twenty members and has grown to approximately seventy-five in total. The
enlarged board membership has brought not only new sources of funding,
but also new energy, a diverse set of perspectives, and expertise in a variety
of industries. New members have supplemented existing board expertise in
construction, real estate, finance, public affairs, and other disciplines
relevant to the projects being planned and underway.
For example, Katherine Farley, senior managing director of Tishman
Speyer, the global real estate development and operations firm, joined the
Lincoln Center board in 2003. In 2006, Farley was elected chair of the
board of LCDP. The planning group for the Promenade Project is headed
by Daniel Brodsky, a trustee from the New York City Ballet and one of
New York’s leading developers. The chairman of the financing task force,
leading the undertaking of $150 million or more in tax exempt borrowings
to help finance the project, is Richard K. DeScherer. DeScherer, cochair of
the law firm of Willkie Farr & Gallagher LLP, was one of the original
draftsmen of the enabling legislation creating the New York City Trust for
Cultural Resources, the issuer of the bonds. These trustees join board
members of longer standing at Lincoln Center, who also bring considerable
expertise in these and other relevant fields of endeavor.
LCPA has also enlarged its committee structure, adding a finance
committee, new media committee, public affairs committee, campus-wide
marketing steering committee, and others. In addition to creating these
committees of the board, LCPA has harnessed expertise in various
industries by creating advisory groups, fund-raising groups, and in-kind
service providers, such as the Lincoln Center Counsels’ Counsel, a group of
major law firms and in-house counsel departments providing strategic and
legal advice on a pro bono basis; a real estate and construction industry
council; a business council; a conservancy to harness the support of
neighboring businesses and residential buildings that benefit from
proximity to Lincoln Center; and a hedge fund industry group that has
provided an “annuity” to Lincoln Center’s corporate fund through an
industry gala each year since 2005. These initiatives, as well as the
redevelopment projects themselves, have benefited all of the resident
organizations across the campus.
The Lincoln Center project management entity, LCDP, through its staff
of twenty employees and teams of outside architects, engineers,
construction managers, and other consultants, has been able to realize
efficiencies of scale on behalf of all the constituents pursuing
redevelopment projects through centralized purchasing, management, and
coordination of multiparty projects. LCDP itself has a robust board and
committee structure, which includes a building advisory group consisting of
leading industry experts. In addition to Brodsky, these experts include
Carol Pittelman, head of construction for the Litwin Group, and J oel
Pickett, president of Gotham Construction. Additionally, working groups of

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 951
representatives from each sector of the campus and an audit committee,
which requires financial experience and financial independence of its
members, are also included. The audit committee calls for a certain overlap
with the LCPA finance or audit committee, providing cross-accountability,
checks, and balances.
The LCPA staff, too, has been reenergized, reorganized, and diversified,
adding positions such as executive director of the campaign (leading the
capital fund-raising effort from private sources as well as unprecedented
fund-raising from all three levels of government) and a vice president of
consumer ventures (directing the Harmony Atrium effort as well as new
technology initiatives, which include providing wireless Internet access in
the public areas of the campus). There has been a redefinition of the
marketing function to include a business development portfolio and a cross-
campus coordination role. Efforts have been made to integrate new hires
with longtime members of staff and to encourage greater interdisciplinary
collaboration.
New pathways of communications have been carved among staff in the
form of regular management committee meetings, such as between staff and
board, between the chairs of the finance committee and audit committee and
the chief financial officer, including discussions of direct oversight and
accountability in appropriate cases, and between the chair of the legal
committee and the general counsel. Accountability comes, too, in the form
of “scorecards” to measure the organization’s performance on behalf of its
constituents, regular review of line employees by senior management and of
senior management by trustees, and financial performance against stated
benchmarks.
The president ensures that every trustee is fully apprised of and engaged
in board matters, not only by careful placement of members on committees,
but also by vigorous and energetic follow-ups. Indeed, the president sends
a letter summarizing each executive committee and board meeting to any
director who may have missed the meeting, usually within a day or two.
Board briefings, discussions, and resolutions are an important part of
every major decision, including with respect to design, scope, cost,
schedule, fund-raising, borrowings, and governmental and community
affairs. The capital campaign, which is underway to pay for the physical
improvements and also includes a significant endowment component, has
resulted in anticipated increased operating costs brought about by the
redeveloped facilities and expanded operations.
C. Economic Redevelopment for a New Era
Lincoln Center is undergoing not only a physical transformation, but also
an economic one. In an effort to make the organization more self-
sustaining and less reliant on contributed income, the organization is
diversifying income streams through greater entrepreneurial initiatives,
exploiting its considerable intellectual property, for example, through a

952 FORDHAM LAW REVIEW [Vol. 76

book publishing deal with J ohn Wiley & Sons, and leveraging its real estate
assets through new catering, restaurant, garage, and hall rental initiatives.
IV. FURTHER OBSERVATIONS ON
GOVERNANCE IN A REDEVELOPMENT ERA
Lincoln Center, like many of its not-for-profit brethren and for-profit
cousins, has revisited its governance practices in light of recent heightened
scrutiny and regulatory activity in the field. In accordance with evolving
standards of good corporate practice, it has upgraded its audit committee
charter; added a whistle-blower policy; refined its conflict of interest policy;
updated its document management policies; reviewed its signing
authorizations, procurement policies, and lobbying practices; and
undertaken an executive compensation study using an outside consultant
familiar with compensation at comparable institutions. The performance of
its president and senior executives are regularly evaluated by the board and
executive committee in executive sessions. The organization has developed
a “scorecard” by which trustees may measure progress of the top twenty
initiatives underway.
As Lincoln Center is in a redevelopment mode, good governance
practices and strong internal controls are even more important. An enlarged
board with considerable expertise in relevant subject areas—real estate,
construction, finance, law, public affairs, and other disciplines—ensures
competent oversight of management. A disciplined and integrated
management team pursues goals in alignment with one another, with the
board, and with the broader institutional mission. The organization’s
growing program and its entrepreneurial initiatives, some of which are
related to its expanding facilities, take the prior generation’s “revolution” to
the next level.
The board and staff include longtime members as well as relative
newcomers, providing both continuity and an invitation to shape the
organization’s future.
Institutional memory is recorded and conveyed through the minutes,
resolutions, memoranda, and other historic documents that formed the basis
of this study. The organization, through a reshaped information resources
department (formerly known as archives), has also recently developed
intranet-based databases to preserve, organize, and make searchable and
accessible board and committee materials and other institutional memory.
Databases and other archival tools include both programmatic materials and
the corporate records going back to the conception of the organization in
1955.
58
58. These databases were developed partially in response to best practices determined
after 9/11.

2007] NOT-FOR-PROFITS AND CAPITAL PROJECTS 953
V. CONCLUSION AND SOME MORE QUESTIONS
Lincoln Center has achieved significant growth in both its physical
resources and organizational capabilities, first during the Rose Building
construction project and now during the current generation of
redevelopment projects. The organizational and governance structures put
into place for the first major capital project set the stage for expansions and
transitions of the next generation.
The “revolutionary” pace of capital expansion, the transformation of the
nonprofit balance sheet to a more entrepreneurial model, and the rapid
evolution of standards of corporate governance raise many more questions
to ponder. How do board members’ special roles during times of
institutional transition affect their relationship with the institution? With its
regular program? With the board members’ fund-raising activities during
and after the transition? Should there be different or separate types of
financial record keeping—for example, the Internal Revenue Service Form
990, GuideStar information, and state charitable contributions reporting—
during capital campaigns and projects? Should the board authorize
different (i.e., higher) levels of check-signing authority during major capital
projects than during ordinary times? Should it permit different thresholds
for financial controls on expenditures? For projects that are funded with
public funds, in part (such as the Rose Building project and the
redevelopment projects) or in whole (such as the Kennedy Center project),
should there be a higher level of public accountability? If so, how should
that be effectuated?
Although there is no one-size-fits-all model for nonprofit organizations
undergoing significant transformations, the lessons learned and practices
being developed today may provide some helpful guidance for other
organizations, as well as set a precedent for itself for the next generation.

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