American Law Institute - American Bar Association Continuing Legal Education
ALI-ABA Course of Study
March 29 - 31, 2006
Legal Issues in Museum Administration
Cosponsored by The Smithsonian Institution with the cooperation of the American Association of Museums
John Henry MerrymanStanford Law School
Copyright © 2006 The American Law Institute; John Henry Merryman
Museums typically face two kinds of ethics issues. One, which we can call "governance ethics," includes conflict of interests, self-dealing and misuse of insider advantage. The other, which we can call "acquisition ethics," responds to the possibility that objects under consideration for acquisition may have been stolen, improperly excavated or illegally exported.
In practice, ethical discourses in the two areas dramatically differ. Governance ethics is a tranquil, if not somnolent, topic with few headlines, sparse litigation, negligible activity in Congress or in national or international organizations and few debates in the professional literature. Acquisition ethics is different. The discourse is dominated by energetic Crusaders whose fields of battle include the media, courts, Congress, national and international organizations and the pages of professional journals. It is a ferociously active discourse, characterized by wide differences of opinion and vigorous, assertive argument.
Why this striking difference? What makes one ethics dialog so sleepy and tolerant, while the other is so hyperactive and combative? In attempting to answer that question I will focus on art museums, but most of what I have to say also applies to others.
THE GOVERNANCE ETHICS DISCOURSE
Conflict of interests is the central concern of governance ethics, with self-dealing and misuse of insider information and status as corollaries. Conflict of interests is not a very complicated notion. If you are a board member or the director or a professional staff member of a museum, you have a duty of loyalty to that institution. If your self-interest, or your duty of loyalty to some other institution, is inconsistent with your duty of loyalty to the museum, you are conflicted.
Two contrasting modes of thought quietly compete in the governance ethics discourse. We can call them "hard ethics" and "soft ethics." For example, if you are conflicted should you recognize that fact and deal with it by eliminating the conflict? That is the "hard" ethical position. Many in the museum world, however, find such rigor distasteful. They favor soft ethics, which in practice shades into obfuscation and denial. More on this below.
Why do we care about conflicts of interests? There are two kinds of reasons. First, the conflict is disabling. A person with conflicting duties of loyalty cannot possibly be totally loyal to both. One, or both, of the conflicting duties of loyalty must inevitably be compromised (duh!). A conflicting self-interest has an equivalent effect, compounded by the possibility that the conflicted person will favor her self-interest over her duty of loyalty to the museum. Second, even for the knowingly conflicted person who wants to be ethical, the conflict has a befuddling effect, impairing his judgment. The museum needs board members, a director and professional staff who are not befuddled. The public is entitled to expect you to exercise your unconflicted judgment for the good of the institution.
Let's look at some current examples of obvious conflicts of interest. These are real cases, in which I have deleted the identities of the people and museums involved.
Case 1. A prominent art dealer is invited to join the board of trustees of a major art museum that acquires and exhibits works of the kind that the dealer shows and sells.
Case 2. The director of art museum A is invited to become a trustee of museum B, which is active in the same fields as museum A.
Case 3. I assure you that I am not making this one up. A distinguished art historian who is the leading expert on an important period of art history collects works from that period and occasionally bids at auction for herself. She also advises other collectors and bids for them at auction. She is employed as a senior curator at a major museum, which she advises on acquisitions and for which she bids at auction. Finally, she is a trustee of another museum that actively collects in her field, which she advises and for which she also bids at auction. I repeat that I am not making this up.
Case 4. This is the generic case of the active collector of works that the museum also acquires and shows who is invited to join the board of the museum.
For each of these cases we can ask the two basic questions: (1) is there a conflict of interests here and (2) if so, what is to be done to deal with the conflict?
The first question is easily answered: each of the four cases displays at least one conflict of interests. As a trustee, the dealer in Case 1 has a duty of loyalty to the museum. As a dealer, he has a conflicting self-interest plus conflicting duties of loyalty to his artists, his clients, has business associates and his staff. The director in Case 2 owes conflicting duties of loyalty to museums that compete with each other for acquisitions, for traveling shows, for professional staff, for trustees, for individual donors and government and foundation grants, for members and visitors, and so on. In Case 3, it would be tiresome to list all of the distinguished art historian's conflicts. In Case 4 the collector's self-interest conflicts with his duty of loyalty to the museum.
Proponents of soft ethics will protest that these are only "apparent" or "potential" or "possible" conflicts of interests. Such people are either confused or in denial, or both. The conflicts of interests in these cases are not potential; they are actual. What is potential is the harm that may result from the conflicts.
Can disclosure solve the ethical problem, as soft ethicists propose? Suppose that the conflicted trustee fully discloses the existence of the conflict to her fellow-trustees. They are warned, and the warning my have some marginal effect, but the record of oversight by fellow-trustees is not good. And disclosure does not make the conflict go away; it remains, still working its harm on the conflicted trustee.
How about isolation of the conflict, also advanced as a soft ethical solution to conflicts of interest? Suppose that the conflicted trustee agrees not to participate in board discussions or vote on any matters that concern his conflicting interest. That may work for a banker-trustee who abstains from discussion of a proposal to engage a new banker for the museum. But it cannot work for the art dealer-trustee or the art museum director-trustee, and certainly not for the profusely conflicted art historian in Case 3. (We'll talk about the collector-trustee in a moment.) Those conflicts cannot be isolated; they are pervasive. The business of the museum is art, and that is the dealer's and director's and curator's business. Everything that goes on in the board room will touch, directly or indirectly, on the trustee's other art world interests. And the conflict unavoidably colors the conflicted trustee's actions when he leaves the board room, taking his insider knowledge and art world clout with him.
To the hard ethicist, the only adequate remedy for a pervasive conflict of interests is prophylaxis: the principle that the conflicted trustee must be cleansed of her conflict. Soft ethicists, who don't like that principle, argue that it impoverishes the board, denying it the experience and wisdom of, for example, the dealer. That is of course nonsense. The museum has its own professional staff, who are presumably capable, and if it is not the board has the obligation to make it so. There is something seriously wrong with the museum if it needs a dealer on the board. Where the board genuinely believes that it needs outside help it can engage the dealer or expert as a consultant.
It follows that if the dealer in Case 1 really understands what conflict of interests is about, she will decline the invitation to join the board, an invitation that should never have been offered. Total loyalty to the museum would only be possible at the expense of loyalty to her partners and staff, her artists and her collectors, and vice versa. If the director in Case 2 wants to be ethical, she will either decline the invitation to join museum C's board or resign from her position at museum B. The two museums compete. Total loyalty to one necessarily means impaired loyalty to the other, but the more likely outcome is impaired loyalty to both. As to the richly conflicted art historian in Case 3, her first ethical move should be to sever her connection with one of the museums, but she still would have considerable work to do to become ethical. The conflicted collector in Case 4 presents an interesting ethical problem that I will return to below.
Will a prophylactic rule on conflicts of interests produce a board composed of art eunuchs, in which no member knows anything about art and the art world? That is another soft ethics claim. The answer is straightforward. As we have already observed, the director and professional staff, whose education, experience and career ambitions are invested in art and the art world, are there to supply art and art world expertise. That is their main business. The main business of the board is to keep the museum open and running. Interest in art and familiarity with the art world are not irrelevant or unwelcome, but they are incidental to the board's main purpose and the performance of its legal obligations.
Hard and soft heads concur on one issue: the museum needs the active support of wealthy, influential trustees in order to survive and flourish. The offer of a position on the board is an effective way of capturing the interest of such people. Some of the most desirable of them are collectors. In this very practical sense, the museum needs conflicted collectors as trustees. To control the potential damage caused by the conflict, special rules apply. During her tenure on the board, the collector trustee should never bid against the museum at auction and should offer any object she acquires to the museum at or below her cost. My late colleague Albert Elsen, once President of the College Art Association, took a more rigorous position: the collector-trustee should agree to donate to the museum any works she acquires during her tenure.
Self-dealing. Self-dealing, in which a trustee sells to or buys from the museum, is nicely exemplified by Count Panza di Biumo's 1984 sale of 80 art works to the Los Angeles Museum of Contemporary Art of which he was, at the time, a trustee, for $11 million. Was this transaction ethical?
There are two distinct approaches to self-dealing. One is a prophylactic rule: no self-dealing. Period. The Panza sale clearly violated that rule. California, however, had enacted a different rule, which permitted self-dealing if the transaction were properly sanitized in advance by either of two alternative sanitization procedures. In the Panza case it appears, however, that the Museum's board performed neither of them.
Those who know something about the works of art LAMOCA acquired in the Panza sale will quite properly point out that it appears to have been a very good deal for the Museum. That may be so, but the Museum's apparent failure to perform either statutory sanitization procedure, coupled with the persistently furtive behavior of its board and staff when inquiries were made, strongly suggest that there was something questionable about the deal, something that, if revealed, could not stand the light of day.
Inside Information. The textbook example of misuse of inside information involves the trustee who buys works by an artist before public announcement of a planned exhibition that will increase their market value. In another scenario the trustee dumps objects in advance of public knowledge that the museum is selling off such works from its collection. Insider trading of this kind is clearly unethical and possibly illegal. To hard and soft heads alike, such information is properly thought of as museum property, no more available for exploitation by individual insiders than other museum assets.
This brief description of Governance ethics shows that it is a clouded area characterized by the polar positions that I have called "hard ethics" and "soft ethics." The differences between them are not just differences of degree; in many situations they lead to opposing conclusions about the resolution of basic ethical questions. Such differences should be resolved; otherwise board members, directors and professional staff act in an atmosphere tainted by confusion, denial and ambiguity. Why is such a divided ethics dialog so tranquil? We'll return to that question, but now we should say something about acquisition ethics.
THE ACQUISITION ETHICS DISCOURSE
Museum acquisitions once were unencumbered by ethical considerations, but those carefree days are over. There has been a revolution in acquisition ethics. The accepted account marks the beginning of the revolution with publication of Clemency Coggins's 1969 article: "Illicit Traffic of Pre-Columbian Antiquities" in the Art Journal. That article was quickly followed by promulgation of the 1970 UNESCO Convention and its 1972 ratification by the U.S. The decisions in U.S. v. Hollinshead (1974) and U.S. v. McClain (1977- 1979). The Customs Advisory Memorandum of November 15, 1977, and enactment of the Cultural Property Implementation Act in 1983 completed the necessary legal structure.
While this account is helpful, it omits the most powerful ingredient of the acquisition ethics mix: the extremely effective archaeologists' Crusade against the international trade in antiquities. From the late 1960's forward, UNESCO Conventions and Recommendations, U.S. laws and judicial decisions and the activities of U.S. Customs and the Cultural Property Advisory Committee have, with few exceptions, adopted positions effectively advocated by archaeologists. Source nations have adopted tactics and legislation that exploit the archaeologists' achievements. UNESCO has incorporated them in its instruments.
The archaeologists' Crusade has changed the rules in the international antiquities market. One of their stated objectives, not yet achieved but they are working on it, is to abolish that market, and they definitely have acquisitors (dealers, collectors and museums) on the defensive. The Crusaders' strategy is to attack at every point, but their central position has two parts. The first part maintains that antiquities should remain in situ in the source nation unless properly (i.e., by archaeologists) excavated, with official permission, according to approved (by archaeologists) professional methods. That is not in itself an entirely unreasonable proposition, but the second part is more troubling: unless proved otherwise, an antiquity must be assumed to be stolen. Through their persistence and zeal, the Crusaders have embedded that reversal of the ordinary burden of proof in international instruments and in some museum acquisition policies.
It is not my purpose here to describe or criticize the Crusade's premises and effects, although I believe that some of them are misguided and damaging. It is enough to observe that the antiquities trade is in turmoil and that museums that collect and show antiquities have to cope with a great deal of turbulence.
There is an additional source of turbulence. In the 1980's a resurgent interest in finding and returning Holocaust art losses to their owners stimulated a literature, conferences, the creation of action organizations and programs, expansion and increased use of the Art Loss Register, and enactment of facilitating legislation. That Holocaust art movement, which continues today, appears to be totally independent of the archaeologists' Crusade, but it adds its own significant new dimension to museum acquisition ethics. Every proposed acquisition of a work of art of a certain age now entails extended research into the work's provenance and familiarity with the structure and history of the international art trade from the early 1930's forward.
A STRUCTURAL EXPLANATION
We have seen that both governance ethics and acquisition ethics display internal disagreement about basic questions. In the case of governance ethics, the conflict between hard and soft ethics seldom shows itself. It exists, hardly recognized, beneath the surface. Acquisition ethics, however, is the opposite of serene; it is an area of open, vigorous combat. Why this difference?
Some of you will already have thought of one plausible explanation: the governance ethics dialogue is mature; its ideological battles have been fought and the terms of peace long ago established. The acquisition ethics dialogue is young, dating from the 1970's, and the crusaders are still full of passionate intensity. The opposition forces are still scattered and disorganized. The terms of discourse and the definition of issues are still fluid and the probable nature of an eventual resolution still clouded.
Though persuasive, that explanation is incomplete. There is another kind of explanation that I will call "structural." Briefly, the governance ethics discourse is so structured that the participants in it have little opportunity or incentive to speak or act, while the acquisition ethics discourse is driven by a strongly motivated mover and shaker unrestrained by structural limitations.
Consider Case 1, the dealer-trustee who has a clear, pervasive conflict of interests. Who has standing to complain about this ethical offence? Individuals, including supporters and members of the museum, do not. In every state the Attorney-General has standing to supervise non-profits and to take legal action to protect the public interest. In every state the Attorney-General is inadequately staffed and funded to do the job. Attorney-General intervention accordingly is too infrequent and adventitious to provide a credible threat of imminent, informed legal action. Motivation is also a problem. Museum trustees tend to be wealthy, influential people, and Attorneys-General are not eager to push such "blue-ribbon" trustees around. They would rather use their limited resources in more congenial ways.
In most states an interested person can, with the Attorney-General's consent, sue in his name as "relator." There is, however, no procedure to require the AG to consent to relator status, just as there is no procedure to require the AG to sue. In some states a dissenting trustee has standing to question possible trustee misconduct, but there are few such actions. The human dynamics of relationships within the board and the attitude that one should, if unhappy, merely resign, militate against trustee whistle-blowing. Indeed, to give you a realistic picture of the situation, consider the California case establishing trustee standing: Holt v. College of Osteopathic Physicians and Surgeons, 51 Cal. 2d 750, 40 Cal. Rptr 244 (1964). In that case minority trustees challenged the legality of a majority decision. The California AG intervened in that case, all the way to the California Supreme Court, to oppose plaintiffs' standing.
Thus, despite the existence of laws and ethical codes, the dealer-trustee may serve out her term on the board without significant opposition. The museum world is well protected against effective legal supervision, and museum boards and directors generally are happy to let it stay that way. Neither the American Association of Museums nor the Association of Museum Directors agitates for expanded standing. On the contrary, they oppose it. All is quiet on the governance ethics front.
In the unruly world of acquisition ethics, on the contrary, a growing body of ethical statements and laws threatens museums. An expanding array of criminal prosecutions, forfeitures and title challenges looms over proposed acquisitions. As we meet here, the Crusaders are in Washington, using their considerable influence in Congress to create further problems for museum acquisitions, for example: advancing the proposal that gifts of antiquities to museums not be deductible from donors' incomes. The Crusaders are also in Paris, on the staff and in the governing structure of UNESCO, where they continue their campaign against the antiquities market. The public, generously informed by the media in terms supplied by the Crusaders, generally supports them. Many of the measures that they stimulate please source nations, and pleasing foreign nations pleases our government. The legal and ethical consequences of violations of acquisition ethics are real and immediate. The structure of the debate is open and unrestricted.
DOES THE DIFFERENCE MAKE A DIFFERENCE?
Although museum governance appears to be overprotected, what are the consequences? Would expanded standing or more aggressive attorney-general oversight lead to the exposure of seriously damaging practices? There is little empirical information on which to base a judgment. Since 1945, Wisconsin law has permitted "any 10 or more interested parties" to sue on their own when the Attorney-General declines to act. In the ensuing 60 years, Wisconsin litigation has produced no examples of serious governance abuses. Nor has it led to harassing litigation. The Wisconsin experience can of course be discounted as atypical. In Illinois, which is far richer in museums, the Harding Museum case is a horrific example. How many comparable examples of serious governance abuse go unrecognized and uncorrected we can only guess.
When compared to those in the rest of the developed world, American museums stand out in their number and variety, in the richness of their collections, in the quality of their exhibitions, in the extent of their outreach to the public and in the prodigality of their finances. Perhaps our present system of unenforced governance ethics, with its "soft" stance in the museum world and unobtrusive attorney-generals, mildly corrected by the accreditation program of the American Association of Museums, is better left as it is. Perhaps, or perhaps not.
As to acquisition ethics, crusading archaeologists are unconstrained by the legal structure. The defect in their discourse is its tendency toward excess. Let me say at once that some of my best friends are archaeologists. Much of what they propose is right. But when they seriously advocate limiting museum acquisitions to inter-institutional loans and exchanges and, with equal seriousness, propose the elimination of collectors, dealers and the antiquities market, they strain our relationship. Such proposals are extreme, and the logic on which they are based is patently specious. Still, the tide of public opinion and governmental action is with them. Perhaps the tide will soon turn, or perhaps not.
Finally, it may not be entirely unfair to characterize the governance ethics discourse as comfortable, though corrupt. It is tempting to describe the acquisitions ethics discourse, on the contrary, as uncorrupted but uncomfortable. Is there the germ of a troubling social truth here? Do corruption and comfort always co-exist? Is comfort unattainable without corruption?
Or is it wrong to describe the acquisitions ethics discourse as uncorrupted? Are its excesses not a form of corruption, an offence to ethics? Does Acton's famous aphorism apply? Have our archaeologist friends been corrupted by their acquisition of power?
Thank you for listening.