Since the beginning of the COVID-19 pandemic more than a year ago, the business model of every art museum has been under enormous stress. Some museums are financially robust enough to withstand this strain, but some are too financially fragile to do so, even with government support. In recognition of this harsh reality, last spring the American Association of Museum Directors (AAMD) made a 180-degree turn on the use of funds from the sale of art from a museum’s collection, allowing some of the proceeds to be used to meet operating costs.
This move has caused turmoil in the museum world, as the debate rages over whether the temporary lifting of the restrictions should be made permanent, as reported by Robin Pogrebin and Zachary Small in The New York Times, on March 19, 2021, “Selling Art to Pay the Bills Divides the Nation’s Museum Directors.” The debate is amplified by the Metropolitan Museum of Art considering selling some of its own collection and using the proceeds to cover operating costs.
Selling artwork to preserve the financial solvency of a museum has a long, vibrant history of debate. In 2009, The New York Times reported on a similar controversy on the sale of two paintings by the cash-strapped National Academy Museum in New York City. At that time, the AAMD both denounced the sale and actively sought to have its members refuse to lend artwork to the museum to bring financial pressure on an already cash-strapped museum.
Before that, in 2005, Fisk University, a historically Black college in Nashville, Tenn., sought to sell two of its most famous paintings as an extreme measure to avoid closing its doors, as reported in the Tennessean. After five years of legal fighting, the sale was allowed to go forward.
The basis of this restriction is engrained in the public policies of numerous museum directors, but it ultimately has no foundation in law. In his law review article “Art or Assets: University Museums and the Future of Deaccessioning,” Christian Brill shows that there is no basis in either the law of trusts or the law of contracts, absent some specific and explicit written prohibition on the sale of the artwork in the deed of gift from the donor, for a blanket prohibition on using the proceeds of art sales for operating expenses of the museum to which the art was donated. Despite this fact, some in the museum community nonetheless seek to reimpose this restriction.
Such a ban makes it nigh impossible to meet a fiduciary duty on settling an estate where a large collection of art is to be donated to a museum; especially, when the collection is previously unmanaged. Angela Kipp, in her book, Managing Previously Unmanaged Collections: A Practical Guide for Museums, points out that managing a newly acquired collection or a collection neglected due to lack of time and money requires looking at the entire collection, thinking like a project manager rather than as a curator and considering the big picture, even if you can only take small steps. Now that, because of the pandemic, time and money is even more limited, fiduciaries must look at whether it is better to fix the roof of the building that houses the entire collection—that is pay for the ongoing operations of the museum with the proceeds of the sale of art—rather than focus on the fate of just one piece.
Ms. Kipp also points out the danger that every fiduciary faces in this situation: the “White Knight”:
“White knight fights for the good and against evil powers…seeing everybody who doesn’t do what you expect them to do as evil powers. And a white knight is very limited in his abilities; the only thing he can do is fight and he will either win or lose a battle. There is no in-between, no chance of negotiating and reaching compromises. If you don’t get what you want as a white knight, you leave the battlefield beaten and wounded, and you take it personally. This helps neither you, nor the collection, nor any other person involved.”
So, what are the alternatives to this fight to the death for the future of museums? Here are some steps:
- Clarify donor agreements on the restrictions on the sale of art and the use of the proceeds;
- Seek to strengthen the museum’s ties with a wider community, demonstrating how the museum provides value to the widest possible community; and
- Only embark on deaccessioning after a formal, clear-cut and public process.
This new, public process includes what Erica Coslor of the University of Chicago Department of Sociology suggests in her article “Art Investment Collections: A New Model for Museum Finance?”: creating a separate investment collection from which artworks may be sold to generate operating or other expenses. There are issues of governance, accountability and conflicts of interest in creating such an investment collection, but this leverages the art market access of museums to create a hedge for other types of endowment assets, while still upholding museum association guidance on a museum’s permanent collection.
Those seeking to reimpose the ban see using proceeds to pay for operating costs as not just wrong but also morally reprehensible. Estate planners must help donors, fiduciaries and museums have a thoughtful, realistic and open process of how to fund the operations of museums through deaccession for this new reality we face due to the pandemic.
Matthew Erskine is managing partner at Erskine & Erskine.
