As we all know, the existing ethical rule adopted by AAM in 1991 limits the use of proceeds from deaccessioning to acquisitions and the direct care of the collection. There are no exceptions. Likewise, objects from the collection may not be pledged as collateral for financing by the museum, regardless of the purpose of the financing. On the surface, it seems appropriate that the rule has become the defining doctrine of museum collections.

The enactment of the rule, however, was as much about staving off a proposed requirement by the Financial Accounting Standards Board (FASB) for museums to include the fair market value of their collections on their balance sheets as it was about the sanctity of collections. FASB’s initiative—to achieve a consistency in how collections were reported by museums—began in 1986 and resulted in an “exposure draft” circulated in 1990 that would require the capitalization of collections on a museum’s balance sheet. It strains credibility to assert that the development of the ethical rule was not influenced in significant part by the FASB threat. By enacting the rule, AAM could argue that if a painting is salable only for very limited purposes, it should not have to appear on financial statements at its fair market value.

The museum world scored a victory. The final version of Standard No. 116 issued in 1993 made it optional to capitalize collections.

This rule protects and serves big, financially sound museums at the expense of the others. It deprives struggling museums access to assets that could ensure their survival and prevents museums from financing acquisitions to build their collections. More significantly, however, to the extent that the rule’s promulgation influenced FASB’s retreat from the requirement of the capitalization of collections, the result was that museums were not required to disclose the full value of their collections. The ramifications of full market value disclosure (not the least of which is the ability to seek donations) are of much more import to large museums with collections of huge value than to the smaller ones. So the rule is sheathed in virtue and violators are dealt with harshly.

Regardless of its genesis, however, a hard look at how the rule supports the shared values of the museum community is long overdue. Indeed, the current economic crisis demands it. There are two distinct questions: 1) Should the constraints on the use of the proceeds from a deaccessioning be expanded to include operating expenses and capital expenditures under certain limited circumstances? 2) Should the criteria to support a decision to deaccession be expanded to include the urgent financial needs of the museum?

The ethical rule is all about collections to the exclusion of all else. Yet a museum is much more than its objects. The museum world is justifiably proud of its role as a site for education and community dialogue. For many communities, the museum is an invaluable resource and an integral part of the community’s economy. Its survival is essential. But the rule requires that a museum close its doors rather than use the proceeds from a deaccessioning to survive. In the words of one respected museum director, those museums “deserve to die.” That harsh punishment may be imposed on the museum by its peers, but it is ultimately a sentence served on the public.

The shared values of the museum community include the continued existence of the museum and its ability to fulfill its mission; preservation and security of the collection; public access to the collection for exhibition, interpretation, study and research; and the ability of the governing body and professional management of the museum to make choices and establish priorities for the museum.

Two illustrations will be helpful in analyzing how the rule holds up in the context of the shared values of the museum world.

The Berkshire Museum in Pittsfield, Mass., hosts around 90,000 visitors per year with an array of exhibitions and programs. It boasts a natural science collection, objects from ancient civilizations and a collection of American art. Few students leave the public schools of Berkshire County without experiencing at least one field trip to the Berkshire Museum.

Last year the museum deaccessioned three Russian paintings that had no relevance to the collection and had never been exhibited in more than 50 years of ownership. The museum netted about $7 million in proceeds at public auction—a very big day in the life of an institution with a $2 million operating budget. The proceeds were placed in an account restricted to acquisitions and the direct care of the collection, as the rule requires.

Although the Berkshire Museum is lean, efficient and well-managed, recent staff reductions to meet budget shortfalls impair the museum’s ability to be the educational and cultural resource so valued by the community. Planned capital improvements are on hold. The collection, on the other hand, is well cared for, and there is no interest in expanding it in a new direction. The ethical rule prevents the museum from accessing those funds to support its present operating and capital needs and to sustain its programs. That’s the tragedy of the rule.

The danger and absurdity of the rule is demonstrated by the hypothetical, but not unique, predicament of Museum X.

The economic downturn has been particularly cruel to Museum X, and many of its donors have suspended their support, promising to resume when things are better. The museum has exhausted its reserves, but projects that if it can stay alive for the next year or two, there is a viable way forward. All other avenues and sources of revenue have been explored without success. In order to pay its creditors and keep its doors open during that period, Museum X will sell several works outside of its core and treasured collection of medieval and Renaissance art. As a result, however, the museum expects to be stripped of its accreditation and deprived of its ability to borrow works from other museums to exhibit to its visitors. And other museums will be prohibited from collaborating with Museum X and prohibited from borrowing its medieval and Renaissance objects for the benefit of their audiences and scholarship in general.

How ethical is that? How does that outcome fit within the shared values of the museum world? Why is preserving every single object ever entrusted to it a higher priority than keeping the museum open?

It is naive to assume that the dissolution of a museum means simply that its collection goes to another museum. The museum creditors, or a trustee in bankruptcy, will likely have a different set of priorities for realizing the greatest possible proceeds from the disposition of the collection. They will most assuredly liquidate Museum X’s medieval and Renaissance paintings coveted by private collectors before looking to the lesser pieces the museum itself was planning to sell.

Responsible boards exercising good judgment may well choose to ignore the rule and use funds received from an earlier deaccessioning to keep the museum alive. Or they might choose to sell an object to ensure the museum’s survival. Indeed, it may be their fiduciary obligation and legal duty to do so. Isn’t it better to embrace a rule that recognizes those several priorities and gives a structure to the resolution?

And finally, why is it not even better to give the museum an opportunity to obtain financing to meet an urgent need by pledging specific objects from the collection as collateral, allowing it to obtain the necessary funds and retain the objects in the absence of a default? The rule even prohibits a museum using an object to finance the purchase of an object. Consider this realistic fact pattern: A painting very much desired by a museum comes on the market. Its sale by auction is imminent. The museum has half the cash it needs to make the purchase and knows it can raise the rest if it has more time. The auction house offers to finance the sale, keeping the painting as collateral while the museum raises the remaining cash. Oops, no can do. The transaction violates the rule. The painting is sold to a private collector and departs the public domain. Can this possibly be a desired outcome of the rule?

What might changes to the ethical rule look like? Here are some possibilities:

Limitations on the use of deaccessioning proceeds shall not apply if the governing body of the museum, in the exercise of its fiduciary duty, has determined that the museum has a legitimate and urgent need for the funds consistent with the mission of the museum and has considered other alternatives to meet such need and found such alternatives to be impracticable.

It shall not be unethical for a museum to deaccession objects from its collection to meet such need or to pledge objects as collateral for financing for such purpose provided that in identifying objects to be deaccessioned or pledged, the governing body considers their value in the context of the overall collection and their contribution to the mission of the museum, and is otherwise in compliance with its policy on deaccessioning.

The role of museums as stewards of our cultural and historical legacy is undisputed and deserves the great respect it enjoys. But a balancing of priorities is in order—placing the viability of the museum and its programs on at least an equal footing with the collection. Why not make it ethical for a museum to weigh priorities and make difficult choices without fear of condemnation and ostracism?

This is not a call to lower a professional standard. This is a call for an examination of a standard. Ethical rules should be an articulation of our collective values. There should be no fear or hesitancy to scrutinize them occasionally to be sure they continue to serve those collective values. The rule serves well the “value” of avoiding financial disclosure. Now let’s look at it in terms of the value of preserving museums and their collections. Its rigidity and lack of exceptions causes it to fail that test.

It is time to recognize that financial exigency may be an appropriate and proper justification for deaccessioning. At a minimum, we need an ethical matrix that will inform decisions on an expanded range of ethical uses of proceeds to ensure the continued existence of museums. At the end of the day, the survival of the museum is really the best way to protect collections for the benefit of the public.

Mark S. Gold, an attorney from Williamstown, Mass., has practiced law for more than 30 years, including the representation of museums and other nonprofit organizations. He holds a master’s degree in museum studies from Harvard University.