Should a nonprofit board member even be compensated for their "service" to the nonprofit? And if yes, at what rate - above market, at market or below market? And what exactly are reasonable expenses a board member should be compensated for getting to board meetings (that aren't local to that member) and/or events?
These are just a few of the questions - both ethical and legal being asked about the Hershey School board which in 2013 was actually told by the Pennsylvania State attorney general to dial-back the spending. Now, it is worth noting that the Hershey Trust that owns the school has about $12 billion dollars in assets. This is not your ordinary nonprofit: its existence came from chocolate. So perhaps it's not surprising, albeit disappointing, that individuals with the duty of ensuring that mission is accomplished, haven't found a way to financially benefit from their "contribution". And yes, I would have thought that the state attorney general and even the IRS could very simply find the board members in violation of the duty of loyalty - putting their own interests ahead of that of the school. But for a reason I can't discern, this board has been given a small slap on the hand and permitted to continue with what I would pose is a flagrant violation of their fiduciary duty and harmful to the school (at least in the long run.
Just so you are clear about the specifics, from the Philadelphia Inquirer we learn:
Eight directors ran up an $18,000 tab for a weekend board meeting last June at New York's Waldorf-Astoria hotel, according to internal records obtained by the Inquirer.
All 10 spent $362,000 in travel, meals and hotels over the last 21/2 years, including at least 60 limousine rides, often from the Philadelphia and Baltimore airports.
Then there was the $6.9 million that board members were paid for their service over the last three years, an unusually lucrative perk for a board overseeing a school for poor children.
Board members earned $1.8 million in fiscal 2013, the year before the agreement, and $1.9 million the first year afterward, tax returns show.
The highest-paid were Philadelphia-area money manager James Nevels, who received $1.7 million over the last three years, and Robert Cavanaugh, a former trust board chairman and a Los Angeles resident, who earned slightly more than $1 million.
Directors such as Nevels and Cavanaugh earned such compensation because they sat on the Hershey Co. chocolate company's board as well as that of the trust's bank.
Directors travel to attend six Hershey Trust board meetings, most often lodging at the trust-owned luxury Hershey Hotel. The board also holds an annual retreat and other events such as the one at the Waldorf in New York.
Records show that the trust paid about $650 a night and two of the board members stayed four nights at the Waldorf, running up tabs of almost $2,600 each.
our directors who lived outside Pennsylvania or New York - former chairman Cavanaugh; Joseph Senser, of Minneapolis; and Joan Steel and Robert Heist, both of the Chicago area - accounted for nearly all the airfare expenses.
They billed the charity about $113,000 in airline tickets and change-seat fees over 2½ years, including 40 airline seat upgrades or choice seats in 2014. The records describe flights with the notation "air" and do not say whether those tickets were first-class.
Limos were a favored mode of transportation for directors who flew into the Philadelphia or Baltimore airports and needed rides to Hershey. Records show that limo costs ranged from $250 to $500 a trip, and the total bill for limos came to about $20,000.
Cavanaugh, who helped his son obtain a $13,000 summer internship in 2015 with one of the trust's asset managers, had the highest expenses over the period: $82,520.
So, in my opinion, just plain wrong. And, what I have just outlined as the abuses doesn't even fully describe the questionable nature of services in the pursuit of mission. Those quoted in the article suggest that not only is the governance structure broken, but the whole Trust should be re-examined from a mission and service perspective. You think?