Nonprofit Board Crisis

When is Nonprofit Nonprofit?

Interesting New York Times article on July 16 covering an issue all nonprofit boards and execs should be concerned about and one I find myself particularly drawn to: when and if a health care provider should be nonprofit.  As you know, I am seriously doubtful that many health care providers should have nonprofit status based principally on behaviors that are practiced that I believe are anything but nonprofit (like requiring cash before chemo; no cash - no chemo).

The NYTimes article focused on VSP Vision Care of Rancho Cordova who is appealing the Supreme Court on an IRS ruling against its tax exempt status.

The IRS says that "VSP's social welfare activities, in relation to its total activities, are minor, incidental and insignificant."

VSP says that it "provide(s) access to vision care for all segments of our socieity.  We do provide coverage to employers, but to all types, public or private, ranging in size from the federal government to employers with two people, and we offer coverage to those who can afford it...  VSP also runs several charitable programs, like Sight for students, which provides vision care and glasses to low-income, uninsured children...

We don't offer our programs through commercial outlets like LensCrafters and Wallmart and over one-third of the providers in our network are in medically underserved areas."

Good corporate citizens -- yes.  Tax exempt -- I need more convincing.

Positive Public/Private Partnerships

The New York TImes offered a great example of private/public (nonprofit) partnerships that result in a win - win.  The article told the story of one public health official's desire to change the behavior of a community whose traditions involved behaviors that resulted in some community members' eventual illness and/or death.  To find solutions about changing behaviors the official turned to some international corporations whose own experience was provided deep and wide insights into how behaviors can be changed.  The application of this knowledge appears to be working in the target community.  To see the full story, go here.

The moral of the story: big business is not bad all of the time.

The Only Thing Wrong With Tainted Money....

There's an old saying about "Immorallly gotten money'."  The saying goes: "the only thing wrong with tainted money is there 'taint enough of it."

Well, in St. Mary's County (Maryland), electronic bingo machines (like a slot machine) are now outlawed.  Yup, the moral police (or people who think they have been awarded badges to be moral police) have won another battle against the evils of gambling and pulled the plug. 

It didn't seem to matter that these machines created jobs and for the most part, were sources of income for area nonprofits.  No, the law is the law and gaming is gaming and according to those that decide, there can indeed be something wrong with "tainted" money.  See the Washington Post of 6/29/08 for more on the story.

State Grants: Always, Sometimes, Never Political?

One of the latest chapters in Obama's campaign for president is focused on his responce to a nonprofit seeking state grant money when he served as an Illinois legislator.  The politics of this: the organization is related to Jesse Jackson.

And the question is what?  Well the question is actually about what are the politics of allocating dollars to nonprofits in their respective cities.  I am scratching my head over this situation as I thought there was always some degree of politics in grantmaking from the state level.  I also thought grantmaking, particularly at a governmental level, very much depended on having some confidence that the organizations funded would produce the promised results.

It sounds like there is a question as to wether the money was used the way it was intended.  That's a problem that will certainly haunt the nonprofit - I hope they will not get more money until they demonstrate how they utilized past funding.  Results really is what it's about - politics is a factor in helping sort out the many requests and sure, those who have been around longer, are more visible, have a relationship that assures confidence, sure, they are more likely to get money.

This discussion confuses too many facts and non-facts.  But maybe, this is what politics is about (not really about the results). 

Good grantmaking is investing in promised results.  That's the question we should be asking -- what were the results?

If the Board were replaced

In the July 8, 2008 Wall Street Journal the heading in one column read: "Icahn gains Microsoft as ally to oust Yahoo Board".  The article goes on to note that Microsoft "would be interested in restarting talks to acquire some or all of Yahoo Inc. if the Internet company's board were replaced."

You know, there's not many stories I can recall where the board of a nonprofit was viewed as so important and so vital that others thought it had to be replaced.  It will be an impressive day when board composition becomes the number-one issue for a nonprofit or the public that supports that nonprofit.

Shouldn't we aspire to the day when board composition is indeed a number-one issue to ensure that an organization achieves its intended outcomes?

Nonprofits Can Have Economic Influence

I was reminded today about how some nonprofits, and particularly foundations have and can exert economic and social power when they choose without even providing service. 

I am reminded of this fact and potential from a New York Times article that reviews the state of the market research industry and some merges and purges that are happening.  One nonprofit owns 57% of the shares of a large international marketing research firm.

Many nonprofits and foundations own a number of shares of stocks in big corporations.  Shareholders influence the behavior of corporations and given the globalization of corporate big business, this may be just the right time for nonprofit and foundation boards to be thinking about the social doings of the businesses they invest in and develop active policies that, like the work they do, can have positive global impact.

ACORN -- GIVE US A BREAK!

The New York Times reported that ACORN, the big nationally "loved" and respected community organizing organization several years ago had an employee embezzel $1 million and the board wasn't even told.  A whistleblower alerted the board and funders are ripping mad now that they know. 

Why are they mad? Until a month ago, the Acorn thief was still working at Acorn and paying the money back from family funds.  The embezzeled amount has been booked as a loan (a $1 million loan?)

Donors and funders should be upset - this is really bad nonprofit behavior and serves only as a model for how business should not be conducted.  Transparency counts for a lot and Acorn, an organization that lives on making evils transparent should definitely be embarrased if not overhauled.  Board members, time for your intervention.

Nonprofit News: A valid replacement for market failure?

In my daily review of newspapers today I came across two stories in two different papers (might have been more but I stopped looking) that related to the development of the nonprofit newspaper business as the burgeoning replacement for the failing for-profit newspaper business.

Good news: nonprofits are supposed to fill the void where the for-profit market and government do not provide viable answers.

Bad news or worry: being nonprofit does not inherently spell sustainability -- as most nonprofits would highlight. 

My question: why does the journalism community (or those who support journalism) believe that nonprofit is a valid answer for a proven market failure?  I don't understand.  I also can't perfectly imagine perfect governance over what can't help raise multitudinous contentious subjects.  Missions and values will have to be very clear and the role of board vs. staff and who pays for what (e.g. the only thing wrong with tainted money is there taint enough of it) must also be agreed upon in advance.

whew!

Fundraising Firms Only Charitable To Themselves

Fundraising firms are only charitable to themselves.  The folks who manage direct mail, telephones and events get the better part of the money raised according to the LA Times' story titled "The give and take for charity".

The article paid particular attention to a nonprofit (Citizens Against Government Waste) that has spent its many years of existence focused on protecting the public's interest by pointing out failures in the way the government works and spends.  The Citizens gets about 19% of the money.  Yet, according to the accounting for some $879,000 raised in a ten year period from these methods, only 6% of the amount of money raised actually went to charity.

Many nonprofits argue that their take would be $0 if they had to rely on raising the money themselves.  Others note how these efforts are good at identifying the long term donor who is captured through these methods relatively inexpensively.

So, bad or good? I think it's about transparency, not about bad or ineffective methods actually (the methods do work).  As long as the donor understands that only a portion of their dollar reaches the cause and that that's ok, this method of raising is ok in my book. 

What's your thought?

Nonprofit Lay Leadership "Overvalues" Professional Leadership

I got a recent comment about a situation in North Carolina and we maybe should be scratching our heads or at least try to understand all the positions around the issue. 

The CEO in the North Carolina United Way raised a huge amount of money last year (not I assume without the help of her lay volunteers).  Her board, likely corporate big-whigs used to big bonuses for being successful, gave a huge bonus in the form of a $800,000 or more increase to the CEO's retirement fund, plus a raise and other benefits which pushed the annual compensation to over $1 million per year.

Now of course the grumbling on the streets is that this is way to much money for a nonprofit exec to be making.  And I of course don't like mega salaries for anyone -- I think that for-profit folks are waaay overpaid but that's not what their peers and owners say so it doesn't really matter that I don't like the practice.  And no, I don't like huge salaries for nonprofit folks either -- it comes from charitable money after all -- people who want to see their dollars make a difference to the cause, not the CEO pocket book.

But let's look at the other side - big-whig corporate guys get paid a lot and some of them think the principle of paying a lot for big results makes sense.  In the case of our North Carolina U.W. CEO it's good to note that Charlotte has some pretty huge companies paying pretty huge wages (Like Wachovia & Bank of America).  For sure the nonprofit sector should appreciate that the for-profit folks are viewing the nonprofit sector, symbolized through this payout, as at least being peer-like.  And, the sector has been working for this recognition for years.

Do I like $1 million nonprofit CEO salaries - no, not in principle.  Do I like that the corporate folks in Charlotte value the nonprofit success stories -- absolutely!