Nonprofit Board Crisis

Nonprofit Hospital CEO Pay

I consistently have mixed feelings about nonprofit executive pay.  On the one hand, I believe first that nonprofit execs deserve salaries that represent their responsibilities (and training) and for sure, if they are managing large institutions, they maybe even need to be paid at rates that are competitive with for-profit counterparts.  I also believe it's up to a nonprofit's board to determine what is appropriate compensation while recognizing that boards comprised of well compensated for-profit folks may actually set higher salaries than boards without these type of folks. 

Meanwhile, just because someone in the for-profit world is paid, in my opinion, outrageously, doesn't mean their counterpart should be paid outrageously.  Hospitals of course come to mind.  A recent report via the Nonprofit Newswire noted a report by CEO Watch that stated that "CEO pay at 11 nonprofit hospitals in the state for 2007-2008 exceeded the amount of charity care their institutions rendered."  By the way, these CEO's all were paid more than $1 million. 

Now comes the quandary, again.  I don't question that running a hospital is demanding and requires really smart accomplished people to do the job.  But $1 million?  And, at the cost of "charity" care?  Just doesn't seem right.  But then, neither does the capitalist pay system overall -- where sports and entertainment personalities make more than the average working person can ever-make in 5 or 10 lifetimes or there's the Wall Street guys and, well the list of inequities goes on. 

So, maybe we should, instead of being critical, yell victorious that there are some within the nonprofit sector who actually do benefit well within an economic system that is extremely selective about who gets rewarded for being smart, skilled and hard-working.

Nonprofit Philanthropy With Strings

There's good news and less good news.  The good news: there's still people with money and they want to give their money to support nonprofit's outcomes.  The bad news: some of these people who want to give money think you would spend their money better if they "accompanied" you on your journey.  A recent Star Tribune articles calls this donor-grantee relationship engaged philanthropy. 

Several years ago, this "donation-on-a-string" was referred to as Venture Philanthropy.  Whatever we call it, this philanthropy-on-a-rope makes a few presumptions.  Again, the good news.  The philanthropist cares about your nonprofit -- enough to not only give money but to roll-up their sleves and get down into the nonprofit Exec's back-yard and help dig.  The bad news: the philanthropist that's caring about your nonprofit want's to work with the exec and dig-in lending all their business acumen to help ensure you, the recipient get your job done and spend their money well. 

Is this so bad?  No, not on the surface recognizing that the philanthropist stays wealthy because they are business saavy and you can always stand to gain some business saavy. 

Always the best situation for the Exec and nonprofit?  I don't think so.  The power dynamics alone mean that the exec may compromise, sometimes appropriately and sometimes not so appropriately to ensure the money keeps coming.

So, venture or engaged philanthropy: whatever we call it we must recognize that it may not be the perfect solution.  But I suppose there can always be worse solutions -- like having no money at all.....

Nonprofit Survival

NPR's Morning Edition presented the Contemporary American Theater Festival earlier today.  The festival is in it's 20th year and it's location in West Virginia often presenting new works that actually draw noteworthy actors as well as "crowds" make it particularly special.

The story caught my attention because at the center of the story was the Festival's founding director and producing director and executive director and, well, you get the picture.  Anyway, I thought, well, here's one of those good stories (for moi) about how an organization will wrap everything it's doing around the founder (it has been 20 years).  I'm thinking "there's likely not much of a succession or sustainability plan in place and where's this guy's board?" 

But, just as these thoughts surface, there's actually mention of the Festival's board as well as the Festival's partner, Shepardstown University.  I imagine for the University this is a great collaboration where it's facilities get some great non-academic year use and brings in a bit of money.  Anyway, founding directors don't regularly mention their boards and their importance to the organization but Mr. Herendeen did as an "engaged" group.  Kudos to Mr. Herendeen!  This is at least a first ingredient to long term sustainability with or without Mr. Herendeen, maybe.

Of course, I don't know how really engaged the board is but who am I to doubt Mr. Herendeen.  I would also note however that the CATF board has 30 people including Mr. Herendeen (a title I neglected to mention).  So maybe not so perfect.  Indeed, there are lot's of opinion about how big a board should be.  For me, stage of development and how effectively the members are managed and utilized are two factors that help determine size.  Thirty is a lot of people but this number could work -- maybe. 

And then there's also the question of Mr. Herendeen serving as a board member.  I suppose that could work but I do have image about how the other 29 members respond when the founder does not agree.

Anyway, kudos again to Mr. Herendeen for at least acknowledging his board as a key contributor to the Festival's success. 

Nonprofit American Idol

I'm just not getting this "nonprofit American idol".  The sector is being deluged with these "friend raising, cash a chit and get people to vote for you, and.....win money!"  A charitable act of kindness for the sponsor?  Obviously not!

An associate sent me the latest from Chase Bank:  

We're asking you to help decide which 200 local charities share $5 million in donations from Chase. Start voting for your favorites on June 15 and show us what matters most to you - and your community. It's a new Way Forward for giving.

New way forward for giving?  I think not.  Quite the contrary this type of philanthropy does no one a service except of course the sponsor.  Sure, the winner gets some bucks but why?  Because they had a social media program in place.  And good for them!  But does anyone really vet the entrants?  And how informed are voters?  Likely as much as the gazillions of individuals who vote for the American Idol.  Good quality, outcomes focused, high standards philanthropy -- not in the least!

Chase and Pepsi and all you other "generous" game players -- GROW UP!  If you are going to be philanthropic -- take it seriously!    We are after all talking some serious money but will it really make a difference doled out this way?  Who will ever know?

Nonprofit Board Resignation

I don't regularly (if ever) see in writing the topic of board members resigning.  Of course I don't regularly see the topic of getting board members to resign very often.  I believe this would be an equally useful conversation that should be regularly discussed.

But, for the moment, Jan Masaoka at Blue Avocado has in this month's newsletter done a good job of framing the need for a nonprofit board member to leave and the advice is sage and a quick read to boot!  And, speaking of getting rid of board members, you will be rewarded at the end of this article.

To read Blue Avocado's latest article, go here.

Nonprofit Sustainability Strategy

Can the nonprofit sustainability strategy designed by Dan Gilbert of Cleveland (and owner of the Cleveland Cavaliers) for Bizdom U be replicated by other nonprofits (even those that have been around awhile)? 

The strategy is simple.  Obtain a gift of $10 million dollars who's interest income will go to offset a portion of the $1 million annual budget.  "Earn" the balance of budget needs by getting a stake in the earnings of profitable student's ventures.

According to the New York Times:

Investment returns on student companies will be funneled back into the program to finance subsequent classes. In return for its initial investment, Bizdom U takes possession of 66 percent of each concern, while the entrepreneur holds 33 percent. Once the entrepreneur pays back Bizdom U’s investment and interest, however, the percentages flip and the student assumes the 66 percent stake.

Clearly the model can only apply to nonprofits focused on entrepreneurship and economic development but there are a lot of these nonprofits around the country.

I do have to note that however clever the sustainability model and the program itself, there was no mention in the Times article about a board.  In many ways, Bizdom U appears to be an extension of Mr. Gilbert -- charitable albeit -- but not very "owned" by the community.  Perhaps another important part of the model would be to engage students as board members.

Nonprofits and Public Policy Advocacy

If you have not been out all day laying in the sun trying to change your skin tone, you may have heard that the indoor version may be just as if not more bad for you.  But as evidence demonstrates, just telling consumers about the ill-effects of a product, like thousands of nonprofits do throughout the country, is at minimum, not enough and at worse, not effective.  Take for instance, cigarettes, drugs, alcohol.

However, there is one method that appears to have a more effective impact: taxation.  Take for instance, cigarettes. I understand that steadily climbing state and federal taxes has reduced cigarette consumption.  And, toward this end, the IRS has recently begun levying an Excise Tax on indoor tanning services. 

I must say though, that indoor tanning as a "big threat" seems to have come a bit out of the blue.  Yes, there has always been some chatter about the sun and the ill-effects of too much, but tanning salons have been kind-of under the  radar.  So why now?  My understanding: some folks, at the legislative level, got "religion" and decided that all the reports meant something and someone had to help people not do harm to themselves.

There is a lesson for me and one I think nonprofit boards and staff should consider more deeply.  Public policy advocacy, looking for legislative solutions to problems, can be effective.  Yes, nonprofits must still do all the education and awareness work as well as the support work but if we really want folks to make a major life-changing consumer decision, taxes and regulation may be more effective. 

And this goes to boards and staff.  When thinking of strategies for having long-range affects on the people who are the focus of your mission, every nonprofit should make sure there's a public policy advocacy component.  As cigarettes, drugs, alcohol and now indoor tanning and maybe soda next, show us, sometimes a little, and maybe a lot of impact can be affected.

Nonprofit Board Chair

I firmly believe that the Chair of a nonprofit board can make or break the board (making it meaningful or meaningless).  The James Irvine Foundation (CA) has a quarterly e-newsletter and this month, they interviewed the Board Chair.  There were some helpful thoughts offered.

About being a Board Chair:

Part of my challenge as board chair is to make sure we have thoughtful, engaging conversations and to keep that going..... I want to make sure at every meeting that we're using it to maximum effect and that we do as good a job as possible. Ultimately, when our term is done we need to be able to look ourselves in the mirror and say we've contributed in a meaningful way.

About the role of the Board:

The role of a board member is to bring perspective – from whatever field in which that person is currently working or where they have experience – to bear on these discussions and to engage with the Foundation's staff. That's in addition, of course, to the fiduciary responsibility we have to make sure the monies are appropriately managed so that future generations can continue to benefit from Mr. Irvine's generosity.

Another role of a board member is to push staff to ask questions and to make sure that they're leveraging off the other talent on the staff. Nobody can be an expert in everything. Much of the success that we're going to have will come from engaging with a bunch of other smart colleagues inside and outside the Foundation who have expertise in different areas and learning from that. I think we do a better job of that now than we ever have.

Good stuff! Thanks Peter Taylor and Irvine!

Nonprofits Organized By Public Universities Create Shroud

Public Universities are, by name alone, supposed to be public.  Nothing should go on behind closed doors.  Nonprofits have however been providing cover for public officials (like Fuomo in Philadelphia) serving as a vehicle for passing money to themselves and others who may prove helpful.

It appears that this deviance in the public sector is not just for personal gain and not conducted singularly by publicly elected officials.  The California University System has enough related experience particularly in the form of public University auxiliary organizations that the State Legislators have created a law that will mandate transparency.

It's troublesome that this had to be mandated.  It's also troublesome that the Universities had to go to these extremes to "hide" sources of money which are presumably in the best interest of the students.  And, it's troublesome that nonprofits and the boards that oversee these institutions don't have higher standards for how their organizations should behave.  Transparency shouldn't need to be mandated by law.  Transparency should be a practice that builds positive relationships, loyalty and support.

To learn more about this new law, see the LA Times.

Nonprofit Rep uses Nonprofits To Support His Personal Agendas

Just like the recent and really unexpected sketch of Sarah Palin on the Utne Reader, or the lawyers who represent people with questionable businesses, there are people who represent nonprofits that are likely not popular among the left of center. 

One of these people: Richard Berman.  And Richard Berman is effective at looking out for the interests of his nonprofits which take positions very often against what might even seem as good causes.  So it shouldn't surprise anyone that Mr. Berman and his for-profit company are now under attack from the very folks he attacks.  And the approach of the attack: that there's not much difference between Mr. Berman, his company and the nonprofits he claims to represent and from who he is paid.

Mr. Berman has a established a few nonprofits, with their own boards, that advocate mostly against other nonprofit positions -- like getting soda out of schools or humane treatment for farm animals.  These nonprofits however may not be even arms-length from Mr. Berman's for profit corporation.  That of course is not technically acceptable but to date, the case against him not that strong and the IRS is not saying there's anything particularly wrong.

So, what to say?  Mr. Berman certainly has the right to represent whomsoever he chooses and the "nonprofits" he represents have the same option.  Is there a wrong doing here?  Is Mr. Berman just using nonprofits to make a profit in addition to tooting his own horn about issues I assume he cares about?

It's pretty much unclear and maybe Mr. Berman has some cleaning up to do with these nonprofits he appears to have created to achieve his own goals.  However, and this from a vegetarian -- nonprofits should first and foremost be equally effective in getting the public to understand their platform.  Strength does not just come from being right but by making sure that what "right" is so clear, the public won't accept the alternative and pave the ways for Mr. Bermans to represent their own aenda and use the nonprofit structure as a vehicle for railing against good principles.