Nonprofit Board Crisis

Nonprofit Social Enterprise

Giving perhaps new meaning to the term "social enterprise", a nonprofit in DC has spent more than $300,000 in city grant money to rehab and operate a nightclub with nude dancers instead of a center to provide job skills for persons with HIV/AIDS. The exec is a "former drug kingpin" according to the Washington Post.

The city believes that the club's profits are being directed to the nonprofit's founder.  But, it's not impossible to believe that the nonprofit's board saw an opportunity to offset the dependency on difficult to sustain philanthropic sources to support the training center.  This of course raises two different questions.  First, the board would not have spent the grant exactly as was initially intended (an illegal act) and perhaps getting a waiver for its plan rather than trying to ask permission after-the-fact, would have been more productive.  Second, there is the question about whether earnings from ownership of a nude dancer club is considered "tainted" money.  Interestingly, the club not only generates income, it provides jobs.......

PS, you can check-out the organization's web site to learn about the organization.

Nonprofit Boards Know Something May Not Be Right When..

Really bad governance is when board members read about how questionably bad their nonprofit is in an investigative article in the nonprofit press.

Should they care or be governing at all, this should be the experience quite a few 9/11 charities are having following an AP article on the topic and a follow-up article in the Wall Street Journal identifying two state Attorney Generals who are themselves following-up on the AP article.  Public official scrutiny is one of my 7 signs a nonprofit board might know something may not be right.  You can review my article here.

But really boards, you didn't have a clue?  Tsk, tsk, tsk.  You didn't have a clue because you weren't being fiduciarily responsible and in the couple of cases cited in these articles, you basically turned the nonprofit over to the execs/founders.  Shame on you and on any board member of any nonprofit who behaves similarly.  Remember, someone might take note.

Nonprofit Governance: How many is too many

A board development planning session I recently facilitated and a review of who's on the board of the Solar Electric Light Fund has me asking a kind-of Sodom & Gomora question I've yet to resolve: how many nonprofit boards can one individual serve on EFFECTIVELY? On the SELF board, members, many with pretty impressive credentials, serve at minimum on 2 boards. I certainly understand having board members who are well-networked although service on even two boards gives me pause -- what about competing demands? But a nonprofit's ability to reach a number of those who would be supporters necessitates having the types of folk SELF has recruited. But, back to Sodom & Gomora and effective. What is the loss of return-on-investment for the individual in service? Is an individual able to fulfill all of their governing responsibilities when serving on two boards; three boards; four boards? You get the picture, but what is the answer?

Nonprofit Board: What's It Thinking?

The Wall Street Journal has reported that the Soundview Health Center is "accusing the Cuomo administration of cruel, needless guillotine action," in a suit to stop the state from cutting off its Medicaid funding.

You may recall that just a few days ago I blogged on this situation asking what exactly the board thought it was doing given that it had chosen to keep its exec who is being indicted for embezzling more than $500,000 from the nonprofit.

It appears from this move that the board thinks no wrong has been done and business should just go on as usual. I'm thinking the evidence suggests otherwise and while maybe asleep or at least passive 'till now, the smart board, should it seriously care about preserving jobs and continuing service, might want to suspend its exec (suspicion is merit for this action) or begin looking for another health center to take over.

Nonprofit Board Chair Tenure

Some folks think that one year is just about long enough to be in the position of board chair (the volunteer leadership position).  One year is particularly appropriate if it comes at the end of 2, three-year terms of board service and, that individual has steadily moved up the rank of committee and officer positions.  But others feel that the term should be at least two years to ensure that the individual in the position has the opportunity to "make a mark" assuming of course that no mark had been made prior to role as chair. 

Of course there are the boards where no one really wants the position and the current chair, in the position for multiple years, is doing a fine job and should just continue until they drop or move away.  So much for succession planning.

As for me, I have generally been a proponent of 1-year chair terms but am seeing the light towards 2 years.  I tend to agree that a 2-year term does better accomodate getting an agenda done but: 1) this means that same person has less time to prepare themselves for the office (assuming folks do prepare themselves for the office); 2) someone will likely not have a shot at being chair; and, 3) succession planning becomes more important.

What's your thought?

Nonprofit Conflict of Interest

The Federal Reserve is a quasi-public tax-exempt organization. From what I can tell, governance of a Fed Reserve Bank is generally held to the same standards of every nonprofit. And, this is what makes the 8/23/2011 Huffington Post reported story about Kathryn Wylde, deptuy chair of the New York Fed's board, and the topic of conflict of interest of interest to me.

According to the Post, Kathryn Wylde has challenged state Attorney General Eric Schneiderman's opposition to a proposed $8.5 billion settlement between Bank of America and a group of investors -- leaping to the defense of the financial industry -- according to remarks quoted Monday in The New York Times. So what you might ask? Well, Ms. Wylde's day job is president and chief executive of the Partnership for New York City, "a nonprofit that is funded by dues from its partner companies, which include the very banks involved in the talks to settle claims over hundreds of billions of dollars in soured home loans."

I believe that what we have here is an excellent example of what it can mean to have a conflict of interst. Only thing is: Ms. Wylde doesn't agree. Me, I'm less complicated. I believe that not having a conflict of interest means removing the hat you are wearing when entering the room or keeping your hat on and leaving the room.

Nonprofit Board Strategic?

In the beginning of the summer the Washington (DC) Food Bank announced that it would begin charging its customers (local food pantrys) for fresh produce. Given the times, this would clearly be a new challenge for many. Today, a billionaire announced a gift of $1 million to eliminate this new charge, retroactively. Hooray for the billionaire and more importantly, hooray for those who might have gone without fresh produce. But just how strategic was this board? We learn from the Washington Post article that the same donor had, in November, committed $5 million to the Food Bank's new $37 million building. Did the Food Bank board calculate that the announcement to charge pantrys would move some donors as it did (well, at least one but that's all it needed)? Of course this would be a risk, a calculated risk, particularly given how much money it had to raise for a building. Congratulations to the Board if this was indeed its strategy which paid off!

ForProfit for Nonprofits

Nonprofits fill the void between the market-driven for-profits and the offerings of the public sector.  But nonprofits, for-profits and the public sector are not islands in the stream functioning totally independently.  The public sector, at least in the past, has found the offerings of the nonprofit sector can better help fulfill the needs and demands of the public.  Nonprofits serve for-profit employees and also provide "added-value" benefits to for-profits.  And of course, for-profits provide goods and services that support the work of nonprofits.  And when a for-profit is created to benefit consumers and nonprofits simultaneously or finds a way to benefit from providing a service to nonprofits - that's capitalism at its best as is demonstrated by the new web site/service Shiftmygift.com.  See what you think.

Nonprofit Run Like A Business

Mr. Starr, (no, not Ringo) is another one of those "I've made my millions on Wall Street so now it's time to do some good" people who has started a school in Somalia that basically seeks to provide everything a school should have to ensure that the students are successful. Hooray for you Mr. Starr!

However, what gave me pause from this Christian Science Monitor article was the following: ..."what makes this school different is that it is run like a business with the Somali people as both shareholders and customers. And it’s in this respect that the former financial executive has most pointedly parted ways with convention, bringing a level of accountability to aid work that its critics have long found lacking."

Really....businesses are accountable and nonprofit aid organizations are not? I have a different impression, of course, beginning by recognizing that nonprofit boards have, for the most part, proven the ability to provide way more accountability than for-profit or public sector boards. Agreeably there have been lapses but if "being business like" is all about accountability, then I would encourage nonprofits to turn to government for a role model before turning to business for how to do it "right" while I think we know what that's generally like.

When exactly are we going to stop calling that which works "business-like" and start looking at the governance and management practices that truly produce results and call these practices "effective models" recognizing that each of the sectors has the places where they generally fail and the places where they generally succeed? And, while we are on the subject, Mr. Starr never refers to his school's governance, at least in this article. While Mr. Starr does brag about being a customer-driven school, an excellent principle I whole-heartedly commit to, like the typical entrepreneur, Mr. Starr doesn't really value a consumer or community guided and supported organization -- what I believe to be one of the best features of a nonprofit.

 

Nonprofit Board Exercises Duty of Care

I believe that one of the most difficult duty-of-care decisions a nonprofit board can make is to close a program - especially a program that involves sending current customers and future customers away; laying off lots of employees; disposing of assets that may even have some historical significance; and finally, risking damage to the brand. But this is the reality for Bialystoker Center & Bikur Cholim Inc. in New York. Thanks to the economy, the Center is closing its high-rise 1930's nursing home. It hopes to find a buyer for the building which will likely put some money back into its pocket to continue to pursue mission-related activities. What is difficult to assess from the Washington Post article about this planned closing is exactly what other mission activities the Center has. I assume there are and this closing will better enable these activities because duty of care may on include ensuring assets are used to pursue mission and risks that affect these pursuits are reduced and a closing appears to accomplish these responsibilities but what if this exercise is just about a board and management being really tired after so many years? Is the board still exercising the duty of care?