Nonprofit Board Crisis

Nonprofit Board Too Big To lose?

I noted last week about all the hoopla going on at the Minnesota Orchestra following the CEO's resignation (following all kinds of labor issues).

This week we note that 8 board members resigned saying the wrong message had been given not supporting the now resigned CEO.  Now, assuming all seats were filled, there remains only 69 board members.  Yes, you read it correctly (and can double check looking at the Chronicle of Philanthropy news item).

I am reminded of the old song: Will You Miss Me When I'm Gone?  Uh, 8 from 77?  Whew!  Do they all have something to offer?  Imagine the board meetings assuming all show.

Nonprofit Governance Matters

What's the difference between the AARP and a few 'smaller' associations committed to the well-being of the over '50 U.S. citizen?  It probably goes without saying that AARP is a really big fish with 37.8 million "members" and lots of branded services and lots of cash in the bank and a really big lobbying voice.  The other groups -- not so big with maybe the biggest (according to the Wall Street Journal) weighing in at 1 million plus "members", not so many products and a quieter voice.

As I'm reading this story that should serve as a reminder to all nonprofits, particularly those with "donor" members: there's always other non and for-profits that would like a piece of your pie.  From this story I also began to consider one other question -- membership and the correlation to governance.  I want to ask: is AARP and their competition truly governed by their members?

One line in the article refers to a competitor claiming that the AARP is 'just lining their pockets' which I don't believe nor do I recognize, with some exceptions that I have written about, that nonprofits, even those that are as large as AARP, are really focused on or have the ability to 'line' the board members (that's the 'owners') pockets.  But I do question whether indeed the AARP and their competitors are truly governed by the members.  The AARP has been actively defending the Affordable Care Act -- was this indeed a board policy decision and did that decision reflect the 'will' of the members?  Is not reflecting the will of the members the role of the governing body of a membership organization?  

So...is being really big enough?

 

Nonprofit Governance Matters

There's a bit of controversy brewing over the newly selected head of the newly established Washington Redskins Foundation.  It turns out that the new head has a history that is less than perfect and this reality is providing additional fodder to those who have issues with the Redskins' owner creating a foundation to benefit Native Americans which is effectively serving as a 'cover' to not addressing the name of the team among other related issues.

And all this may be but equally important this situation helps support one additional detail that appears to have gone undetected: the failure to give attention (or at least it appears) to the governance of the foundation.  Of course this is a corporate foundation and all the governing team are likely close to the Team owner so purely objective governance is not expected.  Just the same, fiduciary is fiduciary and selection of the CEO is one of the three most important tasks to be undertaken by the board (in addition to ensuring financial soundness and pursuit of mission).

So, with all this controversy, do we believe that the foundation board failed to do its due dilligence in selecting its first exec?  And if it failed with this task, what about ensuring financial soundness and pursuit of mission (or for that matter, engagement in even developing mission).  How worried should we be, should we choose to care, that another nonprofit is limping or progressing along without accountable governance?

Nonprofit Values

While I am saddened by the reality of this story, I must lift-up the consistency with values that such action represents acknowledging that when a nonprofit holds-up a set of values and fails to be true to them, bad consequences can occur.  The big question: what happens when a nonprofit wants to change or modify its values (presumably having gone through some process with a change as the result)?

The story.  This past Monday World Vision (the humungous evangelical faith-based international aid organization whose print and video ads you have likely seen) announced that "it would allow its U.S. offices to employ Christians in same-sex marriages."  But a firestorm among its faithful evangelical supporters erupted as a result of this announcement and yesterday, World Vision announced that 

said the shift announced Monday had been “a mistake” that caused distress “for many friends who saw this policy change as a strong reversal of World Vision’s commitment to biblical authority.” The charity’s supporters “helped us to see that with more clarity,” he said.

The response to Monday’s announcement in the evangelical community was swift and largely negative. Assemblies of God leaders urged members to consider ending financial support for World Vision, and a charity employee told Al Jazeera it lost some 60 church partners and 2,000 sponsors over the two days.

Hm....So, could it be that World Vision did not study the policy before making a change?  It seems unlikely to me that World Vision did not study the issue before making a change.

Could it be that World Vision did not believe its was time to make a change?  If yes, then why make the change?

Could it be that World Vision values money over, uh, its heartfelt beliefs and values?

And imagine, this all sounds strangely like the Boy Scouts experience.  Are the same constituents at their table?

Your thoughts welcome. 

Nonprofit Sole Proprietorship Governance

Today must be my animal welfare day as I must also comment on a case in Philadelphia where the Philadelphia SPCA "raided" a cat rescue project and confiscated the majority of the cats.

From the Philadelphia Inquirer article on this story, it would appear that the "cat lady" was doing a fine job of giving stray cats a home.  The woman was filing as a nonprofit and maintained a website that told her story.  But the home was not sanitary, at least from the outside. Hence, the raid.

This seemingly sole proprietorship of a nonprofit was pursuing mission.  But, clearly, a one-person nonprofit has its limits, or does it?  Would a nonprofit with this mission, governed by a larger-than-one group of individuals clear about the way such a venture should be managed have been raided?  We know that many nonprofit boards come together at the behest of an individual with a mission and so, "look" very much like the invitor.  But when folks work together, we also recognize that the collective can bring order and order is maybe what the cat rescue project lacked the most.  The conclusion, sole proprietor governance does not make great governance -- true?

Nonprofit Board Duty of Obedience

When the "law" says to a nonprofit board: "you can't do that" but the nonprofit board says "but we must, it's central to our core values and mission" I propose that the board's response is part and parcel of its duty of obedience -- the requirement that the organization pursue mission as well as ensure that donative money is used consistently with donor's interest.

When the Planned Parenthood board in, let's say, Kansas, initiates law suits to claim their right and obligation to support laws that protect abortion rights, that board is fulfilling its duty of obedience.  And, yes, Planned Parenthood has been stripped of its family planning money and wants that back BUT it was stripped, it believes, for pursuing mission in standing up for abortion rights.  

Clearly, while not frequently discussed, the duty of obedience can be complicated and its pursuit can in the short-run jeopardize the financial security of a nonprofit.  And, the board must be strategic calculating which loss most threatens the pursuit of mission -- loss of funding or loss of the outcome.  I would offer that the Planned Parenthood board has the conversations and as the suits attest, has come out on the side that public policy cannot be permitted to exist if it tears at the organization's central values.

Legal and financial matters aside, board members' discussing the introduction of programs that look like "mission drift" are another duty of obedience discussion.  I would welcome hearing if and on what topic your board had a duty of obedience-related challenge.

To read more about what's going on with Planned Parenthood in Kansas, read here.

Nonprofit Checks, Ballances and Accountability

Apparently, for some nonprofits, what is practical is not necessarily desireable or achievable.  Take for instance the adoption of checks, balances and accountability.

Case in point: Mr. Shroek (I didn't make up this name), over a ten-year period, managed to steal $1.77 million from the Roman Catholic Society for the Propagation of the Faith.  Mr. Shroek was Chief Financial Officer and his final year of theft was also his final year.  This story rises to my attention because it was announced that an agreement was reached with Mrs. Shroek, the widow, that she will repay the Society, $1 million.

Two incredible facts were introduced in the Wall Street Journal story.  The first incredible fact: Mrs. Shroek knew nothing about her husband's extracuricular activity.  I mean, almost $2 million enters the household and Mrs. Shroek knew nothing.  You know, like Carmella Soprano knew nothing about Tony's activities.  

Ah, but more incredible to me, is that now, almost two years after the identification of the problem: "the The Society for the Propagation of the Faith and its umbrella organization, the Pontifical Mission Societies, have agreed to an overhaul of accounting practices, according to the attorney general's office. The new policies include installing security cameras in the mailroom of the organization's New York office, according to the attorney general's office and the charity."

WHAT you say.  This charity needed an attorney general to get them to change their accounting practices?  While I might have thought that at the very minimum either their auditors or insurers or common sense would have prevailed to change practices, two years later and these haven't been changed?  

Simply incredible.  On second thought, with the Vatican as its role model, this should come as no surprise.

Nonprofit Board Sustainability Strategy

Perhaps your first thought in reading the title of today's blog is what's the connection between board and sustainability strategy?  Simple answer: everything.  While a nonprofit's staff clearly brings the technical expertise (research and know-how) to understanding the funding market, I would offer that the long range directional decisions about what and how a nonprofit should depend on to finance its work is one of the fiduciary responsibilities of the board (duty of care).

That said, I must first admit my surprise when learning that a Chicago are home for persons with disabilities, facing significant financial threats, has, for many years, "earned" $150,000 a year from a weekly bingo game.  The bad news: "The spread of casinos that compete with bingo, the decline of the economy and a lack of recent large bequests have forced operators to dip into reserves. In January, there was $53,000 left to run the house.  (The CEO) said he thinks there is enough to keep the house open through August, but they are still in need of a more permanent fix."  Now the nonprofit must go back to the drawing board.

Circle back to the beginning of today's entry and I must ask: where has the board been?  Casinos don't grow-up overnight.  What was the board thinking would happen when competition entered their backyard?  Bottom line: the board missed a beat in its duty of care.  It failed to take the long-range view and today must now struggle with both immediate and long range sustainability challenges.  The CEO is correct, a permanent fix is needed but permanent fixes tend not to be achieved in the short term.  

Meanwhile, this is an important lesson for nonprofit boards without long range sustainability strategies.

Here's a link to the article.  

Nonprofit Leadership and Not

The following New York Times article is a good example of what I think nonprofit leadership can (the now retired Chancellor) and not (the Board of Regents).  While the University is not precisely a nonprofit nor a Board of Regents precisely a board of directors, I believe the principles apply just the same.

Here's the article.

Nonprofit Board Replaced in Toto

When a whole board is "dismissed" and replaced, there is much to be cited about how bad of an oversight has been given.  So goes the reality for the board of the Portland Hotel Society located in Vancouver, BC.

It appears from the Vancouver Sun article that lack of oversight is an understatement when hundreds of thousands of questionable expenses are identified by auditors (thank you bean counters).  By the way, the Portland Hotel Society serves the homeless and the diversion of funds is significantly felt among those who already begin with limited resources.  Tsk, tsk, tsk.  One would think everyone involved knew better.