Nonprofit Board Crisis

Nonprofit Board Members Can't Get Along #NonprofitBoard

As the following Daily Herald article states, the Palatine Township board believes it needs a referee to get business done.  Whew!  The problem, as diagnosed by the group, is that the group isn't using "formal" meeting practices.  I would offer that the absence of more formal (aka "Roberts Rules") can indeed lead to challenges BUT a) Roberts Rules aren't the only guidelines/processes for managing a business meeting and b) in my experience, there are other issues that extend beyond adopting and using meeting management practices.  

Now admittedly the group in question are likely elected folks and most nonprofit boards are not comprised of elected folks.  However, all the folks do have one thing in common: they care about the work of the organization (town in this case).  I would pose that this group may have gotten off on the wrong foot by not spending their first gathering time building relationships.  There is solid evidence that relationships matter when it comes to getting transactions done and from what is described in this article, there's been little work on relationship building.  

So, one piece of advice, go back to start and work on relationships and include some other basics from relationship and team building disciplines.  On-boarding is a good opportunity for developing the relationships and identifying the common ground between members of a decision-making body.  But such work can't stop there.  

And let's thank the Palatine Township board for at least recognizing that work isn't getting done.  But let's hope they come to realize that parlimentary procedures may provide discipline but it does not solve the deeper problems.

 

 

Palatine Township wants expert to referee board meetings

• Bob Susnjara

Palatine Township plans to hire a referee of sorts in an effort to prevent friction between board members and have meetings run smoothly.

The five-member township board wants a parliamentarian to oversee its meetings. Parliamentarians are experts on meeting rules and enforce decorum, such as having only one speaker at a time and keeping personal confrontations at bay.Board members deferred voting on the parliamentarian at a meeting Monday night due to incomplete documents related to the proposal. The board agreed to start seeking someone for the post -- at a cost not to exceed $50 for each regular and nonvoting committee meeting -- before formal consideration next month.

 

Palatine Township Trustee Susan Kern said she expects the parliamentarian will prevent what she considers to be personal attacks that have occurred at some board meetings this year. Minutes from an Oct. 23 meeting show Supervisor Sharon Langlotz-Johnson stated she apologized in a telephone call to Trustee Andy-John Kalkounos for remarks she made to him at a September session.

"I am hopeful -- I think we are all hopeful -- this will solve the problem," Kern said.

Langlotz-Johnson said the outside assistance should provide more structure for meetings and improve how they function.

"We have in the past been in a more casual, friendly atmosphere," Langlotz-Johnson said after Monday's session. "We needed to be more organized ... to be sure people weren't talking over each other, weren't bringing up other subjects. We wanted to stick to the agenda."

While uncommon at suburban governments, parliamentarians are common in larger legislative bodies, such as the U.S. House of Representatives, and are known to help smaller boards, too, said Cyndy Launchbaugh, executive director of the National Association of Parliamentarians.

She said the assistance of a parliamentarian often leads to faster meetings, and the position is used by boards for local governments, churches and nonprofit agencies.

"It's real easy for a meeting to get out of hand," Launchbaugh said Tuesday. "What does that mean? Maybe it's one person who dominates or there is no order, where people are talking over each other."

Palatine Township's proposed resolution says someone should be hired "with the requisite expertise and experience to serve as parliamentarian." Launchbaugh said her organization trains and certifies parliamentarians.

In addition to being masters of the commonly used Robert's Rules of Order and other methods to ensure well-run meetings, a parliamentarian is expected to make sure board members keep their comments on a current issue and prevent crosstalk.

Palatine Township Trustee Bill Pohlman said he'll welcome the outside help.

"The problem is, we really weren't following Robert's Rules, because we've had a very casual atmosphere," he said.

Nonprofit Junior Board #NonprofitBoards

From the Chronicle of Philanthropy - an idea for recruiting younger folks who are not generally in the pipeline for joining your board.  The group in the video called this group a Junior Board - no fiduciary duties, "god parents" previously board members, and activities that focus on networking, fund raising and relationships - with each other and the nonprofit.  Another group is being formed to create a more direct path to the board of directors being individually partnered with board members, serving on committees and basically being prepped and also raising money.  Here's a link to the Chronicle story: 

https://www.philanthropy.com/resources/video/video-how-a-junior-board-can/6479/?cid=pt&utm_source=pt&utm_medium=en&elqTrackId=0b1ad363f6e74c0a854468b2c26b9b2f&elq=732d541d1e0e4b41b8c9784ae8a35071&elqaid=16867&elqat=1&elqCampaignId=7310

Nonprofit Board Strategic and Generative Duties #NonprofitBoards

Being fully informed is an essential element to nonprofit board members being effective for their strategic and generative duties (how else can anyone have a complete conversation I might ask).

Toward this end the following might provide some helpful intelligence to sustainability conversations (which can both strategic and generative).

Happy #GivingTuesday! With a third of all annual giving taking place in December and the U.S. ranking No. 5 overall in the 2017 World Giving Index, the personal-finance website WalletHub today released its report on 2017’s Most Charitable States, along with its Charity Calculator to help donors decide whether to give time or money for maximum philanthropic impact.

To determine where the most generous Americans are inspiring others to be more selfless, WalletHub compared the 50 states based on 14 key indicators of charitable behavior. The data set ranges from volunteer rate to share of income donated to share of sheltered homeless.
 

Most Charitable States
1	Utah		11	Connecticut
2	Maryland		12	Kansas
3	Minnesota		13	New Hampshire
4	Wyoming		14	Oregon
5	Wisconsin		15	New York
6	Washington		16	Ohio
7	Virginia		17	North Dakota
8	South Dakota		18	Missouri
9	Georgia		19	South Carolina
10	Oklahoma		20	Nebraska

 
Key Stats

• Vermont has the most charities per capita, 27.14, which is 4.6 times more than in Nevada, the state with the fewest at 5.95.
   
• Utah has the highest volunteer rate, 39.29 percent, which is 2.1 times higher than in Florida, the state with the lowest at 18.31 percent.
   
• Utah has the most volunteer hours per capita, 75.6, which is 3.7 times more than in Kentucky, the state with the fewest at 20.7.
   
• Utah has the highest share of aggregate income donated to charity, 3.17 percent, which is 4.2 times higher than in West Virginia, the state with the lowest at 0.75 percent.
   
• Utah has the highest share of the population who claim to have donated time, 56 percent, which is 1.9 times higher than in Kentucky, the state with the lowest at 30 percent.
   
• Maryland has the highest share of taxpayers who donated money to charity, 38.48 percent, which is 3.1 times higher than in West Virginia, the state with the lowest at 12.26 percent.

 
To view the full report and your state’s rank, please visit: 
https://wallethub.com/edu/most-and-least-charitable-states/8555/

Nonprofit Board Advocacy Item #2 #NonprofitBoards

It's Tuesday and the political powers that are are busily working on a tax reform bill that also includes non-tax items and one in particular may be of special interest to nonprofits and churches.  This item merits immediate discussion and action by nonprofit boards.  The item I am referring to is the role of nonprofits and churches in politics and more importantly, the ability of these institutions to endorse and financially support political candidates.  At stake is not just the "ok" to engage but also the "ok" to use donor's money to endorse - donor's money that would have otherwise been used to deliver services to meet the needs of constituents, consumers, congregants and the like.  One must also be reminded that these institutions are accorded tax statuses that are different than those accorded political organizations.  Finally, one must be reminded that nonprofits boards are only surrogate "owners" of their entities working on behalf of the public's interests and thus receiving their tax exemption statuses.    Again, this is a conversation for every board of every church and nonprofit.  All are affected as is the public.

To learn more about this particular proposal, simply go on-line or open-up a newspaper.

 

Nonprofit Board Advocacy Item: Charitable Deductions #NonprofitBoards

MAYBE the Congress and Senate will reach a new tax agreement in the next couple of weeks - anything is possible.  Within this agreement is a proposal to cut charitable deductions.  I am hoping that what goes on at the local, state and federal levels to affect your nonprofit's ability to pursue mission generally merits a conversation and subsequent action by your board.  Depending on the outcome of the conversation, action can include board members reaching-out to their representatives and letting them know how their action can affect your nonprofit's work and consumers (beneficiaries).  I am also thinking that the charitable deduction is one of these items.

What follows is a Wall Street Journal piece on the topic of the proposed elimination of the charitable deduction.  It's a good conversation starter for your board - perhaps one of the last meetings of the year likely dedicated to some holiday theme and good cheer but hopefully leaving enough time to take care of business - like discussing the charitable deduction and depending on the outcome, discussing what actions each member will take.  Such is the responsibility of a board.

Here's the piece.

 

 

Individual donations to charities grew 4% in both 2015 and 2016. That rate will swamp any tax effects.

 

 

 

Suzanne Garment and

 

Leslie Lenkowsky

Nov. 20, 2017 7:08 p.m. ET

 

 

A familiar and largely correct narrative holds that tax reform always fails because corporate special interests fight to protect the advantages their lobbyists have written into existing law. Now organizations representing the nation’s charities are getting into the act, lobbying Congress to preserve a tax structure that they say maximizes charitable giving.

From the left-leaning National Committee for Responsive Philanthropy to the more conservative Alliance for Charitable Reform, the charitable world’s main concern is the House bill’s proposal to double the standard deduction to as much as $24,400 per married couple. Today around 30% of taxpayers choose to itemize their deductions instead of taking the standard deduction. Charities reasonably suspect that these Americans would donate less if they could no longer benefit from itemization. Doubling the standard deduction could drive the percentage of taxpayers who itemize down to below 10%.

The Joint Committee on Taxation estimates that doubling the standard deduction could reduce the amount of deductible charitable contributions by nearly $100 billion, from $241 billion to $146 billion. But a drop in the amount of deductible gifts does not necessarily mean an equivalent drop in actual giving.

 

No one can predict with certainty how new non-itemizers might adjust their expenditures if the House bill as currently constructed passes the Senate and is signed into law. But in 2016 researchers from the Lilly Family School of Philanthropy at Indiana University, with which we are affiliated, analyzed several decades of data on the responses to past tax-law changes resembling those in the House bill. Under their worst-case scenario, including an increase in the standard deduction and a cut in the highest tax rate, the analysts predicted a decline in noncorporate donations of $13.1 billion, or 4.6% of 2015 donations. Under more optimistic assumptions, the predicted reduction was less than 2%. A recent Tax Policy Center estimate of the drop in giving was slightly larger, between 4% and 6.5%.

Any net loss of contributions would probably hurt the valuable work that charities do but, recessions aside, Americans have steadily increased their giving despite numerous tax law changes. Individual donations increased by 4% in 2015 and another 4% in 2016. If donations continue to increase at such rates, it won’t take long to make up for changes brought about by tax reform.

Nonetheless, the charity lobby is pushing hard for a “universal charitable deduction” allowing all taxpayers, itemizers and non-itemizers, to deduct contributions to charities. Independent Sector, which represents nonprofits and foundations, says such a deduction would raise nearly as much in new gifts as the House bill would take away.

But the universal deduction idea has problems. For one thing, it would reduce federal revenue by an estimated $13 billion and burden an already overloaded Internal Revenue Service bureaucracy with a greater number of returns requiring audits. More important, a universal charitable deduction would violate the widely acknowledged principle that reform should create a simpler, more neutral tax system.

Charities imagine themselves nobler than other interest groups because they look out for people. But offering tax breaks to sectors of society with worthy aims is a dangerous political game. Why shouldn’t mortgage brokers, for instance, get a tax break? They help people buy homes, and homeownership is a cornerstone of American social and economic mobility.

When the standard deduction was first proposed during World War II to ease the process of tax collection, churches and other charities formed the Council on Taxes and Philanthropy to advocate maintaining or even extending the charitable deduction system then in place. According to tax historian Joseph J. Thorndike, one clergyman warned in 1944 that the standard deduction would restrict “personal freedom” and be a step toward “fascism.” That hasn’t happened. Americans have continued to give to charities no matter what benefits the tax code conveys on them for doing so.

By calling for an additional deduction for giving, charitable organizations are essentially arguing that taxpayer funds should go to them instead of to the government. The nonprofit and philanthropic world may end up doing a lot of good with those extra funds, but the Americans they aim to help would almost certainly be happier with an expanded deduction. Especially if it means they get to hang on to more of their hard-earned money next year than they did this year.

Ms. Garment is a tax lawyer and a visiting scholar at Indiana University, where Mr. Lenkowsky is a professor emeritus of public affairs and philanthropy.

 

 

Nonprofit Board Curiosity #NonprofitBoardsCuriosity

I found the following Linked-In piece helpful in its message to those who would be or are nonprofit board members.  Essentially the missive is that board members can permit their curiosity to guide them as they seek to be high performing.  The author encourages member to be curious in particular about 5 matters: impact, context, money, people and, the board.  Curiosity should lead folks to active engagement and obviously, questions that can inform them and support their fiduciary, strategic and generative discussion, decision-making and action.  I think the author's framing helpful.

Be Curious: How to Be A Successful Nonprofit Board Director

• Published on Published on November 21, 2017

 

 

A CEO of a large nonprofit asked: “Can B3 match our nonprofit board with business people who don’t come in thinking that nonprofits are inefficient"?

This is a question that many nonprofit CEOs ask us. Some nonprofit board directors apparently believe their business experiences alone can "fix a nonprofit’s inefficiencies”.

Why? This stems from the erroneous notion that businesses are more efficient than nonprofits. The Stanford Social Innovation Review article “How to Succeed on a Nonprofit Board” explains the stereotypical belief that businesses focus on being efficient to achieve shareholder value. But because nonprofits focus on social value --- which is hard to measure --- they don’t have to focus on being efficient.

Thus, many business people feel overqualified for their nonprofit board roles. They become less engaged in a nonprofit’s mission. They lack curiosity about what they can actually do to help a nonprofit achieve more impact. In other words, they “might assume they don’t need to give their full attention to do a good job”.

This lack of curiosity is fatal to becoming a successful nonprofit director. Why? Because nonprofits are often more complex to operate than businesses. Unlike for-profit business organizations, nonprofits do more with less resources. They have amorphous goals that are difficult to measure. They get things done through consensus building. (I discuss this in my blog “Three Pointers to Remember When Serving on Nonprofit Boards”).

Thus, all nonprofit board directors need to be fully engaged and curious. They need to bring the whole range of expertise, experiences and networks they have to the nonprofits they serve.

The Stanford article outlines five ways on how board directors can be curious: 

• Curious about impact - Is our nonprofit making a difference to solve a problem in the community? How can the nonprofit increase its social impact?
• Curious about context - How does our nonprofit compare to competing nonprofits? What is our nonprofit’s unique value proposition that would make our beneficiaries choose us instead?
• Curious about money - Where does our nonprofit funding come from and where does it go each year? Why do donors and grantors give money to our nonprofit?
• Curious about people - Who are our nonprofit’s stakeholders? How can we best address their needs, hopes and aspirations?
• Curious about the board - What diverse perspectives are present in the board? Does our board have all the perspectives of the beneficiaries we serve?

Serving on a nonprofit board is a meaningful journey. To get the most of out of this journey, board directors must always be curious.

As governance expert Alice Korngold advises:

“Although businesspeople have valuable talents to offer, they are entering a new realm, with its own culture, language, and challenges, when they volunteer on a nonprofit board. [They] need to approach this new role with openness and humility, be prepared to learn, and then figure out how to use their business skills to advance the organization.”

 

Josephine Victoria Yam, J.D., LLM. is the CEO & Co-Founder of B3 Canada. She is a lawyer-entrepreneur who graduated from Stanford University's Executive Program for Non-Profit Leaders. The B3 “Leaders on Board” e-Learning Program is a nonprofit board governance course for business people. Get your coupon here and start your journey!

Nonprofit Board Blanks on Embezzlement #NonprofitBoardsEmbezzlement

Embezzlement is not a laughing matter but the financial accountability failures in the following story about this Tennessee Hospital  are so crazy, the story does make me want to laugh.  The failures are just so simple and yet....  Do take a look for understanding why checks and balances and annual audits are just part of what should be financial management basics.  Also, consider why or how this hospital board still gets to keep their seats.

Blount County officials grill hospital over nonprofit embezzlement

 

Several Blount County officials are wondering how a Blount Memorial Hospital employee was allowed to embezzle over $186,000 from the hospital’s nonprofit organization during a nine-year period, why no charges were pursued and why they were left completely in the dark.

During a Blount County Audit Committee meeting Thursday evening — one that lasted more than an hour — committee members grilled the hospital’s auditor and hospital CEO Don Heinemann for more information on exactly what went wrong.

One of the biggest questions entailed who was actually told about the theft. The hospital had to report the theft to the Tennessee Comptroller of the Treasury and Blount County District Attorney General Mike Flynn.

Mayor in Dark

Committee member Ron French asked Blount County Mayor Ed Mitchell if he was made aware.

“I was not,” Mitchell said.

Mitchell also penned a letter to the hospital and its board members, dated Nov. 13, expressing his concern over how the hospital’s leadership handled the matter. In that letter, Mitchell made it clear the county government “has no role whatsoever” in the day-to-day activities at the hospital.

“It is vitally important that all matters related to government have complete and full transparency,” Mitchell said in the letter. “The hospital did not meet this standard in this embezzlement.”

Mitchell also went on to comment about his office being kept in the dark.

“The failure of the hospital leadership to give us the common courtesy of notifying us that this was taking place is absolutely unacceptable,” Mitchell wrote. “It has now called into question the confidence and trust that Blount County government has worked very had to cultivate. This also is unacceptable. This situation has tested our faith and confidence in the leadership of the hospital.”

Heinemann, who was also at the meeting, said he regretted not informing Mitchell.

“I was shocked by what we found,” Heinemann said. “I wish I could Monday-morning quarterback myself. I should have contacted the mayor and I didn’t.”

Software Problem

Those on the committee also wanted to know exactly how former Blount Memorial Foundation Executive Director Jane Andrews pilfered the nonprofit she headed of $186,655.57.

Heinemann said the foundation was using an accounting software called “QuickBooks,” and Andrews was able to exploit that software. Andrews would use the software to write a check to herself, print it, then go back into QuickBooks and amend the check to make it appear the check was written to an entity the foundation did business with.

“She found a loophole to be able to go back in and edit who the check was sent to,” Heinemann said.

Committee Chair Susanne Davis said that’s a well-known problem with QuickBooks. It’s why organizations using the software typically have another person reviewing check copies.

“It’s standard,” Davis said. “When you have QuickBooks, you have this problem.”

Davis also asked if Andrews was the only person who was required to sign a check.

“I believe so,” Heinemann said.

“So, in my mind, controls were not in place” to prevent theft, Davis said, adding that two signatures should be required. “(Otherwise) one person can steal. And that’s exactly what happened here, and I believe it could have been prevented.”

The conversation also turned to why it took so long for the theft to be discovered.

No Annual Audit?

Mike Parton, a managing partner at the Knoxville-based Coulter & Justus, P.C., which performs the hospital’s audits, was asked why the foundation wasn’t audited every year.

Parton said the foundation, as a 501(c)(3) nonprofit, had a separate audit “for a number of years.” He said due to the size of the foundation, i.e., its annual expenditures, state law doesn’t require a yearly audit. A decision on implementing yearly audits rests with the hospital board, he said.

Committee member Lee Gowan also wanted further clarification on how the theft was actually discovered.

“Who found the theft,” Gowan asked. “Did you all find it and report it to the (hospital) board?”

Parton said his firm had requested a number of documents Andrews likely knew would reveal the unauthorized disbursements she was making.

“(Andrews) went to her supervisor and disclosed the situation,” Parton said. “We had not received that documentation back, but we had asked for documentation that we believe would have indicated what was occurring.”

“So was this documentation not asked for in the prior years,” Gowan asked.

“Not that we’re aware of,” Parton said.

French, who also serves on the Blount County Commission, found that incredulous.

“Why, after 10 plus years, did you decide to ask these questions that led this person to believe that she was going to be caught,” French asked. “And what events happened that made you ask those questions and not ask them in the previous nine or 10 years. I’m not an auditor, I’m not a CPA (certified public accountant). I’m just a plain old Ron. And, to me, that doesn’t make sense.”

Parton said it was “a very good question,” and the hospital board simply wanted to expand the foundation’s audit.

Davis said she had experience serving on other boards overseeing nonprofits. She said even though annual audits might not be mandated by state law, they should be done “out of due diligence to our very small community” and “to bring integrity to the table.”

Davis also thought it odd the theft began the same year the last full foundation audit was completed.

“Was the person who stole aware there would no longer be an audit,” Davis said. “Or is it just ironic, a coincidence, they’ve been stealing every year since then.”

“I can’t speak to what that employee knew or when, in 2007,” Parton said. “I don’t know.”

Committee members also wanted to know if additional money could have been stolen prior to 2007. Parton said his firm “went as far (back) as records were available and as far as the information indicated,” and it appeared the theft did begin in 2007.

“It started off very small and very limited and it grew over time,” Parton said of the theft. “So I don’t believe the risk of anything before 2007, based on all the evidence that we have, I think it’s a very small risk” any funds were stolen prior to that year.

Commission Recommendations

Before adjourning, the committee decided to make several recommendations to the Blount County Commission. They first recommend the Blount Memorial Foundation undergo an annual audit, one performed by a separate accounting firm.

After learning the hospital’s board of directors also oversees the foundation, the committee also recommended the foundation have a totally separate board. They’re also recommending the hospital take proposals from other accounting firms for next year’s audit, and the audit committee be given a say on which firm is chosen.

Board Diversity

Brenda Lauderback deserves amazing credit for her achievements which are multitudinous.  Interestingly, one of these achievements is not even referred to in the following Pittsburgh Post-Gazzette article.  Actually, I think the recognition is deserved of both Ms. Lauderback and her corporation, Dennys.  Ms. Lauderback is African-American and she now is now the Chair of the Board of Directors of Dennys.  Yes, believe it not, Dennys, the retail restaurant that paid $54 million in damages for having essentially been racist in its service to African-Americans.  

Clearly, despite times when white nationalism has practically become a mantra for a governmental administration that has passively and actively supported the reduction of value and rights of those who are poor and not white, miracles can happen.  We can take heart.  Kudos to Ms. Lauderback and kudos to Dennys!

JOYCE GANNON

Pittsburgh Post-Gazette

[email protected]

 

2:54 PM

 

NOV 16, 2017

 

As a black female launching a career in the retail industry in the 1970s, Brenda Lauderback was told countless times she wasn’t going to make it.

That kind of talk just pushed her to work harder, said the Penn Hills High School graduate who eventually retired as a top executive at Nine West Group apparel company and now chairs the board of directors at restaurant chain Denny’s.

“Very few board rooms have black or Hispanic women or men … and I’ve earned my way to be in the board room by working twice as hard [as men],” she said Thursday at the Fairmont Hotel, Downtown, during an event that focused on board diversity.

Ms. Lauderback, whose first job after graduating from Robert Morris University was in a retail training program at the now-shuttered Gimbels department store on Sixth Avenue, also serves on the boards of Sleep Number Corp. and Wolverine World Wide, and formerly was a director at Big Lots, Jostens and several other public companies.

What helped drive her success against the odds as a female and a minority, she said, was a sense of being an agent of change who could accomplish meaningful things in her roles as an executive and board member. She didn’t want to be present merely to enable companies to “just check the box” on diversity and inclusion.

Ms. Lauderback was the keynote speaker at the annual National Conversation on Board Diversity sponsored by 2020 Women on Boards, a Boston-based nonprofit that tracks the gender makeup of corporate boards.

Pittsburgh was one of 19 cities in the U.S. that held events Thursday to promote inclusion of women in board rooms. Founded in 2010, the organization’s mission is for women to hold 20 percent of board seats by the year 2020.

The group surpassed its goal this year. Women comprise 20.8 percent of board seats on 801 companies it tracked among Fortune 1000 firms. That’s up from 19.7 percent in 2016.

Though that’s three years ahead of schedule, “That’s like scoring a first touchdown,” said Stephanie Sonnabend, a co-founder of the organization who spoke at Thursday’s event.

“The game is certainly not over,” she said. 

In the Pittsburgh area, women hold 20 percent of board seats on public companies, according to research by the Post-Gazette. That data includes some businesses that aren’t headquartered here but have significant operations in the region.

Among corporations based here, Ms. Sonnabend said those that achieved the highest marks on 2020’s annual Gender Diversity Index were PNC Financial Services Corp., Allegheny Technologies, PPG, Wesco International and U.S. Steel. All of their boards include 25 percent or more women directors.

Because larger, public companies on the Fortune 1000 have a better track record at recruiting female board members, 2020 has broadened its focus to include smaller and medium-sized firms that are part of the Russell 3000 Index, said Ms. Sonnabend.

Studies have found more diverse boards boost a company’s bottom line by providing more non-traditional input into management and decision making. Though women still hold far fewer board seats than men, some companies are being more aggressive about recruiting females.

In a recent analysis of 2017 corporate proxy statements, executive search firm Spencer Stuart found women and minorities comprised half of the 397 new independent directors at S&P 500 companies. Women made up 22 percent of the S&P 500 boards, the firm said.

Board diversity is critical, said Ms. Lauderback, because, “We all know the tone at the top sets the stage for everything that happens at a corporation.”

After she left Gimbels, she worked for the department store division of Target as a merchandise buyer and ascended to executive and management jobs before joining U.S. Shoe Corp. where she was president of wholesale, manufacturing and design.

When Nine West acquired U.S. Shoe, she became president of wholesale and retail before retiring in 1998.

As a leader of division teams that included black and white men and women, Ms. Lauderback recalled going to meetings where people clamored to meet the white male members of her team.

“That was before they realized I was leading the team,” she said.

Also during Thursday’s event, the Pittsburgh initiative of 2020 Women on Boards gave its annual board diversity ambassador award to David Bronczek, president and chief operating officer of FedEx Corp.

The company’s FedEx Ground subsidiary is based in Moon, and 25 percent of the parent corporation’s board are women. FedEx also has several programs in place to develop women leaders.

Joyce Gannon: [email protected] or 412-263-1580.

Nonprofit Boards: To Pay or Not to Pay #NonprofitBoardPay

 

 Nonprofit board member compensation has more recently become a topic of interest particularly reignited by Jimmy LaRose.  He's organized a nonprofit that pays all of its board members because he thinks they deserve to be paid and there's no laws that say otherwise.

These arguments may well be true but tradition and lots of other reasons have it that it is perfectly reasonable not to pay the volunteer (note, volunteer) leadership of a nonprofit board.  Member's satisfaction should be that these individuals are in a unique position to see their Theory of Change and mission pursued and not at their own expense.  And, after all, board members are surrogate owners for the public - not for their own benefit.  They may gain other less indirect and tangible benefits but pay is not viewed as one of these.

The following St. Charles Bulletin article provides a fine piece on viewing the arguments for and against paying nonprofit directors.  For sure I would argue that the Health System and board that are the focus of this article are somewhat outside of the box of the majority of nonprofit boards: the System is very large and complex (resulting in very complex governance demands) and the board is identified as spending 10 hours a week fulfilling their responsibilities (I'm impressed if not dubious given that this is so outside the norm of service time according to my own findings over the years).  But, just the same, the arguments are helpful for thinking about this pay or not pay challenge.  

Note that the biggest argument for paying is focused on: the nonprofit's girth and complexity; the amount of time spent by the board; the extent of expertise of members; and more interesting, that board members who fail to perform are fired (that's worth seeing in action).  I'm not buying this argument but I'll have to admit there are moments when I don't want to reconsider as a vehicle for improving board engagement.

Published Nov. 16, 2017 at 10:01PM

St. Charles continues unusual practice of paying board members

Directors made collective $293,000 last year

 

St. Charles Bend (Bulletin file photo) 5528743

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St. Charles Health System continues to dedicate hundreds of thousands of dollars from its annual budget toward compensation for its board members, even as staff and administrators weather layoffs and pay cuts.

It’s an unusual practice for a nonprofit health system, and the amount St. Charles pays its directors — they each made between $20,000 and $36,000 last year — also places it in the minority among its peers, according to a new survey on board member pay. Nationally, 9 percent of nonprofit health systems pay their board members, according to the Governance Institute’s most recent biennial survey, which will be released publicly later this month. Among those that do, most pay less than $5,000 per year.

Over the years, the proportion of nonprofit health systems that pay their directors has not increased, said Kathryn Peisert, managing editor of the Governance Institute, a membership organization that provides research and other education for nonprofit hospitals and health systems.

“Everybody hopes and thinks that this is going to be a trend that’s increasing, and that’s not what we’re seeing,” she said.

St. Charles’ directors, however, did agree to take 10 percent cuts to their stipends, effective last month and continuing into next year. The health system in October announced it was cutting 30 jobs and temporarily lowering pay for salaried workers by 5 percent and for salaried executives by 10 percent.

“If we’re the board of directors, we should be leading,” said Dennis Dempsey, the board’s vice chairman. “It shouldn’t just be the executive team or the staff that’s making reductions to things.”

While the collective $293,000 directors made last year is a small piece of the health system’s $734 million in expenses, paying directors of tax-exempt organizations remains a controversial practice. Some argue the work should be done on a volunteer basis as a way to serve one’s community. Increasingly, though, some in the medical community argue paying directors is necessary to ensure the board has the right mix of expertise, especially as health care becomes increasingly complex.

Each St. Charles director receives a $20,000 base stipend, said Tom Sayeg, chairman of the board’s compensation committee. The board chairman, Dan Schuette, receives an additional $10,000. Committee chairs receive another $5,000 per committee.

Schuette, a local investment adviser, was the top paid director last year at $36,000, according to St. Charles’ most recent Internal Revenue Service tax form 990. Dempsey, who serves as the University of Oregon’s Central Oregon Educational Leadership Supervisor, received $31,000 for his board work last year, as did Dr. Steve Gordon, who is also the national health care principal at Point B Consulting.

Only about 2 percent of nonprofit health systems pay their directors $20,000 or more, according to the Governance Institute’s survey. No survey respondents said they pay $30,000 or more.

St. Charles has paid its directors since 2011. At first, the goal was to attract more physicians to the board and to ensure they stuck around, Dempsey said. Not all directors accepted compensation, however. In 2013, the board voted to make all directors accept compensation.

When Dempsey joined the board in 2001, St. Charles had only one hospital. The board met one day every month. There were no committees.

Since, the Bend-based hospital system has grown to encompass hospitals in Redmond, Madras and Prineville.

“Now, as we’ve gone from one to two to three to four hospitals … the role has changed, and the expectation of what the board is supposed to do, I can personally tell you, has changed dramatically,” he said.

Serving as a director is complicated work, and Sayeg said the board constantly assesses its directors on their attendance and continued education.

“To the extent that individuals don’t perform, they will not be on the board,” he said.

Last year, each director spent 10 hours per week on board duties, according to St. Charles’ tax form.

Dempsey and Sayeg said paying directors has helped St. Charles attract and maintain people with expertise that’s crucial to the health system.

One of those people is Dr. Hartwell Lin, regional director for CEP America’s East Bay Region and an emergency physician for the John Muir Medical Center in Concord, California.

Lin can tell the board what worked or didn’t work for his health system, and cautions against certain decisions, Dempsey said.

Other board members bring significant financial experience, such as Doug Downer, money manager at Sundowner Capital Management in Bend.

Jack Caynon recalls the question of director compensation coming up when he served as general counsel for Salem Hospital. He asked a high-profile community member who sat on a number of for-profit boards whether he would consider sitting on the hospital board without pay. For-profit companies typically pay their board members.

“He said, ‘No, because I make money serving on these other for-profit boards,’” said Caynon, special counsel for the law firm Sussman Shank in Portland. “‘So with my time in my job, as well as doing these board positions, it just doesn’t make sense for me to take a position on a not-for-profit board and not getting paid anything.’”

With that in mind, some nonprofit health systems have taken the position that they need to treat their boards the way for-profit companies do, Caynon said.

“If we want to get the best people, we need to pay them,” Caynon said. “That is kind of their view.”

Nonprofits have to be careful when it comes to board member compensation, however, cautioned Peisert, of the Governance Institute. If it’s perceived to be too much, it could potentially raise red flags at the state or federal levels. In her view, board member pay is not always a necessity.

“I think there are still plenty of folks out there who are willing to volunteer their time to put towards a good cause, and serving on a health care board is one of the best causes out there,” Peisert said.

The Oregon Department of Justice has not looked into hospital board member compensation, according to an email from the department’s spokeswoman. Such scrutiny would more likely come from the IRS, Caynon said.

Dempsey said he thinks whether or not board members are paid is “irrelevant.”

“It’s kind of a personal thing, when you live here,” he said. “Your kids, your grandkids, your family members, your next-door neighbors have to use this place. You want it to be the best it can possibly be.”

— Reporter: 541-383-0304, [email protected]

Nonprofit Salaries #NonprofitBoards

One fiduciary responsibility of a board is to establish the annual budget and within that and according to the board's values, prudently establish employee salaries.  I recognize that salaries pretty much vary regionally but can also serve as a reference between regions.  So, the new Connecticut, Massachusetts and Rhode Island salary survey report completed by TSNE MissionWorks and supported by a number of grantmaking foundations should be of particular interest as it is time for many to be considering the 2018 budget.

The free report and searchable database include salaries paid to employees in hundreds of positions in different types of nonprofits, as well as information on employee benefits.

This information may be used to:

• Enable nonprofit leaders to make informed hiring and pay decisions
• Allow boards to determine appropriate compensation for their executive directors/CEOs and other top positions
• Help leaders explain compensation rates and policies to their employees and potential employees in a meaningful context

Download the report:
http://www.tsne.org/downloads/Valuing-Our-Nonprofit-Workforce-2017-Rev.2.pdf

Access the searchable salary database:
http://tsne.org/salary-data