Nonprofit Board Crisis

CEO "Out" #NonprofitBoards

Unlike yesterday's irresponsible board and CEO, the board of the Silicon Valley Community Foundation, taking a kind-of similar path but at their own expense, recruited an independent investigator and concluded that their CEO, a very prestigious gentlemen, had failed from a values and human respect perspective and created an unsafe and un-inclusive workplace environment for its employees.  

Kudos to the earnest and brave board for listening to its staff and responding seriously and with intent and ultimately taking action based on its learning!  

 From the Nonprofit Times:

The organization’s board reviewed the results of an independent investigation at its June 14 meeting. According to an announcement from the board today, the investigation “found that many allegations from current and former employees were substantiated. SVCF clearly failed to provide a safe and inclusive workplace environment for its employees.”

Nonprofit Board Fail But.... #NonprofitBoards

Being a nonprofit board that totally fails in its duty of care apparently does not always mean that the board must be fired or that the organization should be merged with another or go out of business.  

In Nebraska, after a lengthy investigation, the Attorney General concluded that the board of the Goodwill did indeed fail in fulfilling its fiduciary duties and particularly it duty to ensure mission was pursued but it just has to do better.  Strikes me that the investigation was great but the action by the Attorney General - not so great.  The Attorney General's basic takeaway: the CEO failed.  Incorrect!  The board failed and in a big way.

I would have recommended heads role and that these board members who had grossly just paid tons of salaries to its executive and negligibly served its constituents deserved penalties and to be replaced.  But that is just me.  Smells to me like some folks must really have an "in" such that consequences at most was a slap on the hand. 

But maybe donors can rally around and make demands and maybe the caretakers and consumers can rally around and make demands for a new board.  

 

 

 

 

You can read the story here.

 

Foundation President Cleared of Staff Claims #NonprofitBoards

When the going got tough, the Rockefeller Foundation board got equally tough and appears to have done its job: fulfilling its duty of care and figuring-out how valid were the complaints posed by the Foundation staff against its President (CEO).  Hiring a law firm and conducting a "review" the Foundation board has stated through its chairman that the board is satisfied that its chief paid leader has done nothing untoward.  

Now it stands to reason to wonder why staff would put themselves on the line to challenge the actions of its boss recognizing that the consequences at minimum, a very lukewarm relationship with the President, would not be pretty.  And the items cited in the following Chronicle of Philanthropy article do leave some doubts at least in my mind.  But should we not just take the position that if the board is satisfied, we should be satisfied?  

I'm a little stumped.  I must say that in my experience conducting similar reviews of execs for boards, it has been the rare case there wasn't "something" amiss when the staff steps-up to call the question.  It is very "brave" of staff to take such action so getting at the bottom of the whys and wherefores is a necessary process that rarely doesn't demonstrate some failing, not necessarily illegal or unethical, but not consistent with board and/or staff interests, values, policies and procedures.  Could it actually have been different at Rockefeller?

 

NEWS AND ANALYSIS
JUNE 21, 2018 

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Rockefeller President Cleared After Review Triggered by Employee Complaint

By Megan O’Neil

The Rockefeller Foundation earlier this year hired outside counsel to review an internal complaint alleging that President Rajiv Shah mismanaged staff and steered contracts and grants to individuals with close professional and personal ties to him. Completed in April, the review concluded no wrongdoing occurred, according to Richard Parsons, chairman of the foundation’s board.

The review was conducted by New York law firm Patterson Belknap. In an interview with the Chronicle on Thursday, Parsons described it as a "review." It was set in motion by an anonymous employee complaint submitted in February.

Shah has seen a copy of the review's findings, Parsons said.

"There was no disciplinary action taken, and there was no basis for taking any disciplinary action," Parsons said. "Virtually all the charges, if you will want to call them that, proved to be without factual basis or merit."

With $4 billion in assets and more than $200 million in annual grant making, the 105-year-old Rockefeller Foundation is one of the biggest and most prominent in philanthropy. Shah, who served as director of USAID under President Obama, has been at the helm of the foundation since March 2017, when he succeeded Judith Rodin.

Rodin earned $1 million in base compensation in fiscal year 2016, according to the foundation’s tax filings. The foundation’s 2017 tax filings are not yet available, a foundation spokesman said, and declined to provide Shah’s compensation.

The Chronicle attempted to reach Shah for comment by email and social media but did not receive a response. The foundation declined requests from the Chronicle made Wednesday and Thursday to interview Shah.

Fellowship Program Questioned

Obtained by the Chronicle, the complaint does not include any individual employee’s name or title. It states it was authored by a "group of loyal Rockefeller Foundation staff." The complaint also states that it is based on information gathered from dozens of colleagues in hundreds of conversations.

The complaint alleges bad management by Shah and the disbursement of foundation dollars to individuals and organizations with close professional and personal ties to Shah. It highlights several specific grants and contracts as being problematic.

One example is the newly created Rockefeller Foundation Fellows program. In announcing the inaugural group of seven fellows in January, the foundation said the monetary awards would support independent projects congruent with the foundation’s mission and priorities in areas including health, clean energy, and economic opportunity.

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 The complaint describes the new program as "haphazardly constructed" and the costs as "staggering." It says Shah personally selected the fellowship recipients, each of whom had close ties to the foundation president. As such, foundation staff openly refer to the program as "Raj’s friends and family initiative," the complaint states.

A high-level foundation official told the Chronicle that the idea for the fellowship was to give the foundation access to some of the top minds in the foundation’s priority areas. Shah offered a slate of candidates for the fellowship, the official said, drawn from his extensive professional network.

Parsons confirmed to the Chronicle that Shah had previous professional relationships with all of the fellows. The foundation is spending about $2 million a year for three years on the fellowship program, he said, or a total of $6 million. He declined to give the dollar amounts of the individual awards.

Parsons noted that the Rockefeller Foundation has a long history of awarding fellowships to world-class thinkers and leaders, noting past recipients such as Susan Sontag. He said that as the foundation charts a new course forward, it needs to figure out ways to scale its work in collaboration with others. The fellows, he said, are part of that process.

"We like what we got," Parsons said of the fellows. "These are really good people who are helping us think through some really complicated and significant issues."

The Chronicle attempted to reach several fellows for comment this week but did not receive responses.

Art and Meetings

In his interview with the Chronicle, Parsons described a number of other criticisms of Shah in the complaint as baseless.

For example, the complaint stated that a former USAID colleague of Shah’s was paid $100,000 to hang art in the foundation’s offices. It described the compensation as "ludicrous" and the individual in question as "unqualified" and a "junior staffer."

Parsons confirmed that the foundation did hire Shah’s former colleague but said the work included developing a global staff retreat, implementing a monthly staff town hall, organizing global gatherings, and assisting in the redesign of the New York headquarters, work that included mounting some historic photography.

"I don’t feel uncomfortable with it," Parsons said when asked if the compensation was appropriate for the work, adding, "Looks to me like they got a bargain."

When contacted by the Chronicle, the individual in question confirmed his company had a contract with the Rockefeller Foundation for work that ran from January to August last year. His description of the work matched what Parsons had provided.

Parsons also denied that under Shah the foundation has spent wastefully on consultants, another criticism included in the complaint. However, the foundation would not provide details of its spending on consultants.

"There was a modest increase in administrative expenses, mostly associated with the fact that we were in transition," Parsons said. "We have things that are shutting down that overlap with things that are starting up."

He described at least some of it as one-time costs, something that any organization is likely to see in a transition period, "but it was not really material and not a cause for concern for the board."

Known Leader

The 45-year-old Shah is one of a long list of former Obama administration officials to transition to prominent nonprofit jobs. Even before taking the top role at Rockefeller, he was well-known in the foundation world.

Shah worked at the Bill & Melinda Gates Foundation from 2001 to 2009, serving in several positions including director of agricultural development, director of strategic opportunities, deputy director of policy and finance, and chief economist. While there, he helped launch the Alliance for a Green Revolution in Africa, a project centered on boosting agricultural productivity and reducing hunger, for which the Rockefeller Foundation was a major partner.

Shah led USAID from 2009 to 2015. He subsequently founded Latitude Capital, a private-equity firm focused on emerging markets.

Shah joined the Rockefeller Foundation board in 2015. In 2016, when Judith Rodin indicated she would be stepping down, Shah asked that the board consider him for the job, the New York Times reported last year. Parsons told the New York Times Shah was the unanimous choice and an ideal successor to Judith Rodin.

"He’s a performer," Parsons said. "You put him up in front of a group and people come away impressed. Now, he’s got a platform."

When asked in an interview with the Chronicle last year about any new priorities for the Rockefeller Foundation under his leadership, Shah noted the organization’s long and consistent history in areas including economic opportunity, health, and food. He also cited its support for global refugees and building resilient communities in the face of climate change and other crises.

"I’m studying all of that, and what we do going forward will be pretty consistent with that history," Shah said.

Speaking with the Chronicle on Thursday, Parsons reiterated his support for Shah.

"We have to learn how to work effectively to create partnerships and work effectively to bring greater resources to bear on large-scale problems," Parsons said. "Not only does Raj have the background and experience that he brings to us but he’s got the vision and the personal standing with many of these other players with whom we need to sort of join hands and collaborate."

Correction: A previous version of this article was imprecise in its reference to the review of Rajiv Shah, calling it an investigation. The headline of that earlier version also referred to Shah as CEO rather than president.

To Raise $ or Not to Raise $ #NonprofitBoards

I am really torn about the following Philadelphia Business Journal article that focuses on moving nonprofit board members to be fundraisers.  I have to first admit though that the suggestions as to how a board member can serve in a fundraising capacity are reasonable and not overwhelming.  That said, I believe the author's assumption that "the board must a fundraiser be" to not inherently be a "fact" or even a given.  And likely, as too many execs experience, there are probably more board members who do not play any part in raising funds than those who do.  But let's not let this reality also be a reference for what "should" be.  My assumption however, is not that fund raising is an absolute part of the job of being a nonprofit board member.  Alternately, I do believe that if a board's discussion ends with an agreement that being a board member of that organization includes giving and/or getting, then all members have a requirement to do so and they should be advised of this obligation upon joining.  If however the board has never had this conversation and no understanding was given upon joining - no obligation.  Conversation and agreement matters - assumptions and presumptions do not.

With that said, I'm skipping the author's presumptions that board members must raise money and going on to his eight suggestions.

 

Eight Ways to Meet People Halfway

Some board members are naturals at fundraising. Others aren’t. Maybe they prefer not to. Perhaps they don’t know how. They might not want to impose on friendships by asking for a contribution. There are many ways to meet people halfway.

1. Big checks. Your board member doesn’t feel comfortable raising funds, but they are willing to write a big check that gets the campaign started. If they won’t raise money but will give lots, they have shown their support.

2. Training. Some board members might not want to ask because they don’t know how. Some non-profits engage a consulting firm to run their capital campaign. They usually provide training for board members in how to solicit. This often involves having a story to tell that inspires people to get behind the project.

3. Teaming. The board member new to fundraising is sent out on a call on a friend alongside a member of the development office. The board member and their friend get on well, chatting in the friend’s office. The staff member talks about the charity’s mission and asks for a gift. Repeat the process. The board member gets comfortable after a while and volunteers: “I think I’ve got this.”

4. Matching gift.  Will your board member who is reluctant to fundraise put up a challenge grant instead? They will match money raised from other donors dollar for dollar up to a specified total amount. Those who fundraise love it, because it motivates other donors. Donors love it because they feel the impact of their gift is doubled.

5. Cocktail party at home. Another board member doesn’t like fundraising, but enjoys entertaining. They agree to hold a drinks party at their home, inviting many of their friends. The printed invitation pulls no punches. “We’ve been involved with the museum for ten years. We love it. Come to our house next Friday for cocktails and hear what the museum is up to next year. We hope you will get involved too.” A member of the professional staff gives a short talk, letting people know how they can support the mission.

6. Dinner party guest. Here’s another variation for the board member who enjoys entertaining. Suggest they invite a member of the development department the next time they hold a dinner party at their home. This isn’t that usual a request, because board members usually know the staff who do fundraising very well. When someone at the table asks “What do you do” or “How do you know our host?” they explain how you both work together supporting their local charity.

7. Wearing different hats. You have a board member who is uncomfortable approaching friends for support. Suggest the “different hat” approach. They sit down with someone and say: “For the next five minutes I’m taking off my friend hat and putting on my (charity) hat.” They explain the group’s mission and ask for support, mentioning a specific dollar amount. After five minutes they say: “Now I’m taking off my (charity) hat and putting my friend hat back on.” It sounds contrived, but it’s effective because it clearly defines two different roles.

8.  Will you do what I’ve done? Here’s an approach for the highly competitive board member who is often approached by friends to support each one’s favorite charity. It assumes they are having a good year and know their close friend is having a good year too. “We’re having a capital campaign at our charity. As a board member, I’m committed for (X) dollars. Would you consider giving a gift too? I don’t expect you would do (X), but how about (Y)? Although it might be pushy to explain how much you are giving, it puts a number out there, then softens it with a request for a smaller amount.

Some board members simply won’t fundraise. Others probably would if you gave them a little help and offered options.

Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor” can be found on Amazon. 

 

 

Nonprofit Board Member Gets and Gives #NonprofitBoards

One of the latest government/nonprofit scandals has been uncovered in NYC.  A City Councilman managed to have $130K from the city budget allocated to a nonprofit which he founded and I presume is also a board member.  OMG - imagine!  But wait!  Aren't board members supposed to get and give?  Isn't this Councilman just doing what is expected of him as a board member?

Ok, so we don't really know what his nonprofit does (Albanian-American Community Association so I think we can guess) and this group is presumably one of his constituents.  See a problem?  

Here's the story from Politico.

SHADY — Bronx Councilman Mark Gjonaj gives his nonprofit $130K in taxpayer funds— Crain’s’ Will Bredderman: “The new city budget for the fiscal year beginning July 1 includes $130,000 for the Albanian-American Community Association—courtesy of its founder, Bronx Councilman Mark Gjonaj...The group has never received money from the city budget before this year, Gjonaj's first as a member of the local legislature. This is likely because the nonprofit was not registered as required with the state Charities Bureau until this past March, despite having incorporated in New York in 2007. The $130,000 from the city comes just months after State Board of Elections records show Gjonaj gave the group $10,000 out of his campaign account in January.

 

 

 

Nonprofit Board Fundraising Ploy or...? #NonprofitBoards

As the following Washington Post article describes, the Baltimore Salvation Army is closing its emergency family homeless shelter.  The Shelter folks cite the drop in Federal Funding as the reason for the closure.  

While I don't doubt the Fed's reduction having an affect (and actually toward an equally valid purpose), I do wonder aloud that this is a "boy crying wolf" situation and evidence of poor planning.  I mean really, this place has been around for 80 years and they haven't built up a reserve and possibly an endowment in anticipation of the day the Feds would say no more?  Where is the dedication to mission?  Is this a nonprofit board that's only 'in it" as long as there is money?  

The Army board should think twice about its history and experience as well as its commitment to mission.  On the other hand, if the Shelter managed to actually place its residents in alternate housing, then maybe they have actually found a solution to the challenge of homeless families and that is worth a new mission.  

Something's not right but certainly the Army isn't saying what is the full story.

 

Salvation Army closing homeless family shelter in Baltimore

By Associated PressJune 19

BALTIMORE — A Baltimore emergency shelter is closing after 80 years.

The Salvation Army’s area commander for central Maryland, Major Gene Hogg, tells The Baltimore Sun in a Tuesday report that the nonprofit will move roughly 15 families from the Booth House to alternative housing in the coming weeks. He says a main factor in closing the shelter that has 57 beds is a reduction in federal funding for temporary accommodations for homeless people.

Hogg says the shelter cost $900,000 a year to operate, but the Salvation Army has been running it with a $700,000 deficit after the federal government redirected money a couple years ago toward permanent housing for the homeless.

Terry Hickey, director of the Mayor’s Office of Human Services, says Baltimore is helping the Salvation Army conceive a transition plan for Booth House families.

Exec Insubordinate #NonprofitBoards

While it's true the US President is elected by the "people" (ok, maybe not THIS president), doesn't the Congress have the power and responsibility to hold the President accountable? If the Congress doesn't approve of what the President is doing (immigration internment camps of children for instance), can't the Congress say "STOP" AND take away HHS' money?  Of course!  Who's the boss of whom here? It appears that the shoe is on the wrong foot and the President is basically, insubordinate to the values and principles and even rules that inform how this country proceeds.  Any nonprofit executive behaving this way would have been fired by now.  But wait...this is government :(.

Nonprofit Board Diversity Matters #NonprofitBoards

Just how successful IS your nonprofit in reaching all the audiences it believes could benefit from its offerings?  Well, it probably comes as no surprise that the opera, even in Italy, its home of origin, isn't doing that well at attracting younger audiences - those who must fill the seats as the seniors pass-on.  So, according to the Wall Street Journal, it is time for the opera to do something different.  And one key, I will offer in taking this step, was recruiting at least one board member who actually was and understood the target audience.  And here-in lies the lesson.  A diverse board has far more capability of understanding audience that a board comprised of one or another demographic.  But remember, one demographic alone does not diversity make.   

Taking over last year as coordinator of the under-35 chapter of the Milano per la Scala foundation Valeria Mongillo looked for new ways to draw and keep younger members.

When she saw her first opera at La Scala in 2012 at the age of 24, she was so carried away by the music and the gilt-and-scarlet decor that she bought the Under30 pass. But she couldn’t find anyone to go with. “I had a hard time finding people my age who wanted to come,” she says. “Opera is not very well-known, and it’s expensive.”

Over the past year the youth chapter has grown to about a third of the foundation’s 600 members. The key, she says, is creating a clubby atmosphere with trips to see opera in other European capitals, meetings with the singers, and museum visits. “You need to create a group, or else they leave,” she says.

Ms. Mongillo, who also has a seat on the board, set up partnerships with local institutions including the Brera Fine Arts Academy. She created a coordinating committee of young people to brainstorm ideas about social events. And she sought tighter links with Juvenilia, a Europe-wide network for young opera lovers in which members take turns hosting events and travelling to them.

 

Nonprofit Board D&O Insurance #NonprofitBoards

Should nonprofit boards have Directors and Officers (D&O) liability insurance?  Without a doubt!  Why and what is this D&O all about?  The following submission in the Talahassee Democrat provides an excellent explanation to these questions.

I am often asked by people what personal liability they are assuming when they serve on a board of directors for a nonprofit organization. This is a question that should concern all who choose to serve in this capacity but it is a pretty simple solution. If the organization you wish to serve does not have D&O insurance policy, then you are taking on potential personal liability.

 

D&O insurance is liability insurance payable to the directors and officers of a company, or to the organization itself, as reimbursement for losses or defense costs in the event an insured suffers such a loss because of legal action brought for alleged wrongful acts in their capacity as directors or officers. It covers the entity itself as well as the personal liabilities for the directors and officers of the entity. Intentional illegal acts are typically not covered under this policy. 

Officers and directors of nonprofit boards have special responsibilities, such as the duty of care and duty of loyalty to advance the charitable goals of the nonprofit and protect their assets. Any allegations of misconduct may require officers and directors to defend themselves in court or face considerable lability exposure. Duty of care standards imposed on officers and directors of nonprofits have tightened in recent years. 

This coverage can be broken out into three parts. Coverage A covers the right of directors and officers to receive payment from the insurance carrier for defense costs and liability in the event of lawsuit, provided they do not have the right to be indemnified. Coverage B extends coverage to the nonprofit surrounding reimbursement money paid to satisfy indemnification claims that the directors and officers may make against the nonprofit. These indemnification claims must be made against the nonprofit under the organizing documents of the entity. And finally, D & O insurance provides coverage to the nonprofit for its own wrongful acts. 

D&O insurance is also very useful to attract and retain board members. Their personal assets are at risk every day in making decisions to further the growth and success of the nonprofit. Directors tend to feel more secure when there is an insurance policy in place to back up the organization's promise to indemnify. Most director’s personal homeowners, umbrella or business insurance does not extend to cover nonprofit directorships.

The D&O policy fills that liability gap and allows the director to serve with greater confidence and security. The limit of coverage is a shared limit with the entity and all directors so the limits need to be large enough to cover all parties. It is likely in a lawsuit of wrongdoing all directors and officers will be named as well as the entity itself. 

For both the nonprofits and its current and future directors and officers the purchase of a D&O policy coverage is crucial. This policy will fill the liability gap that exist in board service for nonprofits. Ask your insurance agent questions about how to place this coverage and establish appropriate limits of coverage.

Bart also provided us with interesting information about who can sue a nonprofit board of directors and we’ll add that to a future column. 

Bart Gunter is the Area Vice President for Rogers, Gunter, Vaughn Insurance/ HUB Florida. This agency has extensive experience in insurance for Nonprofits.  Notes on Nonprofits is written collaboratively by Alyce Lee Stansbury, CFRE, President of Stansbury Consulting and Kelly Otte, MPA, Executive Director of PACE Center for Girls/Leon County.

 

 

Nonprofit Governance Trends from an Association Perspective #NonprofitBoards

Association boards are not inherently a proxy for the whole nonprofit sector but they can be viewed as a kind of bellwether given that their members (frequently nonprofits) are wide and varied and say something relevant about what is happening in the world.  So, the following revelations by BoardEffect and shared by Business Mirror may not be totally surprising but offer a few insights just the same.

One observation in particular regarding Trend 2 about fewer meetings.  The suggestion of virtual voting?  Not every state legislature agrees.  I do believe that technology can make a difference in efficiencies but I don't believe there to be any substitute for really making meetings about mission and telling stories and outcomes.

Association board trends 

ASSOCIATION board governance has never been as challenging as it is today according to a study made by BoardEffect, a US-based solutions provider for nonprofit boards. This is amid lingering economic uncertainty, the need to accommodate millennials, and the ever-present challenge of recruiting and inspiring a diverse cast of new board members. Replicated below are four trends that experts see at this time and beyond, along with suggestions for addressing them.

 

Trend No. 1: Greater challenges in recruiting board members—Keeping boards populated with volunteer members who are a good fit is a never-ending quest. Busier lives and schedules, longer hours on the job, and perceived liability due to greater public scrutiny of boards, all these factors are pushing potential board members away from board service. There’s no one solution to the recruiting challenge, although boards that embrace social media to get the word out—as well as a good web site that clearly states a mission and interests—may help attract new members.

 

Trend No. 2: Fewer meetings, smaller boards, a drop in attendance—To every board leader who laments how hard it has become to keep board attendance at a high level, rest assured that the issue is widespread. Just as boards have gradually shrunk in size, the average number of meetings over a year has also dropped. With that drop has come a worrisome decline in board attendance. Low meeting attendance creates greater risk for the organization as it increases the likelihood of major decisions being made by a minority of board members. In some cases, the solution to poor attendance can be better use of technology to close the gaps. Technology can streamline meetings by allowing members to better prepare ahead of time, paving the way for more well-informed discussion, reduce meeting length, and hold online discussions and “virtual” votes.

 

Trend No. 3: Millennials will continue to change charitable giving —As the millennial generation comes of age, its motivations for giving to charitable causes and for serving on boards needs additional study. With around 80 million millennials coming of age, knowing how they spend their cash on causes is going to be critical for nonprofits. That means that boards need to embrace new ways of approaching charitable giving. Expert and futurist Amy Webb recommends against using the word “donation” and instead, using “investment,” which has a different connotation. Although millennials turn to social media and digital means for involvement, in either case, a personal connection tends to influence both volunteer time and giving.

 

Trend No. 4: Continued focus on diversity—Even as the pool of potential board members in a community seems to be shrinking, board leadership continues to struggle with making boards more diverse in many cases without much progress. As boards continue to shrink in size, every individual counts. It, thus, becomes even more imperative to ensure that the board is made up of a cross-section of its community. “Board recruitment should be a continuous and deliberate activity of the full board,” a BoardSource report states. The effort, the report states, should be “led by a governance committee that is responsible for ensuring that the board has the right people, structure, guidelines  and resources.”