Few nonprofit boards face the kind of "threats" to their comfort as do those in the public corporation boards do. There are no shareholders and the nonprofit board members, while they can be booted-out for bad behavior, rarely face such actions from the external public. At the same time we have certainly seen really public-perceived "bad" decisions as we have when college alumni have said a college board can't close their institution. So, what precisely should a board be thinking about in terms of honoring and respecting public interest? The following Forbes article offers some considerations on this topic.
Aug 19, 2019, 10:16am
The Era Of Nonprofit Activism Is Nigh
The recent Sackler/Safariland protests waged against the Metropolitan and Whitney museums may portend an era of greater nonprofit focused activism. How might this differ from the traditionally public company focused kind?
The public company situation is pretty straightforward: shareholders own the company, management does the day-to-day work, the board of directors oversees management on behalf of the owners. Shareholders who are dissatisfied—for financial, social/environmental/governance or other reasons—can complain or sell their shares. In the background is an implicit threat: if aggrieved shareholders own enough shares, they can wage a “proxy fight” to change the board or even takeover the company and throw the incumbents out. A bevy of lawyers, bankers, and consultants (e.g., Institutional Shareholder Services) supports the whole process.
By contrast, a nonprofit has no owners. Instead of being accountable to its (nonexistent) owners, the trustees of a nonprofit have a duty of obedience to ensure that it is managed in pursuit of its mission. So even activists who sincerely believe that a nonprofit is woefully underperforming have no direct mechanism to change the board—let alone mount a hostile takeover—though they can still apply indirect pressure through funders and staff.
Most nonprofits have very limited financial resources so any action that threatens funding will quickly cause problems. Funders incur only de minimis switching costs as there are usually similar nonprofits more than happy to accept their money. And since many foundations and government agencies are hyper-sensitive to public controversy, it may not take much pressure to make them flinch. Nonprofits are also heavily dependent on their passionate, mission-driven workforce. Pressure that demoralizes staff, increases employee turnover or makes hiring more difficult will therefore be very effective.
Elite cultural institutions may be particularly susceptible to activism because they often have aspirational missions open to very different interpretations by insiders and those on the outside. Here is the Whitney Museum's mission statement:
“The Whitney seeks to be the defining museum of 20th and 21st century American Art. The museum collects, exhibits, preserves, researches and interprets art of the U.S. in broadest global, historical and interdisciplinary contexts. As the preeminent advocate for American art, we foster the work of living artists at critical moments in their careers. The Whitney educates a diverse public through direct interaction with artists, often before their work has achieved general acceptance.”
Even when Adam Weinberg, the director of the Whitney, tried to narrow its mission in response to criticism that the museum was not doing enough, it was still expansive:
“Even as we are idealistic and missionary in our belief in artists—as established by our founder Gertrude Vanderbilt Whitney—the Whitney is first and foremost a museum. It cannot right all the ills of an unjust world, nor is that its role. Yet, I contend that the Whitney has a critical and urgent part to play in making sure that unheard and unwanted voices are recognized. Through our openness and independence we can foreground often marginalized, unconventional and seemingly unacceptable ideas not presented in other sites in our culture.”
In addition, the "elite" reputation of certain cultural institutions, the prestige associated with being on their boards and the wealth of many board members can lead to more activist-attracting charges of “toxic philanthropy” and “reputation laundering” than in other fields.
Finally, the practicalities of activism seem easier at cultural institutions. They have public spaces in which to protest, a supply of would-be volunteer protesters (artists have a long tradition of protest, many have flexible schedules and some, such as Nan Goldin, are brand names), and enjoy coverage from a mainstream press that generally ignores rank-and-file nonprofits.
But while elite cultural institutions may be more prone to attract activist attention, other types of organizations are likely to come under pressure too. A rereading of Exit, Voice and Loyalty, the seminal analysis of “voice” (i.e., complaining) in restoring institutional performance, suggests several things about the activism that may emerge:
- The internet, social media and low-cost video recording/printing technology have greatly reduced the cost of complaining, which is therefore likely to become more prevalent.
- By raising the perceived ex ante probability of success, successful activist campaigns beget more activism.
- Funders that have traditionally cut and run at the first sign of trouble have likely lost the capacity to muck-in. These funders will need to develop the institutional fortitude to stay the course if their favored organizations come under pressure.
- Board members at elite nonprofits pay a high entrance price for entry—the give or get—and a stiff penalty for exit—the loss of status. As a result, they are likely to be very loyal while finding it hard to accept any outside criticism of the organization, given their emotional and financial investment.
- Since many nonprofits produce quasi-public goods, people without any direct connection to a given organization can still have a stake in their performance.
Yet even if the era of nonprofit activism is nigh, most trustees can still rest easy in the knowledge that there are simply so many nonprofits that only a tiny fraction will ever become targets. Nevertheless, trustees should take the activist threat seriously as part of prudent risk management. They also need to redouble their efforts to do those difficult or uncomfortable things that they already know are right. (For example, developing policies for rejecting donations or removing board members; communicating more regularly with, and providing access to, outside stakeholders; increasing diversity, etc.)
At the same time, activists must recognize that getting organizations to remove a trustee or reject a donation is the easy part. Those with a longer-term agenda for positive institutional change must engage constructively with organizations rather than merely browbeat them from a distance. In particular, activists who think that a particular board of trustees could be doing a significantly better job should propose qualified candidates to serve on it. Candidates with relevant experience, a passion for the mission of the organization, an appreciation for the complexities of running a nonprofit and a willingness to take on the duties of loyalty, care and obedience.
Making change requires being in the room where it happens. Those who seek it should welcome the invitation to come in.