Nonprofit Board Crisis

Nonprofit Board Acting Badly #NonprofitBoards

Following-up from yesterday's story, here's another attempt to hoodwink a nonprofit - and they got caught!

From inweekly:

 

 

Board Functioning with Mostly Dead Members #NonprofitBoards

The following Miami Times story is simultaneously funny and sad.  Don't let this be a reality for your nonprofit board!

A board functioning with mostly dead members got a rude awakening when two of the living were slapped with an ethics investigation.

Some actions of Mae Christian and former state Rep. Roy Hardemon were discussed and addressed at last week’s Miami-Dade County’s Commission on Ethics and Public Trust.

The two are the only remaining board members of the Model City Community Advisory Committee, which came under scrutiny after an anonymous complaint was made against them.

But community member Renita Holmes said she made the complaint and that she is not “anonymous.”

The complaint received said Hardemon and Christian served on two county boards simultaneously, which would have been a violation of the county ethics code.

That claim was unfounded.

mon and Christian served on two county boards simultaneously, which would have been a violation of the county ethics code.

That claim was unfounded.

What the ethics investigation did uncover were “severe potential ethical transgressions” as well appearances of conflicts of interest and revealed that the Model City CAC has been basically defunct for several years.

Hardemon said the Model City CAC is alive and well and believes the ethics complaint is a personal attack against him. He pointed out that the committee advised county commissioners to redevelop North West 18 Avenue in Liberty City, and they did.

“If we are dysfunctional – I know they use defunct but I am going to say dysfunctional – why would they reserve space for our meeting next week? Hardemon said Tuesday.

MEMBERS DIED, NOT REPLACED

Christian, who said she has been on the committee some 15 years, told investigators other members of the committee had died and had not been replaced. But investigators would find there were some other people involved with the Model City CAC.

Ethics investigators wrote that Hardemon and Christian put together a plan to get state dollars to develop Poinciana Park into a logistics center. Christian, on Jan. 17, 2018, made a presentation at “a purported meeting” of the Model City CAC to get $25 million for the Poinciana development. Those funds were to be managed by a non-profit she started in 2015, the Model City Advisory Board Community Development Corp. Hardemon is a member of the board of Christian’s nonprofit.

In an attempt to get funding for Poinciana Intermodal Center, Model City CAC presented a “purported document” in the form of a “resolution” to Miami-Dade’s Public Housing and Community Development department signed by Hardemon, Christian, Gerald Reed Jr. and LaVerne Holliday recommending that $200,000 come from Community Development Block Grants for pre-development costs of Poinciana.

For the Poinciana project, Hardemon secured $2 million in state funding that was erroneously set to be issued to the city of Miami. Hardemon wanted those funds to go to the Model City Advisory Board Community Development Corp. But the $2 million were supposed to be appropriated to Miami-Dade County. The investigation noted that the funds could not go to Hardemon and Christian’s organization because it has no county affiliation.

“They [the county] didn’t incorporate our organization,” Hardemon said.

The Commission on Ethics discovered that Christian sought a $42,000 reimbursement for an August 2018 trip to Nigeria from the Model City CAC, which she said she made on behalf of Model City Advisory Board Community Development Corp, her nonprofit.

The Commission on Ethics said Hardemon and Christian’s actions “could be perceived as exploitation of their official position.” It went on to say those actions “appear to be clear violations” of the county’s guidelines. But the conundrum for the investigators is that since the committee wasn’t functioning as it was supposed to, the actions of Christian and Hardemon were sort of moot.

Christian could not be reached for comment.

HOLMES COMPLAINS

Holmes, who has been a past critic of the Model City CAC, said she sent the initial complaint to the Miami-Dade County Office of the Inspector General, to look into the “abuse, and misuse of funds and compliance as well bullying,” she wrote in a text to The Miami Times. The Inspector General turned her complaint over to the Commission on Ethics.

Holmes has questioned why the Model City CAC holds no elections and has demanded its meeting minutes.

"Ever since Roy assaulted me last year at one of the CAC meetings I haven't received any notices about the meeting or where there held," said Holmes.

 

A frequent attendee to meetings called by the Model City CAC, Holmes once reported to police that she was attacked by Hardemon at a meeting.

When asked who are the other members of the board, Holmes didn’t know.

“Who they in there presenting and having meetings with? Ghosts?” Holmes asked.

Hardemon has previously said he was forced to restrain Holmes June 27, 2018, after she began throwing chairs and screaming at a meeting attendee.

The Commission on Ethics recommended that the Miami-Dade County Public Housing and Community Development department – which oversees the Model City CAC – consider removing Christian and Hardemon and shutting down the group.

Christian told the Commission on Ethics that her trip would make future trips possible and that “it would benefit the community.”

The county bore some responsibility, the Commission on Ethics found.

The Commission on Ethics wants an evaluation of all Community Advisory Committees, increased oversight and supervision by PHCD and recommends “immediate” training of all the county’s Community Advisory Committees.

The Community Advisory Committees focus on nine neighborhoods that are historically underserved in Miami-Dade County. They are to provide insight to the board of County Commissioners.

The Community Advisory Committees are required by both Miami-Dade County and Housing and Urban Development (HUD) in order to receive Community Development Block Grant funds. The Commission on Ethics questions how the county has been able to secure CDBG funds given the state of the Community Advisory Committees, specifically the Model City CAC.

It plans to forward its findings to PHCD, and local and federal Inspector General offices.

Nonprofit Board Chair and CEO #NonprofitBoards

In a recent Chronicle of Philanthropy piece, Alex Counts, founder of the Grameen Foundation, has offered his thoughts, based on his own experience, on what it takes to create a positive relationship between the CEO and Board Chair.  Before summarizing his points I will offer that Mr. Counts' points should remind us all that nonprofit boards and board members are relational AND transactional noting that the relational elements most often influence the transactional.  This point summarizes the importance of considering Mr. Counts' ruminations whether all are correct or possible.

1. The chair must earn the respect of the board. 
2. The chair and CEO must engage deeply. 
3. The chair and CEO must complement and substitute for each other. 
4. As chair, be visible to, and inspire trust in, the staff. 
5. Accept occasional tension as part of a healthy relationship rather than a problem. 
6. The chair has the CEO’s back. 
7. Maintain regular communication — with some meetings focused on a tight agenda and others unstructured — and account for the realities of people’s lives. 
8. Agree on, and work together to attain, the desired board culture. 
9. Collaboratively manage conflict on the board, and between board and staff members.
10. Understand each other’s roles, ideally based on direct experience. 

Your thoughts and experiences are welcome.

Nonprofit Board Chairs #NonprofitBoards

What's the difference between research/evidence based recommendations and experience/maybe common sense recommendations?  The answer: the following article from tallahassee.com is precisely the difference.  Bottom line: while much of what is described in this article may well be a-ok and prove, were it tested, to indeed produce a board chair that serves effectively, there is in fact no research that would support this advice.  Herein lies the challenge - lots of advice and maybe some experience or common sense to back it up.  Caveat Emptor!

That said, please read but don't just accept carte blanche - think!

One of the interesting things about writing this column for as long as Alyce Lee and I have is that there are nuts and bolts ideas that are just as relevant today as they were years ago when we first wrote about it. Especially in relation to nuts and bolts information about operating a board. This is why we refresh and rerun columns, like today.

When is a board chair a good one? When I googled the question, there were about 100+ sites that came up with lists. As I pondered which one to click on, I suddenly asked myself why I was researching the question at all. I’ve been working with boards for 30 years. I’ve worked with excellent board chairs and ineffective ones. I don’t need Google.

A dynamite board chair:

1. Wants to be the chair for the right reasons. Because they have a vision. Or they believe deeply in the mission. Or they want to influence a positive change or stabilize an organization after a change. I think it’s perfectly fine for people to recognize the prestige it brings to their resume, but it can’t be the only reason they’re doing it.

2. Doesn’t commit to be the chairperson unless they are willing to work really hard. This means owning the position and taking it very seriously.

3. Understands the difference between their role and the CEO/Executive Director’s job. As chair, their focus is on the organization’s future, its public reputation, financial health, the performance of the board and quality of the ED’s work.

4. Does not micromanage and does not treat the ED like their employee. When the ED shows them a new flier, they don’t tell them they want another color. Doesn’t ask the ED to check in and out with them. Recognizes the unique servant leadership relationship they have with the ED and respects and values the ED’s leadership but also has no problem identifying where the ED should not be leading.

5. Creates a culture of enthusiasm for fundraising. Approaches it with dedication. Encourages enthusiastic giving by example. Leverages relationships and looks for opportunities to promote the organization in other areas of their lives, such as their workplace, place of worship, and civic organizations. On alert for every opportunity to publicly support the mission of the organization. Is willing to ask for money and leverage their position to gain support for the organization.

6. Is a student of board governance and doesn’t think they have nothing left to learn. Recognizes the way it was done on another board may not have been the best way. Driven to have a high performing board. Maintains relationships with every board member. Calls members when they are missing from meetings or falling behind in obligations. Never sets the ED up to be the bad guy with board members. Effectively manages the work of the executive committee. Driven and motivated to identify the highest quality board members and spends time welcoming and working with new board members.

7. Creates an agenda that encourages conversation about the future of the organization. Develops meaningful work for the board and encourages an environment of learning and commitment.

8. Expects high-quality work from the CEO/ED. Sets expectations, follows up with positive and critical feedback designed to encourage professional evolution. Ensures a strong annual evaluation process. Is not afraid to take corrective action when warranted. Recognizes their job is not to take care of the ED over and above the welfare of the organization. Doesn’t ignore indications the ED may not be the best leader for the organization.

9. Recognizes the board’s supervisory responsibilities to the ED. Makes structured regular time for the ED.  Asks for their opinions of board operations, provides mentoring and guidance when requested. Provides a constructive sounding board for the ED. Organizes board recognition of ED’s birthdays and holiday gifts when appropriate.  Remembers the ED is responsible for the staff, but the board is responsible for the ED.

10. Works harder between meetings than during meetings. Works the phones with other board members and donors. Provides support and guidance to board committees and holds them accountable. Attends important events in the life of the nonprofit and recognizes the ED and staff regularly for their accomplishments.

11. Requires an annual strategic planning session and actively tracks the accomplishments and goal dates.

 

 

Non-profit versus For-profit #NonprofitBoards

As a consultant who singularly works in the nonprofit sector I regularly defend that nonprofit, sans the greed motive of corporations and the public demand of citizens, are best.  They are governed by volunteers.  They are not driven by greed.  They fill the void left by for-profits and the public sector (although with the later this is sometimes a fuzzy distinction when for some more than 75% of their revenue is a contract with the public sector) and all-in-all, they make communities and those who live in communities better off.

Yahoo Finance, in reviewing a College Board report, cited that these distinctions may not make nonprofits holier than their counterparts when it comes to higher education.  While on the one hand acknowledging that for-profit colleges are just that, for-profit, they are in many instances cumulatively (all things considered) cheaper/cost effective AND provide just the education aka skills, that the student desires: specifically, skills that get students a job.  The report did indicate thought that students' completion rates at for-profits are not as high as non-profits (not clear why).

Governance distinctions aside, if this report is correct, perhaps it's necessary to review the rest of the nonprofit sector for its strategic or not differences with their for-profit counterparts.  Overrating the nonprofits am I?  I certainly hope not. 

 

 

Advisory Councils #NonprofitBoards

The Jacksonville YMCA is utilizing a structure and nomenclature that I believe to be a very appropriate and useful approach to utilizing volunteers to inform its programming.  With a purpose to "ensure the entire military community was heard" the Y has created a "14-member Military Outreach Advisory Council".  NOT A BOARD nor governing, this body, guided by staff, has been providing its perspective in helping develop programs tailored to military families."

Bottom line, by engaging community folks, asking their input, and pursuing their ideas, the Y is effectively building its constituents who may in the future also be future board members and donors.  This type of structure is the correct approach I believe and worth modeling if these objectives are desired.

You can read the full story here.

 

Nonprofit Board Composition #NonprofitBoards

Today, nonprofit board composition is a BIG topic particularly when considering diversity, inclusion and equity which are obviously topics that include more than just composition.  

A new museum, Planet Word, is about to open in Washington, DC.  Planet Word, as one might gather from the name, is focused on language and literacy.  Whatever you think of these topics, the Post-Gazette did a fine job of discussing the museum's origin and intent and more interesting to this blog, the board and founder.  Specifically:

In 2013, she started to research her project by attending museum conferences, meeting with leaders of institutions she admired and hiring a staff, including Executive Director Patty Isacson Sabee. She built a board that includes investment bankers, developers, lawyers, educators, writers and museum professionals  — a group with expertise in all aspects of the project, Ms. Semmel said.

“I’ve been so impressed by Ann’s step-by-step, dogged, thoughtful process,” she said, adding that Ms. Friedman and the staff have reached out to local community groups, partnered with Apple at the Carnegie Library and participated in the National Book Festival.

In addition to the board of directors, Planet Word has an advisory board that includes Harvard professors Steven Pinker and Catherine Snow, New York Times crossword puzzle editor Will Shortz, musicians Ben Folds and Paul Simon, and authors Jason Reynolds and Deborah Fallows.

Now the question: has the museum founder hit the target on creating the "right" board - one that brings the "right" skills AND diversity to the table?  And what about this Advisory "board" (not nomenclature I am fond of for an advisory group - sends the wrong message about who's responsible at least from a fiduciary perspective)?  One clue: the founder is a VERY rich individual.  

Tainted Money? #NonprofitBoards

A short chapter in the misdeeds of President Trump ended Friday with the closure of the Trump Foundation.  

To a great extent, this closure came as a result of proven technicalities.  Few in general might think the misdeeds of the Trump Foundation THAT serious - serious enough to warrant so much time and attention and the closure of the Foundation, distribution of its assets AND a $2 million penalty.  

The "paper" statement is basically that the Foundation, aka the Trump family member board, violated campaign and charitable giving finance laws. OK - maybe not so serious - not like anyone died or that money didn't get distributed to good purpose. 

BUT, in reality, why this is a big deal and worth all the fuss is that charities are permitted under tax law to benefit the public - singularly, first and foremost.  But the misdeeds of the Foundation's board (the Trump family members) saw the first benefit of the Foundation not to be the public but the President of the Foundation - Mr. Trump.  Raising money for the campaign via the Foundation - Trump was the PR beneficiary.  Using Foundation funds to pay business debts - Trump was the direct beneficiary.  Buying a painting of Trump to hang in one of his golf clubs - Trump was the beneficiary.  And all these gains at the expense of the public because they were tax free to Mr. Trump.  Not to mention that "some" "allies" of Trump were "moved" to make large contributions to the Foundation - moved?

 

So now the transactions have been noted and fined and the "criminal", although there's obviously no going to jail over this matter, has been "punished".  Of course the other family members, equally failing in their respective fiduciary duties as Foundation board members, are essentially unencumbered.  While one of Mr. Trump's penalties is that he can't serve on a board in the future (appreciate this is one of the ways ex-presidents make money and do stuff) - what about the rest of the board?  Aren't they equally culpable?  They would be in most other similar situations.

But, wait, there is one more question: might a charitable recipient board of the penalty dollars want to consider the question: hey, isn't this tainted money we are accepting?  Thought for the day :). 

Core Governance Principles: How's Your Board Doing #NonprofitBoards

In my ongoing work with nonprofit boards I am conscious that what is happening in terms of governance by the for-profit world is not quite happening in the nonprofit world.  The general rule for boards is that governance has three characteristics: independent leadership, accountability (aka oversight, compliance & risk management) and conflicts avoidance.

My experience would pose that in the area of independent leadership, nonprofit boards struggle to not defer their very essence to whatever their execs propose.  Nonprofit boards generally do not have a mind of their own but instead, their "mind" tends to be linked to that of their exec, to a fault.  I would further pose that the volunteer leadership would do well to work on this separation of minds while of course distinguishing between recognizing that the exec is in possession of all that is operational and tactical as well as many external realities but the demands for strategy must come from a partnership assuming that the board brings to the table a broader view of the world and passion for a direction.  Big assumptions.

Oversight by nonprofit boards, again in my opinion, is a more hit-and-miss occasion recognizing that at minimum, oversight of the partnership with the exec would be a good beginning but many boards aren't even clear about what might be their dashboard and the goals the dashboard reflects never mind the compliance and risk management challenges.  Education is clearly needed.

Finally, perhaps the one place where generally boards do somewhat better but nowhere near 100% is conflicts avoidance.  Quite nuanced, again, boards would benefit from a clear understanding of what is and what is not a conflict and carry this understanding forward into practical decision-making.

Much to be done.

Boards: Male, Pale and Stale #NonprofitBoards

Today's boards (nonprofit and corporate): male, pale and stale.  But, must they, can they, stay that way?  No!!!  The following Forbes article speaks to the conditions and opportunities if not mandates for changing this.

The Boards, They Are A-Transformin’

 

Michael PeregrineContributor 

Leadership Strategy

 

ASSOCIATED PRESS

No, it doesn’t mean that the Bard of Fourth Street has become a governance consultant. Nor does it suggest that the board must accommodate a voice of protest in its mix. But it does speak to significant new developments affecting board composition that provide important guidance to the nominating committee.

Over the last several weeks, three separate, prominent organizations have released reports that speak to issues that directly impact board composition and related governance topics. These include the latest Blue Ribbon Commission report from the National Association of Corporate Directors (“Fit for the Future: An Urgent Imperative for Board Leadership”), the 2019 Spencer Stuart Board Index and the latest release of the New York City Comptroller’s Boardroom Accountability Project.

These reports, from organizations and officials with disparate orientations, offer a common call for fundamental change in board composition practices. The shared takeaways from these reports are first, that boards of major companies must accelerate their board refreshment practices in order to face looming business challenges; second, that some progress towards that goal is already being made; and third, government is increasingly seeking to be an aggressive “partner” in the director nomination process. The underlying message is that effective governance requires prompt evolution from the “male, pale and stale” status first exposed by The Conference Board’s impactful March, 2019 survey.

 

Today In: Leadership

The new NACD Blue Ribbon Commission report examines board composition through the lens of what it describes as a “business revolution with profound implications for companies...a period of challenge and transition.” In NACD’s view, the ability of boards to meet the demands posed by this new disruptive environment will depend in part on their ability to add “new types of expertise, experience and capabilities to their ranks.” In other words, the pace and scale of change requires a different, more diverse board membership model. NACD thus links the ability of an organization to maintain a competitive advantage with the willingness of its board to transform its composition.

The NACD report compares the desired board composition to the roster of a successful professional sports team, which combines players with certain fundamental skills and personal attributes with others who possess certain critical talents and capabilities to work together as a cohesive whole. This growing need for specialized expertise is, to NACD, causing nominating committees to move away from the traditional emphasis on directors with the same background (e.g., CEOs or other senior executives); gender (e.g., males); ethnicity (e.g., white); and age (older or at career’s end).

Spencer Stuart’s 2019 Board Index similarly points to indications of board transformation. This Index, reflecting a survey of the S&P 500 and of governance/nominating committee members, reflects a continuing shift in the profile of directors of major corporations. Particular survey results point to a dramatic acceleration of women and minority directors added to S&P 500 boards; reduced emphasis on prior CEO or other senior leadership and/or board experience as prerequisites to board appointment; a greater willingness to consider other corporate leadership skills in the nomination process; and an uptick of concern about director overboarding.

The Index also finds that low boardroom turnover rate continues to persists, and is likely to continue absent more aggressive refreshment practices (e.g., retirement policies/age caps and term limits).

Spencer Stuart attributes the increasing transformation to the willingness of nominating committees to accommodate calls from shareholders and other stakeholders for greater boardroom diversity across the spectrum.

The New York City Comptroller’s release is the third phase of the office’s Boardroom Accountability Project, a campaign begun in 2014 in order to make boards more diverse, independent, and climate competent. This newest initiative calls on companies to adopt a policy requiring the consideration of both women and people of color for every open board seat and for CEO appointments, like a version of the “Rooney Rule” adopted by the National Football League. To promote the initiative, the Comptroller has contacted fifty-six S&P 500 companies that, regardless of the current diversity of their board or CEO, do not currently have a Rooney Rule policy, to advise them that he will file shareholder proposals with companies which lack  apparent racial diversity at the highest levels.

Comptroller Stringer’s call includes gender and racial/ethnic diversity, and is reportedly the first time a large institutional investor has called for this structural reform for both new board of directors and CEOs. The Comptroller’s stated goal with this latest initiative is to “make meaningful, long-lasting, and structural change in the market practice so that women and people of color are welcomed in the door and considered for every open director seat as well as for the job of CEO.”

While the Comptroller’s initiative is not a statutory requirement, it is the latest example of governmental efforts to impose their imprint on the board nomination processes of public and private/nonprofit corporate boards. In this regard it follows the statutory examples set by Florida and Illinois, and by progressive political candidates such as Elizabeth Warren.

Collectively, these reports provide important fodder for nominating committee discussion. Traditional views on the appropriate qualifications for board service may need to be reconsidered. The vigor of director recruitment efforts may need to be recharged. Commitment to effective board refreshment practices may need to be renewed. There’s a lot to be added to the committee’s agenda.

NACD may have gotten it right. Changing times indeed may require changing boards. Of course, the perspectives of a disparate group—a corporate governance trade association, an executive search firm and an elected municipal official—constitute neither law, nor established best practice. But their respective credibility, and the consistency of their message on board transformation merits governance attention. Nominating committees may need to confront the possibility that as to board composition, the waters around them may indeed have grown, and in a big way.

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Michael Peregrine

I am a partner in the Chicago office of international law firm McDermott Will & Emery and earned my law degree at Northwestern University. I represent corporations (...

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