Nonprofit Board Crisis

Community Voice Matters #NonprofitBoards

In a reminder that those served by a nonprofit can be heard when those paid haven't listened, the CEO of New York Road Runners, the non-profit behind the New York City Marathon, is stepping down amid organization-wide allegations of racism and sexism and calls for his removal.

According to bluzz.com

In September, a group called Rebuild NYRR – made up of current and former NYRR employees — started an online petition demanding the immediate resignation of Capiraso for allegedly fostering a “toxic, discriminatory, and systemically racist work culture at NYRR.”

More than 1,150 people have signed that Change.org petition as of Monday morning.

“For years, we have been experiencing racism, bias, and bullying that goes unchecked. We want to create a healthy, equitable, and safe environment for ourselves and for our community. We have been pushing for fairness and cultural competency for years only to have it fall on deaf ears,” the group had posted on its website.

Kudos to the members taking action and apologies that it took community organizing and legal action to move the board to act and response.  Nonprofit boards must be ever vigilant that they are caretakers of the community's resources and must be held accountable for their actions including not listening.  While the board has turned around seemingly responsively, I would encourage the folks that initiated these actions to consider taking many if not all the seats at the table.  The board failed to do their duty.

Nonprofit Board DEI #NonprofitBoards

Most folks are willing to acknowledge that nonprofit board members are predominantly white males.  And there is consensus among at least community foundations and the mega foundations that this failure in diversity produces results that do not change the causes of poverty among the many national and community ills.  And finally, there is general acknowledgement that a huge cause in the failure to diversify nonprofit boards is rooted in a reality that the networks of those who serve is generally void of people of color (of course this doesn't explain the disproportionality in terms of number of women on boards).

A recent study on the topic of corporate board diversity reveals with a deeper dive analysis that one huge factor affecting board membership and recruitment is the reality the networks of those who are seated as board members is very insular and results in only those within as possible participants as board members.  So, break into the network - change the participation by people of color.  Sadly or maybe optimistically, change a % of the number of insiders who are committed to expanding their networks and in-turn, expand the possible number of people of color in positions to become board members.

Here's the Jackson Journal Courier article:

Janet Yellen and Kamala Harris keep shattering glass ceilings – but global elite boys club remains

Kevin L. Young, University of Massachusetts Amherst

 Updated 12:05 pm CST, Wednesday, November 25, 2020

(The Conversation is an independent and nonprofit source of news, analysis and commentary from academic experts.)

Kevin L. Young, University of Massachusetts Amherst and Tuugi Chuluun, Loyola University Maryland

(THE CONVERSATION) Janet Yellen may soon become the first woman to lead the Treasury Department, about six years after shattering another glass ceiling at the top of the Federal Reserve.

She’s not alone in breaking down barriers in President-elect Joe Biden’s proposed new Cabinet. Michele Flournoy is the favorite to lead the Pentagon, while Biden named Avril Haines to be his director of national intelligence – if confirmed, they would be the first women in either of those positions. And that’s not to mention Kamala Harris, who on Jan. 20 will become the first woman vice president in U.S. history.

There’s often an expectation that busting these barriers – as women have been doing for many decades – will eventually lead to the kinds of systemic changes that will finally yield parity between men and women in leadership roles in government, the corporate world and beyond.

 

 

To understand these dynamics better, we analyzed the connections among the elites who govern many of the world’s most powerful companies and organizations. We wanted to see how many women and people of color had found their way to the center of these networks, which is a signal of how influential they are.

While Yellen and Harris represent progress, our results show it’s still largely a boys club.

Two steps forward, one step back?

Around the world, women are increasingly making their way into positions of power in disciplines like economic sand finance that are notoriously sexist.

Yet despite notable achievements, such as at the International Monetary Fund, where both the present and previous heads have been women, the worlds of finance and business remain highly male-dominated.

Among big global corporations, for example, women are rarely in top leadership positions. For example, only 37 of the companies listed among the Fortune 500 are led by women – and yet this is a record high. In the U.S., only 5% of CEOs in the S&P 1500 are women.

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The inner circle

Why are so few women breaking through?

We thought the answer might lie in looking at global elites. These leaders have power not only because they run organizations but because they often have many connections to other elites.

In a paper published in November in the peer-reviewed journal Global Networks, we examined the racial and gender diversity among the elite leaders who govern about 100 of the most powerful organizations and companies in the world based on global rankings and size. Our list includes some of the world’s largest companies, such as Walmart and JP Morgan, several influential nongovernmental organizations, such as Doctors Without Borders, Oxfam and Amnesty International, and international organizations of all kinds, such as the World Trade Organization and the World Economic Forum.

For each organization, we focused on the individuals who sat on their governing boards. These are the folks who make an organization’s most important decisions and determine who is ultimately in charge. We assembled a list of about 1,600 people who were on these boards in 2018. We then analyzed their ties to one another in terms of belonging to the same boards across organizations.

In all, we found about 9,000 ties that connected these leaders, creating a massively complex global network. By adding up these ties, we were able to reveal a snapshot of how leaders relate to one another and – more importantly – which leaders were at the periphery of the network and which were at its center.

We wanted to determine whether many women or people of color have made it to the center or core of this global network of elites or whether they mostly remained at the periphery. Studies of network power have found that it’s not enough to be a part of this network to have influence; one must be highly connected within it as well.

We found that women made up about 25% of leaders in the network – but only 6% were women of color. Men of color made up about 21%. The other leaders were all white men, who made up over half of those in the network.

What was most striking to us, however, was how few women and people of color penetrated the highly interconnected inner circle. Just 15% were women and 10% were men of color. Very few were women of color. Yet the figure for white men in the inner circle jumps up to 75%.

Making connections

This, of course, is just a snapshot.

We don’t know how it’s changed since or what it was 10 or 20 years ago. We are currently trying to chart how these dynamics evolve over time.

One thing we do know is that men tend to dominate the inner circle of these networks, and that’s likely allowing them to amass even more power and influence.

It’s not enough for women and people of color to make it to leadership positions; they also need to be able to tap into the center of power networks to ensure the progress represented by Yellen, Harris and Biden’s other Cabinet picks continues.

This article is republished from The Conversation under a Creative Commons license. Read the original article here: https://theconversation.com/janet-yellen-and-kamala-harris-keep-shattering-glass-ceilings-but-global-elite-boys-club-remains-150799.

Nonprofit Board Self-Evaluation: Or Not #NonprofitBoards

Because my consulting practice leans toward nonprofit governance, the subject of evaluation and self-evaluation by the board does arise.  My associate Yvonne Harrison has specialized in developing a self-evaluation and through a longitudinal study has some good results to suggests that a self evaluation is not only perfectly fine but effective.  

Today my associate Dr. Fram offers some differences on this position positing that the best evaluation is one done with the assistance of a professional (e.g. like me!).  Still, I'm not convinced and I ask you to read his points as follows:

 

ARE NONPROFIT BOARDS CAPABLE OF EVALUATING THEMSELVES?

Are Nonprofit Boards Capable of Evaluating Themselves?

By: Eugene Fram       Free Digital Image

A study of business boards by Stanford University yielded the following results:

• Only one-third (36%) of board members surveyed believe their company does a very good job of accurately assessing the performance of individual directors.
• Almost half (46%) believe their boards tolerate dissent.
• Nearly three quarters of directors (74%) agree that board directors allow personal or past experiences to dominate their perspective.
• And, perhaps most significant, the typical director believes that at least one fellow director should be removed from the board because the individual is not effective. *

Given that many of these business boards have the financial power to employ legal counsel or consultants to conduct a rigorous impartial evaluation, what can a nonprofit board, with limited financial resources, do to make sure that the board and its members are being fairly evaluated to drive change?

Ask The Tough Questions:  No matter what process is used in the evaluation, the board has to address some difficult common questions.  These include:

• To what extent are board members overly compliant with the wishes of the board chair or CEO? Having been a veteran nonprofit board member or a consultant with dozens of others, I find there is a tendency for nonprofit board members to “go along to get along. As a result, the board tends to be compliant with the wishes of the board chair, the CEO or an influential director. Rigorous/civil dissent is not part of meeting discussions.
• Leadership selection discussions are rarely a priority. Often, through lack of interest or the organization’s formal culture, the board has little contact with staff members below the senior management level and little interest in assessing where future management strength can be developed.
• I have yet to encounter a nonprofit board that is willing to discuss its effectiveness in terms of overall strengths or weaknesses. Critical tough questions are: Are all members contributing at a minimum “get or give” level?  Especially between meetings, how can board’s internal communications be improved? To what extent does the board become involved in micromanagement or perpetuate it long after the board has outgrown the startup stage?   For example, I observed one mature board make a decision about the timing of fundraising events and then spend the next hour brainstorming the types of events that might be developed—clearly a management responsibility to investigate.
• The strategic strength of the board. Nonprofit board member backgrounds should be aligned with the emerging needs of the nonprofit.  Examples, if fund development is going to be a priority, a person with event planning experiences should be recruited. If the reserve fund return is not being maximized, a person with a financial background, not a CPA, is required.
• The ineffective nonprofit director. It is the most vexing problem that boards face. This person’s behavior can range from one who monopolizes discussions to the person who attends meetings but never makes any financial or other types of contributions. Some boards claim that they can approach the problem by asking each director to assess the effectiveness of his/h colleagues, but in decades of nonprofit governance experiences, I have never encountered a board that has had this process in place.

Review Current Practices:  If the board has never been self-evaluated, to do a proper self evaluation, these steps are important:

• Develop a questionnaire to be completed by all board members.  It should be carefully crafted to determine how the board as a group and each individual board member contributes to enhancing the organization’s mission.
• The committee assigned to the project should seek the assistance of someone with professional evaluation competence to guide the work.  Hopefully he/s will accept the assignment on a pro bono basis. This also can be an interesting project for a small group of graduate students, guided by a knowledgeable professor.  Because of the confidential nature of the material, no more than three students should be involved.
• Develop the processes for dissemination, confidentiality, collation of materials and organization of survey information. Again, engage a professional to assist with these efforts.

Traditionally, nonprofits use a simple questionnaire to evaluate the organization and the CEO. Their development processes vary widely, and their usefulness often can be questioned when not all board members take the time to thoughtfully respond to the survey or when it is developed by committee. However, board self-evaluation needs to be completed with professional assistance, and the results reported with diplomatic care to drive positive board change.

*https://www.directorsandboards.com/news/how-boards-can-self-evaluate

Nonprofit Board Conflicts of Interest #NonprofitBoards

While it may seem like there are really huge "other" issues nonprofit boards are addressing these days it is important to remember that conflicts of interest (the Fiduciary Duty of Loyalty) is ever present and a legal responsibility of each board member.  My friend Don Kraemer offered the following advice in the latest issue of the Nonprofit World Q&A.

Q I’m working with an all-volunteer nonprofit that has a possible conflict of interest. The board president pays a member of his family (who is on the board) to mow the grass at our facility without putting the job out to bids or seeking other estimates. In addition, the president pays his father (who is also on the board) when his father purchases materials and installs things (such as ceiling fans) in our buildings. Other members of the board are concerned about this but are afraid to broach the subject. They’re looking for guidance on how to handle this situation.
A The only way to handle the situation is to face it and deal with it. It’s an obvious conflict of interest when an organization contracts with members of the board or their family members to provide goods or services to the organization. It’s not necessarily illegal, however, if the cost is fair to the organization.
You don’t identify the tax status of your organization, but if it’s a 501(c)(3) public charity or a 501(c)(4) social welfare organization, paying too much for these services can be considered an “excess benefit,” with serious tax consequences for those who receive the excess or for those who knowingly approve the excess. There may not be enough involved here for the IRS to get involved, but the “safe harbor” procedures for determining whether the payments
are reasonable or not would provide a good guide for your organization to be sure that things are okay. Unless your board is going to prohibit any conflicted transactions (which in general I don’t think is a good idea), it ought to require that these safe harbor rules be put into place so that everyone can be confident that what they’re doing is within the law.

Don Kramer, Nonprofit Issues, nonprofitissues.com Also see these articles at NonprofitWorld.org

Nonprofit Board Chairs #NonprofitBoards

Here's info from an international study on board chairs.  The conclusion is that chairs that follow the 3 "e's"-engage, encourage, enable - will find success with their boards.

Since boards of directors are not always transparent, and the role of their chairs doesn't come with a handbook, we hope this report will shed light on the workings of board chairs. Board chairs share various issues internationally, but how they lead their boards effectively was of particular interest in the study.

All board chairs surveyed considered that their main task is to provide effective board leadership. We found strong similarities in the way chairs from various countries define the job itself and the way they go about it. Chairs play three specific roles: engaging, enabling and encouraging, what we call 3Es leadership.

Engaging board members to use their talents in the service of the board is a challenge for the chair. It is no simple task, particularly as most boards meet only a few times a year. Often directors are based in different locations and have multiple affiliations and limited availability.

Two practices to deal with this challenge described by the respondents were setting expectations up front and maintaining communication between board sessions.

Effective chairs recognise their main task is to provide constructive board leadership. In addition to specific practices, our report also showed that there are some personal characteristics which make some board leaders more effective than others Humility and ego management "If you intend to use your chair position as a platform for selfaggrandisement," one of the most experienced chairs remarked, "you are in for trouble." The terms "restrain", "non-domineering" and "leaving room for others" were cited when referring to productive board discussions which lead to effective decisions.

Enabling board members to work effectively as a group is the second function of the chair. To properly facilitate discussions at the board meetings, the chair must plan and prepare premeeting, in-meeting and post-meeting work.

Encouraging board members is important to the chair in order to keep the board motivated, engaged and productive.

Big Trends in Nonprofit Governance #NonprofitBoards

I attended ARNOVA's annual conference last week and in particular a session on trends in the field of nonprofit governance.  Dave Renz and Dennis Young spoke.  Here's some of my takeaways

1. Hybridity -  recognition that there are public policy matters to address as a consequence noting that as a result of social enterprise there is a blending of public missions and private enterprise including no rules re governance and profit/asset distribution as examples
2. Networks - how to govern these using traditional modes is unclear - networks are the collaboration of many to solve "wicked" social problems like racism and poverty - but managing the governance needs of the members over the governance needs of the whole is not instantly clear
3. Competition and collaboration within the sector - is it really best for all?
4. There is becoming a blurring of boundaries of authority and responsibility for new efforts like collective impact and again networks
5. If nonprofits are about addressing the gap left by the public and corporate sectors, what is the gap when the nonprofit is more regularly called upon by the public sector to do the public sector's job or corporation's use of nonprofits for a variety of its goals
6. The depletion or demise of nonprofits reflects the depletion or demise of the distribution of wealth - smaller poorer nonprofits fare more poorly in hard economic times just as does the poor

A reminder from David Renz - board is a structure while governance is a function.  

PS - here's a perfect example of that blending between nonprofit and public sectors raising the question - is the nonprofit truly independent and sustainable on its own from www.nynmedia.com:

New York City Department of Social Services: Two nonprofits and two law firms are scoring deals with the city agency. Goddard Riverside Community Center is inking a $456,858 contract to provide single-room-occupancy housing to homeless men in West Harlem through June 2026. Those are small potatoes compared to the $10.1 million and $5.9 million deals going to Catholic Charities Community Services Archdiocese of New York and Catholic Charities of Brooklyn and Queens to respectively do homeless prevention services in the Bronx and Brooklyn. Guidehouse LLP and Padilla and Company LLP are respectively providing $558,344 and $1.7 million worth of services to the department. 

Nonprofit Failed: Should it Survive? #NonprofitBoards

The Boy Scouts are back in today's news as the deadline for being a part of the class action suit for having been molested is near.  

More than 100 years old the Scouts have been plagued by sexual predators all these years.  At lease 88,000 have been identified as survivors as of this date.  There have been records kept on incidences since the early days - they were called Red Files or Perversion Files.  The Scouting organization knew the problem but they went on.

The Scouts have $1 billion in the bank.  They, the board, have filed for bankruptcy to protect these assets and cheat those who have been their victims.  In taking this approach, is this a board truly fulfilling its fiduciary duty - organization over consumer?  I think not! Time's up!  

Really, this is the nonprofit sector.  If there remains a void/need that neither the corporate sector nor public sector has filled, let's put the Scouting Organization in the ground and start over.  Could even use the same equipment but clearly not the same people in charge.

Survival of the Fittest #NonprofitBoards

One takeaway for me from the 2020 ARNOVA Conference going on as I write:  depending on who you ask (aka CANDID) some not so slight number of nonprofits will not survive COVID and a Recession: Evolution Population Theory at play otherwise recognized as survival of the fittest. 

Practical response: rethink for the long not the short-run if planning to be around to accomplish mission - eg fundraising for the short-run is just that!

Nonprofit Board Meetings #NonprofitBoards

Again from the corporate governance manifest, Dr Fram offers thoughts about nonprofit board meetings:

 

Building Meetings & Operations

• An agenda focus needs to be on forwarding–looking for discussion of the mission and its impacts. Nonprofit agendas quite often default to discussions of current operational topics. Perhaps a lead director is needed whose responsibility is to keep agenda topics on forward-looking items?  
• The performance of the current CEO and other key members of management and succession planning for each of them needs to be on agendas more often. There is wide acceptance of the view that nonprofit CEO performance assessment can be improved and research data show that succession planning efforts for CEO and other senior managers are very modest. Senior management bench strength can be evaluated by the nonprofit board through an assessment of key employees and direct exposure to those employees.
• Significant risks, including reputational risks are critical items for the agenda. Nonprofit boards are traditionally conservative because they are responsible for tax, foundation or charitable resources. Risk levels of nonprofit boards “vary greatly depending on their sizes and other similar factors”. However the huge success of the Alzheimer’s Association with its “Ice Bucket Campaign” has given many nonprofit boards reason to review fund development risk taking.
• Standards of performance, such as maintaining and strengthening of the nonprofit’s culture and values, are clearly agenda items. Both for-profits and nonprofits have begun to establish behavioral outcomes as performance measures. Because there can be a big discrepancy between outcomes and impacts, many foundations and other donors are asking for impact evidence of performance, a significant challenge for many nonprofits.
• A board should be continually educated on the impacts the nonprofit is creating and changes in it mission arena. Board education is often delegated to the nonprofit CEO, who in turn places a low priority on it.
• As authorized and coordinated by the board, directors should have unfettered access to management, including those below the CEO’s direct reports.   The principle was introduced by Sarbanes-Oxley in 2002 as a suggestion for public boards. It should also be a significant principle for nonprofit boards.

Nonprofit Board Composition #NonprofitBoards

Adapted from a "manifesto" on corporate (for-profit) governance, Dr Fram offered the following "make-sense" thoughts on nonprofit board composition:

 Board Composition

• Director’s loyalty should be to the external stakeholders and the nonprofit. A board must not be beholden to the CEO, management or staff. It is not unusual for nonprofit board members to assume that they represent the  CEO, management and staff. They represent a wide range–from clients to foundations and even to vendors they engage for services.  
• It is important to recognize that some of the best ideas, insights and contributions can come from directors whose professional experiences are not directly related to the nonprofit’s vision. Charitable and human service boards tend to recruit directors from these ranks. Professional and trade associations need to expand their thinking in this direction.
• Collaboration and collegiality are critical for a functioning nonprofit board. While board members should have a modicum of passion for the nonprofit’s mission, recruiting independent thinkers, those who will not “go along to get along” is vital.   Robust board discussions, with occasional “no” votes by some directors is a hallmark of a thinking board.
• Director candidates should be drawn from a rigorously diverse pool. It is not unusual for the pool of nonprofit board candidates to be drawn from a stable group of friends, family and colleagues of current/former directors, people who will be readily available. Recruitment committees need to be more creative and to seek independent thinkers who bring practical and creative perspectives to nonprofits.  Unwittingly many nonprofits acculturate new board members to a stagnant culture.  They need to look to these people to lead in modifying the current culture in positive directions.   
• A nonprofit is more likely to attract and retain strong directors, if the board focuses on big-picture issues and can delegate other matters. A common problem with many nonprofits is that they retain the micromanagement culture of the startup organization long after it is an appropriate format.