Nonprofit Board Crisis

Volunteer and Professional Leaders Matter #NonprofitBoards

You can learn a lot more about what happened through the links in this story but it's clear there were multiple board and exec fails.  According to the editorial - all has passed - but has it with just a change in professional leadership? Read on.

 

The Editorial Board: New CEO shows that, like Shea's, Forest Lawn has learned a lesson

• Aug 28, 2023
 

Two important nonprofit organizations in Western New York suffered through a torturous 2022 over fractured leadership but, now, both are showing signs of moving to a better time.

Most recent is Forest Lawn, which on Wednesday announced the hiring of Julie R. Snyder, a former top executive with another area nonprofit, HealthNow New York. She will become the cemetery’s chief executive officer on Sept. 11. And while Shea’s Performing Arts Center is still looking for a new leader, it has made operational changes that will serve it well and which Forest Lawn and other nonprofit groups should look to emulate.

Both these entities, in different ways, strengthen the culture of Western New York. Shea’s, of course, is a magnet, drawing theater-lovers from around the region for plays, concerts and other performances. They eat at restaurants, patronize bars and pay to park their vehicles. They spread the word to others.

Forest Lawn, meanwhile, is first and foremost a place of peace and beauty – one of the country’s most lovely cemeteries and the forever home many influential people, including former President Millard Fillmore. It’s a gorgeous feather in the city’s cap.

But both entities lost their way and in similar fashion, with persistent allegations of bullying and abuse from chief executives and implications of inattentive or uninterested boards of directors. Complaints at Forest Lawn also included allegations of labor violations. For Shea’s, the fallout was especially harmful, as it lost the longtime financial support of M&T Bank whose late founder, Robert Wilmers, was instrumental in resurrecting Shea’s from near ruin.

 

While the crisis could have done irreparable damage to Shea’s, there was no such existential risk to the cemetery. Still, a high-profile asset needs high-quality leadership and it appears that Forest Lawn has found the right person – an executive not just with proven leadership skills, but with experience dealing with sensitive issues.

“I view this role as a vocation,” Snyder said, “having worked in health care for more than two decades and frequently been close to families at times of great loss,” Snyder said in the statement. “This role is one of both leader to a dedicated team, but also liaison with the funeral professionals who serve our community, our important regulators in Albany and my fellow Buffalo residents who value, as do I, Forest Lawn as a historic parkland.”

Those are the words of someone who comprehends the importance of her new role. Now she has to put them into action.

 

Under her leadership, Forest Lawn should consider some of the improvements already made at Shea’s, including regular meetings between the leadership team and the board of directors; necessary revisions to the employee handbook and monthly meetings for staff. As obvious as the need for communication may seem to be, it was allowed to fall apart at both Shea’s and Forest Lawn. This is a way to begin rebuilding it.

 

Shea’s, meanwhile, is still looking for a new leader. To be sure, the job requires a different and specialized set of skills, which is more evidence of the need to find the right person. It, at least, is beginning to deal with the problem that fomented its mess.

It’s good to see these invaluable assets move past the crises that each brought upon itself. To be sure nothing like it can happen again, the board of each institution – and all other nonprofit organizations, for that matter – need to take to heart their own obligations, one of which is, first, to be aware and, second, to act when signs of trouble appear.What’s your opinion? Send it to us at [email protected]. Letters should be a maximum of 300 words and must convey an opinion. The column does not print poetry, announcements of community events or thank you letters. A writer or household may appear only once every 30 days. All letters are subject to fact-checking and editing.

One Board Steps Up, Finally #NonprofitBoards

National and International Sporting League boards do not have a great reputation for taking action in the defense of women.  However, FIFA has stepped up and imposed a sanction on the Spanish soccer federation head, Rubiales as described below in 1440 Daily Digest.  Yes this is a story that hit the news with Rubiales offering an unsolicited kiss to one of the winning Women's World Cup members.  Yes, this is plain and simple sexual assault.  Rubiales is not apologetic and he is of course essentially challenging his board to take action.  Of course a simple answer for the team member is to sue as this would force the board, aka the owner, to take action one way or another.  More to come on this story but the burden weighs heavy on the board - within the federation, FIFA and in general, the world.  In the end this is an important test of core values for the board that must define what is acceptable behavior by their employees.  At the core, this is the story.

 

Spanish Soccer Scandal

Spain's women's soccer team—the winner of this year's Women's World Cup—released a statement yesterday saying the players won't participate in any more matches until Spanish soccer federation president Luis Rubiales resigns. Rubiales faces criticism for unsolicitedly kissing Jennifer Hermoso after grabbing her face during Spain's trophy ceremony last Sunday in Sydney, Australia (see footage).  The 46-year-old Rubiales, in an emergency meeting of the Spanish soccer federation yesterday, said he won't step down from his post, which he has held for the past five years. He called the kiss spontaneous and claimed it was consensual. Hermoso, in a separate statement, claimed she did not consent to it.  The parties' responses come a day after FIFA opened a disciplinary case against Rubiales for the incident; a three-person committee will determine whether he violated the governing body's basic rules for decent conduct. Spain's national sports council also said it plans to file a case against Rubiales at a sports tribunal next week.

Nones - the dechurching of the US #NonprofitBoards

Commentary in today's Washington Post should come as no surprise while at the same time being quite unsettling.  The subject: church (a blanket name for places of worship).  The reality, many citizens aren't.  The issue for me: core values or at least a source and reinforcement of core values.  Another consequence: fewer to care about our fellow beings and this reality has an impact on the nonprofit world.  If there is no central source of awokeness, in the proper and most positive sense of the word, then all else fails and we begin to create a country that looks very much like what the 8 clowns less the biggest one who had a some-what conversation this past week win.  Thoughts for a Sunday.

Here's a summary of the commentary.

By Chris Suellentrop Politics opinion editor  Email There might be no greater force reshaping the country in ways we don’t fully understand than the rise of the “nones,” the term for people who do not belong to a particular religious faith.  Most nones, as Post Opinions columnist Perry Bacon Jr. points out in a searching and personal essay about his own quest for belonging after leaving his church, are former Christians. They’re not all young — while 40 percent of adults between 18 and 29 are nones, so are around 20 percent of people older than 65. They’re not all Democrats, either — about 15 percent of Trump voters in 2020 were nones, as were a third of Biden voters, Perry notes. “In their new book ‘The Great Dechurching,’ Jim Davis, Michael Graham and Ryan Burge estimate that about 40 million Americans used to attend church but don’t now,” Perry writes. “I could not have imagined when I was a kid or even a decade ago that I would be in this group.” But he is. And so are many of you, I suspect. Perry’s essay — ”I left the church. And now I long for ‘a church of the nones’” — traces his own story, a reckoning that began with the election of Trump and the embrace, by many Christians, ”of a man so obviously misaligned with the teachings of Jesus,” as Perry puts it, and ended with the birth of Perry’s daughter. While he doesn’t miss the theological aspects of church, he does miss the community. And he wonders if he and his fellow nones might rebuild it.   “Many Americans, including me, were once part of churches that were essential parts of our lives,” he writes. “It’s strange to me that America, particularly its left-leaning cohort, is abandoning this institution, as opposed to reinventing to align with our 2023 values.” I’ll be at Sunday Mass with my family this weekend, but I strongly identified with the struggle Perry describes, of how to fit an ancient institution and practice into a contemporary family that wants to uphold the virtues of equality and tolerance.  None or something, we all could do worse this weekend than spending an hour reading and reflecting on what he has to say.             .

Board Responsible for Knowing #NonprofitBoards

There's a big controversy in Arizona over essentially whether the board of the nonprofit that addresses the development of school boards throughout the state fulfilled its duty of care (due diligence) in hiring its executive.  The story from the Arizona Republic suggests its did not.  The consequence: the story from the Arizona Central, to begin with.  What do you think?

EDUCATION

Arizona school boards group rocked by controversy over resume of executive director

Ray Stern

Arizona Republic

 

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The president of the Arizona School Boards Association resigned from his job last month over concerns that the nonprofit ignored false information its new executive director submitted in a resume.

James Bryce, a longtime board member for the association who had served as president since January, said he quit the volunteer position after the group's 25-member board of directors overruled his decision not to sign a contract with Devin Del Palacio for the executive director position, which pays $215,000 annually.

Two other employees resigned over the controversy, including an associate director. The Arizona Republic reached out to them. One didn't answer a mobile phone call. The other said she didn't want to comment.

 

The association declined comment on the matter.

One board member, however, defended Del Palacio as the perfect choice to lead the organization and said Bryce was making trouble because he wanted to hire someone other than Palacio for the job.

"It was very clear from the beginning of the process that James had a preferred candidate," said Monica Timberlake, who also serves on the Quartzsite Elementary School District's governing board.

 

Del Palacio is a noted community leader and has been a member of the Tolleson Union High School District governing board since 2014. He's worked for the Arizona School Boards Association as a "strategic advocacy consultant" for two years. Del Palacio, who is chair of the National School Boards Association’s National Black Council of School Board Members, has served on the association's board of directors for the past four years. The chair of the Black council has a seat on the association's board.

Del Palacio was sworn in for brief duty as a Democratic state lawmaker last year, filling out the 2022 term of Rep. Diego Espinoza, D-Tolleson, who resigned in September.

The association named Del Palacio in June as the replacement for outgoing executive director Sheila Harrison-Williams, who served in the job for more than three years. In a news release at the time, the association called Del Palacio a "dynamic and visionary leader" whose "extensive experience and profound knowledge of the educational sector is incredibly pertinent to our work."

"The ASBA Board of Directors firmly believe that under his leadership, the association can overcome challenges, seize new opportunities and drive ASBA to greater heights," the statement said.

 

Del Palacio didn't return phone messages for this article.

The association describes itself on its website as a "private, non-profit, non-partisan organization that provides training, leadership and essential services to public school governing boards statewide," adding that it represents more than 240 school governing boards statewide.

In response to questions about Bryce's allegations, newly installed association president Desiree Fowler — who also serves on the Page Unified School District governing board — told The Arizona Republic that the matter requires privacy and that the association "is unable to provide any information or details" about them.

Fowler told members of the board of directors, in an Aug. 19 email obtained by The Republic, that they should commit to supporting Del Palacio.

"Our shared journey demands that we move forward together," Fowler wrote, "and those who feel divergent from this path are respectfully invited to resign from their positions immediately."

A complaint alleged misrepresentation of credentials

 

Bryce, an electrician for the city of Safford who serves as a member of the Solomon Elementary School District governing board in Graham County, said he first learned of the issue when he was hit with a "whistleblower complaint" alleging Del Palacio misrepresented his credentials.

The group's legal counsel told Bryce that he risked violating his fiduciary duty to the association if he didn't properly vet Del Palacio, Bryce said. The counsel suggested that an independent law firm investigate Del Palacio's credentials, and the firm soon completed an investigative report.

 

But at its July meeting, a majority on the board of directors voted to not look at the report, instead demanding that Bryce sign an employment contract for Del Palacio, he said.

"They tried to say I didn't have authorization to get that legal advice," Bryce said. "They refused to hear it and excused the lawyer."

Bryce refused to sign the contract and resigned his position. Afterward, the association's legal counsel provided the board the report of the findings, Bryce said.

A summary of the report provided by Bryce states that Del Palacio submitted a resume to the association in 2021 for his consultant job but was told by Harrison-Williams that the position required a college degree. He then submitted a second resume indicating that he graduated from the former Western International University in Phoenix with a bachelor's degree in business administration.

The executive director position also required a college degree, and when Del Palacio applied for that job this year, he submitted the resume that claimed he had a bachelor's degree, according to the summary Bryce provided. Bryce said a staff member informed him in June that by having the degree, "Mr. Del Palacio met the minimum qualifications advertised in the job posting."

 

Bryce shared a resume with The Republic that he said had been submitted by Del Palacio. "Bachelors in Business Administration, 2010," it states under the heading "Education and Credentials." It also lists program certificates he's received from Georgetown University and Rio Salado Community College.

 

Del Palacio's LinkedIn account lists Western International University as an educational institution that he attended from "2006-2006" and doesn't mention a bachelor's degree. In a 2020 interview with podcaster Stevon Cook, Del Palacio acknowledged that he attended Western with a plan to obtain a business degree but "dropped out."

An association employee who knew that Del Palacio did not have a college degree brought the two resumes to the legal counsel, who raised the issue to Bryce under the association's whistleblower policy, the summary states. At that point, Bryce had a "duty and authority" to have a contract attorney review the allegation, the legal counsel told the association's board, according to the summary.

"Since Mr. Bryce had information of this fraud allegation, he had the duty and authority to have the contract attorney review the allegation," the summary of the report by the legal counsel states. "It would be malpractice not to."

Del Palacio also submitted the same resume listing a bachelor's degree to Maricopa County last year before his selection as an appointed state lawmaker, county records show.

 

Departed president: 'We're supposed to teach good governance'

Bryce had served on the association's board of directors in some capacity for about 10 years and served last year as its president-elect. As president, Bryce presided over board meetings and appointed standing and special committees.

He believes he's made the right decision to step down because he said the association's leadership has abandoned its "ethics" and is setting a bad example for the school governing boards it represents. One-quarter of the association's revenue comes from Arizona school districts, Bryce said.

"We're supposed to teach good governance" but could be "our own case study" at an upcoming law conference members will attend, Bryce said.

Del Palacio was simply seen as the winning job candidate from the beginning by a majority of the board of directors who could not be swayed, he said.

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Board member pushes back

Timberlake agreed that Del Palacio was viewed by the board's majority as the best choice and that, contrary to what Bryce claimed, the job didn't require a college degree. As a current school board member, Del Palacio had the right kind of experience, she said.

The main problem for the association recently has been Bryce, Timberlake said.

"His actions throughout the entire process were completely unethical," she said. "He did everything he could to make sure his chosen candidate was the selected candidate. When it didn't go his way, he found other ways to attack Mr. Del Palacio."

Bryce put the association "at risk" and violated its confidentiality rules by going public with the group's private information, she said.

Asked how the board would address Del Palacio's claim of a degree in his resume, Timberlake said she wasn't sure he didn't have a bachelor's degree but that she couldn't discuss the matter because of legal issues at stake.

Reach the reporter at[email protected] or 480-276-3237. Follow him on Twitter@raystern.

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A Library Story and Governance #NonprofitBoards

The following Royal Examiner letter to the editor offers a detailed outline as to why the private nonprofit sector can at times offer more than the public sector or for-profit sector for that matter.  I would pose of course that many of the issues highlighted in this letter about the state of the library (which apparently due to politics' future is up for grabs) are pertinent to many boards in terms as to how they must continue present and future.  It's a good read.

 

OPINION

Facts, Accounting, and Homework, Oh My!! A Library Supporter Digs Into the Finances

 

Published

 15 hours ago 

on

 August 23, 2023

By

 Letter to the Editor

 

If you don’t care to read this long and detailed letter about the library’s finances, here’s the takeaway: At the insistence of 90 individuals who question the existence of LGBTQ+ people, the library will close next June, at the latest, unless the 20,549 library card holders in Warren County speak up ASAP – and VOTE for candidates who support our library. Botetourt County supervisors just said NO to library detractors – Tell your county supervisor to do the same.

Now for the facts: Having read Richard Jamieson’s letter of August 6 regarding Samuels Library’s one million dollar Investment Account, I decided to take advantage of Interim Director Eileen Grady’s offer to discuss the library’s finances in person. A summary of our conversation follows, all of which may be confirmed by any member of the Board of Supervisors (BOS), but in particular, Chairperson Vicky Cook, who attends library board meetings as BOS liaison. In the interest of transparency, I am a former board member of both the library and the Friends of Samuels Library. I have never been paid by the library for any of the services I have offered, which included assistance in raising funds to build the current facility. I also bring to bear a twenty-year career as a fundraising and organizational development consultant to a national clientele of nonprofits classified as 501(c)(3) by the IRS.

And – since I first started researching this letter, Mr. Jamieson has issued a new one (August 14), denying library board treasurer Peter Walker’s accusation of a smear campaign. In my humble opinion, if it quacks like a duck … well, you know the rest. In any case, you can judge for yourself after reading the facts, which are, I confess, rather dry. Should you get bored, I’ve inserted headings below to help you skim.

What is a nonprofit? By definition, all 501(c)(3)s are public charities or private foundations. Absorbing Samuels Library into the county government, as suggested by Mr. Jamieson, would not alter its public mission. In addition, all nonprofits are incorporated, as indicated by Inc. on their tax forms. There is nothing devious about this.

Assuming that most readers are avid to learn about nonprofit finance, I refer you to the Library of Congress website (https://guides.loc.gov/nonprofit-sector/form-990), where nonprofit tax returns, called Form 990s, are made available as soon as they are released by the IRS, which can take up to 18 months. Due to its fiscal year (FY), July 1 to June 30, Samuels filed its 990 in November. The FY-21 990 (July 1, 2021-June 30, 2022) is available for review on samuelslibrary.net under About Us/Policies & More. The FY-22 990 (July 1, 2022-June 30, 2023) and the 2023 Financial Report will be made available following the state-mandated annual audit, which takes place in the fall. For enthusiasts, the Library of Congress also features tutorials on how to read Form 990.

Samuels Library adheres to best management practices for nonprofits, which, unlike those applicable to for-profit entities, are based on their charitable public service mission rather than financial profit. As stated by the National Council of Nonprofits (https://www.councilofnonprofits.org/running-nonprofit/governance-leadership/principles-practices-best-practices-nonprofits), “While there is no single definition of leading or ‘best practices’ for nonprofit organizations, there are well-recognized ethical standards and accountability practices that every staff and board member of a charitable nonprofit should be aware of. Specific legal obligations vary state by state, so many state associations of nonprofits share resources on state-specific legal requirements, as well as promote “best practices” to raise awareness about how ethical, accountable, and transparent practices make nonprofits more effective. Recognizing and adopting these practices not only benefits individual charitable nonprofits, but also donors, and the individuals and communities that charitable nonprofits serve.”

Why not turn Samuels over to the county? Mr. Jamieson’s comments focus on the need for and management of the library’s investment fund. Best practices (see https://nonprofithub.org/nonprofit-reserve-funds-a-primer/) recommend reserves of 9-12 months for operations in case of emergencies (such as the pandemic) or shortfalls (caused, for example, by a tax-supported county budget that does not recognize inflation). Therefore, in keeping with best practices, I was pleased to learn that the library has approximately $962,500 in its investment account and maintains a balance of $40,000-$75,000 in its liquid (cash) reserve fund.

Unfortunately, like our own personal retirement savings, the accumulation of these funds usually requires years of fundraising and judicious investment. In addition, portions of donated funds may be restricted by donors for specific purposes. Therefore, contrary to Mr. Jamieson’s assumptions, if the BOS decides to defund the library, Samuels might be able to operate through the end of the fiscal year (June 30, 2024). After that, if not before, closure is guaranteed. – But then, what would happen if you were required to spend all of your retirement savings in one year?

Mr. Jamieson claims that this situation could be avoided if the County would simply take over the library. Of course, as an independent 501(c)(3), the library would have to agree to that first. But according to Ms. Grady, who served on the Town Council from 2004 to 2008, when the library budget was shared by the County and Town, a County-run library would actually cost more. For one, government entities must meet state-mandated standards for employee compensation, insurance, and pensions, all met by Warren County for its own employees but significantly higher than the library’s current staff costs.

Furthermore, donations and volunteer participation would likely diminish since most people don’t see why they should support a government institution beyond their tax dollars. (My own experience as a fundraiser for dozens of organizations confirms this.) In FY-23, Samuels volunteers donated 8,308 hours, equivalent to eight full-time positions at the library’s average staff salary of $33,000. Loss of volunteer power would thus increase the need for more staff.

Show me the money!  Eighty percent of the library’s budget comes from the County, 15% from the State ($197,222 in FY-23), and 5% from its own fundraising. County funding has remained relatively stagnant: $991,758 in FY-20, $1,003,087 in FY-21 and FY22, and $1,024,000 for FY23 and FY24 (a 2% increase over FY-21-22). It is important to note that state aid is tied to County funding via a complicated formula (https://www.lva.virginia.gov/lib-edu/ldnd/state-aid/), not to exceed $250,000. And, as per Virginia Administrative Code 17VAC15-110-10: Requirements: Local operating expenditures from taxation or endowment for any library, or library system, shall not fall below that of the previous year. Therefore, even if the County funds the library below last year’s allocation, state aid will be discontinued.

Mr. Jamieson claims that the library’s investments have been poorly managed. The library’s highly readable investment policy prioritizes balanced growth and income with a moderate tolerance for risk. (Please see samuelslibrary.net under About Us/Policies & More).

For a decade, investments have been managed by an advisor from Truist, who gives an annual report at the September board meeting, open to the public.  At this time, the Investment Account includes:

• Proceeds invested from the County’s purchase of the Villa Avenue facility in 2012, now the Warren County Community Center. The original mortgage of $293,628 was paid to the library by the County over a period of years, terminating in 2019;
• A $57,000 restricted endowment. This is divided between a donor-restricted bequest of $50,000 in 2021 and a $5,000 seed fund created simultaneously by the library so that other community members could donate smaller amounts to a permanent endowment.
• Additional funds donated by other community members and organizations. In FY-23, 427 donors contributed to the library. Of these, 52% (344) were individual community members, 35% (23) community groups such as Rotary or Elks, 23% (56) local corporations, 9% (3) regional foundations, and 1% (2) government entities (other than Warren County and Virginia Library Foundation). These figures, representing a 25% increase over FY-22 and 51% over FY-21, indicate strong and growing support from the community.

As per the Library’s Investment Policy, Samuels is also allowed an annual distribution of 3% or less from the Investment Account, “as the Board shall specify, or unrestricted principal” … “for use in special projects, or as otherwise determined by the Board.”

The library’s Reserve Account houses 1) donations restricted to the current fiscal year (for example, most community groups donate to specific programs or purchases) and; 2) a portion of unrestricted donations to cover shorter-term (2-4 months) cash flow shortages, emergencies (e.g., unanticipated attorney fees (!) or an HVAC repair), or planned projects that exceed the county’s allocation (e.g., the newly reconfigured Young Adult section).

Mr. Jamieson cites a loss of $93,649 during FY-22. Like many investors, the library experienced strong returns during the extended bull market. Indeed, at the beginning of FY-22 (July 1, 2021), the balance of the investment account was $984,154. Due to the recession, it had shrunk to its low point, $890,505 by June 30, 2022, the end of the fiscal year. However, despite withdrawals of $29,317 in FY-22 and $24,879 in FY-23, the balance now stands at $962,517 (July 31, 2023). Had the county’s allocation kept pace with inflation, no withdrawals would have been required. Instead, withdrawals were required to cover cost-of-living adjustments (COLA), keeping salaries apace of the rampant inflation we’ve all experienced over the past two years.

Mr. Jamieson’s letter also cited a decrease of $52,904 on July 10, 2023, apparently attributed to poor management or needless spending – he’s not really clear. Coincidentally this figure accords with the value of the endowment around that time, and there is no record of a withdrawal, so perhaps he’s confused an asset with a loss.

Assuming a new Memorandum of Agreement is approved by all parties, County funding is likely to remain flat – necessitating further withdrawal from the Investment and/or Reserve Account. In FY-24, this translates to a total withdrawal of $67,590 in order to balance the FY-24 library budget. As mentioned, the County’s allocation fails to account for COLA, medical insurance hikes (which have increased 8-10%), increases in utilities such as the $75,000–$80,000 cost of heating and cooling a 28,000-square-foot building, and other practicalities. 

Community members respond. Spectacular volunteer support (mentioned above) and an outstanding 65% repeat donor rate (donor retention) that exceeds the national average of 45% believe Mr. Jamieson’s claims that the library fails to serve its community, to say nothing of 2,035 new patrons registered during FY-23 alone. (Approximately half the residents of Warren County now hold library cards.) Last week, an anonymous donation of $25,000 was made in memory of a transgender family member. This is hardly the portrait of an institution that has failed to fulfill its community mission – unless, of course, you believe that these people are fictitious.

Quacking like a duck: The third definition of “smear” in the Merriam-Webster dictionary is “a usually unsubstantiated charge or accusation against a person or organization — often used attributively.” “Smear campaign” is given as an example.  (https://www.merriam-webster.com/dictionary/smear) Giving the benefit of the doubt, in Mr. Jamieson’s “Lotta Money” letter of August 6, he apparently lacked the time to prepare a fully documented case or didn’t know where to find the answers to his questions. Among the many unsubstantiated claims and inferences in his penultimate paragraph:

• That Warren County taxpayers would pay for legal fees and communications consulting. In essence, this is true. Assuming that library supporters are also Warren County taxpayers, the library has received a total of $7,736 in unsolicited donations from more than 40 community members toward legal fees.
• That potential litigation against the County would be funded by taxpayer money, which he states “has the feel of extortion.” So far, in addition to the contributions just mentioned, the library is covering the rest of its reserves, funds that could be better spent for community programming, and the purchase of library materials.
• That “there was no discussion about these additional budget items.” I guess he didn’t attend the May 8 library board meeting (or request the minutes), during which this decision was discussed in preparation for a July vote.

Democracy anyone? Our nation’s founders believed that democracy depended on an educated populace. Children of the Enlightenment promoted civil discourse, scientific methods, and reliance on reason in order to prevent voters from falling prey to superstition, rumor, and demagoguery. Researching and writing this letter required a week of my time. My disappointment in Mr. Jamieson, soon to assume stewardship of our public resources, stems from his failure to verify his claims of financial impropriety. The job of county supervisor comes with a lot of homework. How can democracy function if those we elect betray our trust through negligence or, worse, intentional proliferation of misinformation?

Please take advantage of your local library to educate yourself about the world in its infinite variety – and about the library itself. Learning about complex topics such as finances takes time, dedication, and energy, but the rewards are many for you and your country. Even though I am not running for office, I take full responsibility for any errors cited above and would appreciate any verified factual corrections. Thank you – and please speak out on behalf of your library.

Sonja Carlborg
Front Royal

Sex Abuse In Plain Open #NonprofitBoards

During the celebration and awarding of trophys to the Spanish Women's Soccer Team and in recognition of their having won the World Cup, the President of Spain's Soccer President openly and apparently unabashedly kissed a player receiving an award on the mouth.

On the surface this "sounds" innocent but rest assured, this was not an act of innocence and rather a sexual assault.  Any act that crosses the personal safety of an individual and is threatening and unwanted is an assault - a violent act.

Thankfully, and given its somewhat dubious history in this realm, FIFA in addition to the Spanish Government have committed to investigating and taking action.  And while the first rounds of apologies and claims of innocence with "passion" being the excuse have been rendered by the offender, a leading official, these do not excuse the behavior.

Core values and standards must indeed guide those who are acting on behalf of or part of an organization.  Without values and standards there is chaos and more importantly injury to one or more.

Here's CNN's version of the story.

The president of the Spanish government’s High Council of Sport (CSD) says he will take action against Spanish Football Federation (RFEF) president Luis Rubiales if the soccer body fails to do so.

On Tuesday, RFEF called an extraordinary general assembly – set for Friday – which was expected to deal with the fallout of Rubiales giving Spain star Jennifer Hermoso an unwanted kiss on the lips during the medal presentation ceremony after Spain’s Women’s World Cup final win over England.

However, the incident doesn’t appear on the order of the day for the assembly that was released by the RFEF.

Spain's head coach Jorge Vilda appears to touch female staffer inappropriately during game celebration

Speaking to the “El Larguero” program on Spanish outlet Cadena SER later on Tuesday, CSD president Victor Francos said the council is willing to get involved after receiving three formal complaints about Rubiales’ actions.

“We have been very clear with RFEF on the need to open the procedures established by the Sports Law,” Francos said. “We could not pass by not opening those internal disciplinary proceedings.

“From there, we are going to wait for the case to be resolved urgently, which is very limited with two people involved and there is not much to investigate.”

The CSD is an autonomous decision-making body of the Spanish government’s Ministry of Culture and Sport and has the potential power to demand the removal of Rubiales, but do so the body needs to follow a series of required steps, including having an external complaint filed against him and the case having to be heard in front of a tribunal.

Miguel Ángel Galán, president of the National Training Center of Football Managers, has already presented a complaint about the unwanted kiss to both the CSD and the RFEF Ethics and Integrity Committee, which have been received and accepted.

In a statement announcing the extraordinary general assembly, RFEF said it has opened “the internal Federation processes in relation to integrity.”

Rising criticism

Francos’ comments come amid increasing pressure on Rubiales.

On Tuesday, a day after Rubiales apologized and admitted he “made a mistake” kissing Hermoso, Spanish Prime Minister Pedro Sánchez said Rubiales’ apology was “not enough.”

“It is true that there has been some behavior, in this case of Mr. Rubiales, which shows that in our country there is still a long way to go in terms of equality and respect and in this equalization of rights between women and men,” Sánchez said.

“The apologies made by Mr. Rubiales are not enough. I even think that they are not appropriate and that, therefore, Mr. Rubiales needs to continue to take steps to clarify what we all saw.”

Politicians across the political spectrum in Spain also echoed the PM’s criticism.

“We maintain our asking of the resignation of the gentleman who belittled and assaulted a woman. His excuses serve absolutely nothing,” Yolanda Díaz, Spain’s acting second deputy prime minister and leader of the Sumar party, said in a press conference.

Cuca Gamarra, parliamentary spokesperson and secretary general of the Partido Popular, also said: “All institutional leaders should have exemplary behavior and that exemplary nature should be respect towards women and what we saw in that final in this sense was shameful. Only shame comes to my mind, at a minimum.”

In an interview with Spanish newspaper ABC on Tuesday, Spain center-back Irene Paredes said that the unwanted kiss was “an unfortunate gesture,” but that she and the team hoped that it wouldn’t “tarnish everything” the squad achieved at the Women’s World Cup.

Nonprofit Board and Derivative Action #NonprofitBoards

The following might knock off your socks if you think as a nonprofit board member you can't be sued for your bad actions.  Do read on.

 

 

August 21, 2023

 

California Supreme Court Sets Precedent – Unlike For-Profit Corporate Directors – Former Non-Profit Director May Maintain Derivative Action

The California Supreme Court sets new precedent that unlike for-profit corporations, a former non-profit director may maintain a derivative lawsuit.  The decision increases the likelihood that decisions of boards of non-profits will be subject to judicial review.

In corporate disputes when a board of directors will not take action in response to a board member’s request, an outvoted director may file what is referred to as a derivative lawsuit.  In a recent California Supreme Court decision, the court was forced to answer what happens in a non-profit corporation when the board member who files a derivative action is no longer on the board.

May the former board member continue to prosecute a derivative lawsuit? The California Supreme Court in Turner v. Victoria recently ruled that unlike a for-profit corporation, a former non-profit director may maintain a derivative action.

            THE BASIS FOR THE DISPUTE

In the underlying dispute the former director, Deborah, was not nominated for reelection pursuant to the bylaws (the rules governing corporate operations).   As result Deborah was no longer on the board.

The reason the remaining board members did not nominate Deborah was because of her derivative lawsuit.  The derivative lawsuit was based on the former board member’s challenge of the board’s recent settlement.  The settlement arose because the founder of the non-profit, Conrad Prebys, had disinherited his son from his Trust.  Conrad Prebys, was a prominent real estate developer and philanthropist

Pursuant to the terms of Conrad Prebys’s Trust’s assets, after preliminary distributions, were to go to the non-profit corporation.  The Son under the Trust was to receive $0.  Yet, the board settled for $15 million.

And so, the former board member filed a derivative action.

            THE ANALYSIS

For the issue at hand, it is important to note that non-profits are obviously unique and have different rules than for-profit corporations.  Non-profits function in a host of areas and fields providing services.  Many are surprised to learn for instance that even a country club or duck hunting club may function as a non-profit.  Some members of non-profits hold ownership interests in the entity.

For a non-profit, a director however does not have to be a member and very well might not be a member.  By contrast, In a for-profit corporation it is highly unlikely that a director would not also be a shareholder and as a shareholder would have a right to file a derivative action.

In any event, Turner v. Victoria is focused solely on whether a former non-profit director can bring a derivative action and the Court answered  – yes.

The primary basis for the ruling is that California Corporation code sections 5142 and 5233 contain language permitting directors to “bring an action” against breaches of charitable trust and self-dealing.

Yet for a for-profit corporation, the statute includes the phrase “may be instituted or maintained.”  This also applied to shareholder derivative lawsuits.

The reasoning for the distinction makes sense, because as stated above, in a non-profit public benefit corporation context there often would be no other basis by a former director to maintain an action.

In the for-profit context directors are often shareholders.  Shareholders in a for-profit have an opportunity to receive dividends.  There is a direct financial incentive to review board decisions.

Non-profit corporations are prohibited from issuing dividends or otherwise making distributions.  Therefore, directors have little or far less of a financial incentive to bring a derivative action.

Because of the statutory language and the public policy issues, the Court did not wish to curtail and write in a statutory limitation to director derivative actions for non-profit corporations.  To do so would be contrary to the statute and wrongdoers could thwart lawsuits by removal of directors.

Naturally, this would discourage directors from pursuing such claims, which they must individually fund.  This would be a disservice to the public and thwart that the very purpose of permitting non-profit corporations.  The California Attorney General cannot oversee all non-profits due to the sheer numbers.

            TAKEAWAY AND FINAL THOUGHTS

The decision settles any attempt to defeat derivative actions based on former board members.  Going forward, boards of non-profits must understand that their decision making will be subject to review through derivative by former board members.  Non-profit corporations and its board of directors cannot attempt to rely on a procedural defense of non-election of a board member to defeat a derivative action.  Boards will have to continue to abide by their fiduciary duties in making key decisions.

Separately, as to complaints or issues as to board decision making, members of the non-profits can take issue with boards where so provided.  Such members may, subject to the bylaws and overall membership support, seek recall of board members or the replacement of board members.

[View source.]

Firing CEOs #NonprofitBoards

Because a significant part of my practice involves evaluating the "fit" of a nonprofit CEO when a board thinks there may be a problem, I thought I would share the following to help those who serve on boards consider the whole picture when such an event arises.  

BOARD PERFORMANCE & METRICS

The Touchy Subject of CEO Dismissal

READ TIME: 6 MINUTES

Firing the CEO can be one of the most difficult decisions a board can make – it will also be among the most critical. However, many boards, including those of non-profit organisations, will resist bringing up the need to fire their CEOs, while other boards will be far too quick to fire their chief executives.

There are many reasons a board may be slow to act when it comes to CEO dismissal:

• In the case of the CEO demonstrating to the board that they are unable to cope with the demands of the position, one reason a board might not handle worsening situations such as this well is that directors may not know of the abilities of the managers already present inside the organisation or what is reasonable performance for the sector in which the organisation operates.
• Directors may also be concerned about how key stakeholders, such as major clients or funders, may react to the potential removal of the CEO.
• Other reasons for the board not acting include concerns about finding another CEO with the appropriate skills and experience to take the job; or the CEO’s contract includes a large termination payment; or in other cases, the board may wish to avoid open conflict with the CEO, particularly if the CEO dominates the board.

On the other hand, firing the CEO too quickly can mean the organisation may lose a good CEO, who just needed to learn from their mistakes and prevent a recurrence. For example, the CEO’s leadership style may be highly directive, while the previous CEO was collaborative, which may upset both the board and the CEO’s direct reports. Boards must recognise that each CEO brings a unique set of knowledge, skills and experience, and they will not be the same as the previous CEO or any other CEO the board was hoping to emulate. It should be noted that CEOs are not always readily available. Further, most organisations will not have developed succession plans successfully and, thus, will not have managers prepared to step up to the CEO position, particularly at short notice, which is another reason to think carefully about firing the CEO too quickly.

Replacing a CEO is time-consuming, expensive, and potentially disruptive – the implementation of board decisions can be left in limbo, staff morale can plummet and there is always the risk that the new CEO will not perform any better. Before rushing to dismiss the CEO, the board must balance the costs of replacement against the potential benefits.

When the board does make the decision to dismiss the CEO, there generally two major reasons:

1. A sudden crisis involving the CEO such as a breach of the law or the organisation’s code of conduct or actions that are so damaging to the organisation and its reputation that the CEO must be removed.

2. Ongoing pattern of non-performance, e.g.

   • Failure to live up to the agreed-upon standards of performance;
   • Inability to fit into the culture of the organisation or lead effectively; or
   • Inability to implement the agreed strategy or adapt to a changing environment, which is often the case in the non-profit sector.

Many organisations now contract their CEOs on a continuing contract, but subject to the board having the power to terminate the contract for either any disclosed reason or non-disclosed reason, upon a notice period, often either 3 or 6 months.

In addition to the normal CEO assessment process, which should provide feedback from the board and the CEO’s direct reports, the board is responsible for ensuring there is a process to bring any issues with the CEO’s performance to them as soon as they occur, for example, workplace bullying accusations or loss of a major contract. In other words, the board should provide the CEO with real-time feedback.

Should the board not be satisfied with the CEO’s actions on these matters, it will need to investigate the problems further to find their causes. If these investigations reveal that the CEO is not handling the job well, the board may need to take a more active role in the strategic and functional operation of the organisation. The CEO will need to be set clear objectives and have the consequences of their actions clearly outlined.

By this stage, it is not uncommon for the CEO to realise that the problem is escalating out of their control and the CEO may offer to resign. Alternatively, the board will need to act decisively to limit damage should they need to remove a CEO.

Key questions for the board at this stage include:

• What needs to be considered before determining grounds for termination?
  The board should understand the organisation’s legal obligations as the CEO’s employer, e.g. contract terms, Fair Work Act 2009 (Cth).

• Who will provide the CEO with notice of termination?
  For example, in some cases the chair and another director may meet with the CEO to give them a letter of termination, explain the reasons the termination and provide them with the opportunity to ask questions.

• Who will lead the company when the CEO is dismissed?
  The board should be prepared to appoint an interim CEO for the period of transition.

• Who will be charged with moving the termination process forward and ensuring all arrangements, policies, procedures and legislative requirements are followed?
  Will an ad hoc board committee be established, or will the chair or a subgroup of directors oversee the process?

• What are the external reporting requirements?
  If the CEO is on the board of a non-profit organisation, ASIC or the ACNC must be notified.

• What impact will this have on our key stakeholders?
  The board should consider the impact of replacing the CEO on internal and external stakeholders – a communication plan should be put in place to address any concerns.

Finally, the board should also consider its part in the CEO’s failure:

• Did the board communicate its expectations to the CEO?
• Did it hire the right CEO given the organisation’s strategy?
• Did the board regularly review the CEO’s performance through a formal assessment process?
• Did the board provide appropriate support and feedback to the former CEO?
• Does the board have the expertise needed to make effective decisions?

By reviewing its own part in the failure of the former CEO, the board will be in a much better position to ensure a successful and productive partnership with the new CEO.

---

This article was originally published in the Better Boards Conference 2017 Magazine.

Nonprofit Board Cultural Competency #NonprofitBoards

Dr. Fram offered what I believe to be an interesting and helpful lens for thinking about a nonprofit board's behavior and ability to function.  Dr. Fram offers that Cultural Intelligence should be added to the IQ and EQ as references for this assessment.  

I agree that cultural (and in-turn, cultural intelligence) very much matters particularly in how a board's members conduct business and more so how the board responds to new members.  Culture is not always a measurable element but it is quite tangible in behaviors - you know, "the way we do things".  Culture or institutional norms can very much affect how well a board and its members do their jobs.  Equally important, it's the un-spoken norms that enable the "knows" to retain control and exclude members from equally participating in decisions and the work.  Hm...society perhaps?

 

HOW DOES CULTURAL INTELLIGENCE (CQ) IMPACT A NONPROFIT BOARD?

How Does Cultural Intelligence (CQ)* Impact A Nonprofit Board?

By: Eugene Fram                   Free Digital Photo

There are many ways to assess the balance of capabilities on a nonprofit board. EDs and board chairs are generally familiar with the implications of terms like IQ (cognitive ability) and EQ (emotional intelligence). New research has added a third characteristic— cultural intelligence or CQ.  Obviously, CQ comes into focus when boards are dealing with global or international issues. But its usefulness is still germane to community-based and/or domestically focused professional/trade associations. Making a change in board strategy is at best a challenging process. But when that plan collides with cultural differences, board culture will trump change. To paraphrase Peter Drucker’s pronouncement—“Culture Eats Strategy for Lunch.”  Following are a few of the many types of nonprofit CQ divisions that I have observed:

 Baby Boomers vs. Millennials: Up to this point in their history, NFP boards have tended to be organizationally conservative, but this may be changing rapidly. One of the most prominent developments is the influence of the millennials, those born rough between 1980 and the turn of the new century. The new cohorts tend to have cultural values that are quite different from those  of their parent or grandparents.Millennial work patterns, for example, are more informal, often spanning long hours and ignoring 9 to 5 routines. All of this can create a cultural gap between themselves and their boomer board colleagues and between baby boom management and millennial staffs. As they move into senior management positions,will they collide with those who have adhered to traditional conservative nonprofit cultures?    Currently their social values align with those of many human service nonprofits. But in the future, will cultural values they encounter frustrate them to the point of turning their energies toward other career opportunities? One current report concludes, “Despite what you may have heard, millennials aren’t lazy.  In fact they’re downright work-obsessed–and it’s making life worse for everybody.” 

 Entrepreneurs vs. Public Service Backgrounds: Persons with public service backgrounds tend to move slowly in bringing about change. For example, the challenge of developing consensus among city council members can be daunting.  In contrast, an entrepreneur must be able to pivot his/h organization quickly from plan A to plan B.  Consequently, “processing” takes precedence over “pivoting” when  an NFP organizational change is proposed. These two board types brings different tempos to board discussions.  If the gap is left unresolved, the entrepreneur may leave and a valuable voice is lost. Unfortunately, in my experience, I have met too many entrepreneurs who simply refuse to accept nonprofit board positions because of this discrepancy.

 Management Backgrounds vs. Independent Contributors: Persons with management background are directors who have had leadership responsibilities with small or large groups of subordinates. Independent contributors are those who basically work alone or may only have responsibilities for just a few subordinates—e.g., attorneys, professors, planners or physicians.  Board members in the latter group can assume they have  management knowledge superior to the executive director’s or other senior personnel. Often their insights are outside a manager’s experience “space.”  This creates a cultural gap that can be harmful to nonprofit’s operations.   Example: A medical association board refused to set performance standards. for its executive director and staff. One staff member commented, “Board members don’t want to build trust and establish mutually accepted goals, these guys just want to give orders.”  The cultural gap was substantial because management and staff did not know the standards and behaviors by which they will be judged annually. Another staff colleague angrily commented, “I’m not going to allow a twenty-something medical intern order me what to do!”

How to bridge the gap

 Board chairs and EDs should develop a realistic inventory of the types of CQs on their board to be certain that one style is does not dominate.

 With the continual turnover of board membership and with annually changing board chairs, the ED needs to assume long-term responsibility for the inventory.

 It probably is not possible to develop a perfect balance of cultural norms.   As a result, the chair and ED must make sure that those who have “minority CQs,” such as the entrepreneur described above, feel that their participation is meaningful and appreciated.

 Never underestimate the impact of culture and its various CQ components.   The dominant legacy, especially with successful nonprofits, must be widely accepted. But it also should be reviewed occasionally to make certain that the board is not simply accepting it at face value. The Impacts must be robust performance for all clients, along with innovative and operational effectiveness. Assessing board member’s CQ categories can be a challenge for many chairs and EDs. These categories often do not fit into discrete groupings like age and educational levels. But practice with them over time should be helpful. They allow chairs and EDs to better retain those productive outliers whose CQs may not fit the traditional legacy culture.

* https://www.indeed.com/career-advice/career-development/cultural-intelligence#:~:text=Cultural%2

Advocacy is More Than OK, it's Essential! #NonprofitBoards

NONPROFIT BOARDS: IT"S OK TO DO ADVOCACY & LOBBYING!  BUT, not very many folks engage.  And all one has to say is: look around, you can't get your nonprofit and its constituency ahead if you don't choose to get engaged with this one quiver.  

This is certainly NOT a new message that I've been singing for a few years now but I believe the times indicate it's even more critical that nonprofit boards look around them and see what's going on and take action.  The future is at stake, FOR SURE!  Read the following from The Conversation to better understand why and a bit about how.

Nonprofits may engage in advocacy and limited lobbying, but few do so, says new research

by Lewis Faulk, Heather MacIndoe and Mirae Kim, The Conversation

Fewer than a third of charities in the U.S. (31%) engaged in advocacy in the last five years. This represents a dramatic decline in the past two decades, we found, even though the law allows these groups to speak up regarding the issues that affect the people they serve.

 

The results of the Public Engagement Nonprofit Survey, a new nationally representative study we conducted on behalf of Independent Sector—a coalition of nonprofits, foundations and corporate giving programs—indicate that many charities don't engage in policy discussions because they don't fully understand the rules governing those activities.

We are scholars of nonprofits who conduct research regarding nonprofits. The executive directors of about 2,300 nationally representative nonprofits completed this survey during the second half of 2022.

Along with finding that only three in 10 nonprofits engage in policy advocacy, we found that only 25% report ever formally lobbying government, compared with 74% that ever lobbied in 2000—and this is heavily related to not knowing that they can. In 2000, the last time a similar survey was conducted, 73% of charities knew they had the right to support or oppose legislation, compared with only 32% who know that today.

We were surprised to see such a sharp decline in nonprofit advocacy, despite ongoing educational efforts around advocacy by national and state associations of nonprofits and others since 2000.

All charities, officially known as 501(c)3 nonprofits due to the portion of the U.S. tax code that defines their obligations, may legally speak out regarding public issues in an effort to influence local, state and national government decisions. There are roughly 1.5 million nonprofits of this kind in the U.S., including food banks, homeless shelters, day care centers and arts organizations.

It can be vital for the advancement of their missions that charities exercise this right. For example, after-school programs can encourage staff members and volunteers to address school board members and other local officials, state representatives—and even members of Congress. They can suggest ideas for new rules, laws or funding that would help the children they serve.

The rules for how nonprofits can advocate are more flexible than many people believe. Nonprofits can raise awareness about issues affecting the people they serve, and they can also lobby by directly reaching out to public officials about legislation. As long as nonprofit employees don't spend too much time out of their day—meaning that doing so does not become a major part of their daily activities—and don't use government money for lobbying, they're complying with the law.

While how much is "too much time" is unclear, charities can file a simple one-page form with the IRS, called the 501(h) election, providing their organization's name and address and taking the election. Filing this form lets charities follow much clearer rules based on how much money they spend on lobbying rather than how much of it they do. What's more, when nonprofits use this form, their volunteers don't face any limits on the time they spend lobbying on behalf of organizations.

There's evidence that the public wants nonprofits to be engaged in this way. According to a recent poll the Independent Sector conducted, 87% of registered voters support nonprofits educating policymakers about the needs of their communities.

We believe these findings indicate a need for more training of nonprofit leaders regarding the importance of advocacy and lobbying tied to their missions.

We have several additional related studies underway, including qualitative interviews, that will cast more light on why so few nonprofits engage in advocacy and identify potential solutions. Following the completion of the project, we plan to make the data publicly available for additional research by other scholars of nonprofits. We're also planning to conduct follow-up surveys to see how these trends evolve.

Provided by The Conversation