Nonprofit Board Crisis

Come See Me At My New Locale

mikeb — Thu, 03 Apr 2008 11:09:19 -0400

Due to bandwidth limitations I've had to move my blog. Please visit my new location:

Nonprofit Board Crisis at Typepad.

Thanks!

Diversity on Foundation Boards Makes A Difference

mikeb — Wed, 02 Apr 2008 09:49:13 -0400

Diversity on boards makes a difference says John C. Gamboa in his op-ed piece in today's San Francisco Chronicle.

Mr. Gamboa writes his piece in response to Jeffrey Farber's (Koret Foundation) op-ed piece on a pending (California) Foundation Diversity and Transparency Act.

Mr. Gamboa, the executive director of of the Greenlining Institute speaks strongly in favor of the Act citing a number of reasons that the foundation community needs to be held more accountable and more importantly, should be paying out a larger portion of annual incomes.

Of equal interest to this blog is the bill's requirement that "large foundations disclose their board and grant-giving diversity. Mr. Gamboa notes that this part of the bill has "ignited a firestorm of controversy and condemnation from major foundations" who charge that "the proposed law would unleash "diversity police" or promote "reverse" racism."

Community foundations have for years been evaluating the diversity ratios of their prospective grantees as one of the criteria for approving a grant application. The philosophy is simple: a more diverse board, one that reflects the beneficiary of services, will be more responsive and sensitive. Thanks to community foundations holding up this standard, I believe this to be true and a practice that should be adopted by foundations. Foundations should have boards whose members reflect their mission and beneficiaries. The rich don't feel the pains of the poor and even middle class. That pain is helpful in identifying solutions for easing the pain

Board Chair Role Changes, CEO Resigns

mikeb — Tue, 01 Apr 2008 09:06:44 -0400

According to the Washington Post, the CEO of the Boys and Girls Clubs of Greater Washington completed a "negotiated resignation" following "the recent appointment of a new Board Chair. At the crux of the resignation, the CEO states that discussions with board members revealed plans for the new Board Chair to have a broader role and be more active than the previous Chair.

There are all kinds of various issues that certainly surround this case (like the disposition of certain properties) but I find the processes much more interesting. It appears as though the board was unhappy with the CEO's decisions and rather than overtly express this (or perhaps conduct an evaluation measured against results-focused goals) they decided to change their own leadership and give themselves, or at least their chair, new authority to get results that would be more satisfying.

This saga is a great lesson in nonprofit governance and more importantly, board:exec relationships. Great fodder for a case study.

Service on Subprime Lender Board: $200,000 Annually

mikeb — Mon, 31 Mar 2008 09:08:22 -0400

Wow! According to the Chicago Tribune, one of Hilary Clinton's top advisors was paid $200,000 a year to serve on the board of a subprime lender (yes, there's a bunch of issues here).

I can't think of a nonprofit board where a member is paid this kind of money for service while performing a whole lot more duties than folks sitting on these corporate boards. The big question: what's wrong with this system?

Nonprofit Fraud Report Out Today

mikeb — Sat, 29 Mar 2008 15:54:33 -0400

The New York Times reported today on a study by four college professors who examined the incidence of fraud by nonprofit employees or volunteers and concluded it's (fraud) is huge and maybe the money defrauded cumulatively equals the amount of funds given to nonprofits by foundations and corporations -- that would indeed be HUGE!

Clearly, the only thing wrong with ...

New Book on Nonprofit Revenue Generating

mikeb — Fri, 28 Mar 2008 10:08:46 -0400

I first missed this New York Times article from March 17, 2008 but I don't want you to miss it. The article focused on a new book by North Western University Professor Weisbrod focused on revenue generating by nonprofits. Three cases were cited in the article: the Metropolitan Museum of Art which generates more than $96 million dollars from revenue sources like parking facilities; the Girl Scouts whose uniforms sales represents 41% of annual budget; and Public Television which generated $4 billion from the sale of stocks for Tickle Me Elmo.

Professor Weisbrod's book sounds more critical than supportive particularly because of the issues around tax exemption. Anyway, this sounds like a good read for all those who are students of nonprofit social enterprise.

Zoo Not Meeting Acreditation Standards: Who's to Blame?

mikeb — Thu, 27 Mar 2008 07:00:00 -0400

The Maryland Zoo, in Baltimore is just not hacking it according to the Baltimore Sun which noted that pretty much anything that can go wrong, from crumbling buildings to underpaid employees and the failure to pay the water bill, is going wrong. According to the article, if things don't change, the zoo faces a very questionable future.

So who can fix the problem? The state? The city of Baltimore (like it has the money)? The under-resourced management? The Board or Friends Of? Me, I always think nonprofit fixes start with the volunteers (board) together with management. What about you?

Funder Calls Shots -- Founder Says OK

mikeb — Wed, 26 Mar 2008 07:00:00 -0400

Oral Roberts University, more like Oral Roberts, said ok to a life-changing gift of $70 million (according to the March 20, 08 Chronicle of Philanthropy).

This is the kind of deal that really gives me pause. Mind you, I like the ending but...

Should a donor have so much to say about the way an organization conducts its business? That's sort of the big question here. Oral Roberts had a board that by most standards "wasn't helping the cause". The founder-owner-operator I think basically got independence to run the university the way he saw fit. Unfortunately, the way he saw fit wasn't ensuring the university a long life.

In steps a donor who says he can do something about the situation but he wants a hand, at the board level, to make the changes necessary. And the incentive, big bucks.

Short term analysis -- stuff gets fixed in the way the donor would have it and mission continues.

Good deal?

Bluring of Commercial and Nonprofit Realms

mikeb — Tue, 25 Mar 2008 15:07:55 -0400

Today's LA Times reported on the "subtle and not-so-subtle bluring of commercial and nonprofit realms" as applied in this article, to the theater world. As noted in the article, the "issue boils down to procedures, values and most important, who's in control."

And as stated toward the end of this piece, "This unfortunate shift in the balance of power between art and commerce is evident in the way bragging rights for the largest theaters in our area derive from snagging Broadway tryouts and tours to their subscriber-based houses. What's conspicuously missing isn't just bold vision but the courage to buck the commercializing trend.

But the fault, dear theater-lovers, is as much our own as it is our mushy leaders'. After all, for many of us the words La Jolla Playhouse are synonymous with flashy products such as "Jersey Boys" and Billy Crystal's "700 Sundays" and what gets everyone's mouth watering is the word that "9 to 5: The Musical" will premiere at the Ahmanson this fall.

Lately, artistic directors seem more intent on wooing consumers than cultivating audiences. The chief losers in all of this are artists. The notion that there is a pile of masterpieces being overlooked while resources are squandered on yet another movie-turned-musical may be a wishful myth. Yet there are playwrights with potential masterpieces in them who are not being given a chance to evolve in the current corporate climate. Patch has helped quite a few of them in his long career in Southern California.

Before bidding him adieu, let's thank him for enriching our stages. And then let's all spend some time trying to figure out the secrets of his unbusiness-like legacy."

Effectively we must all be thinking about where nonprofit begins and ends, well beyond the theater voide. There are indeed core questions about control and voice and public interest and most importantly, purpose. There are no simple answers except for those who would not ask these questions. But for donors, these are the questions that frame giving.

Tainted Money or Not: Options for Paying for Mission

mikeb — Mon, 24 Mar 2008 13:44:42 -0400

Wikipedia and the foundation that oversees it is at a crossroads for thinking about how to pay for its future and the "so what" of taking certain kinds (sources) of money. It's a debate that is worth many nonrpofit's listen and it's the age old -- what's wrong with "tainted money" beyond that is there "taint" being enough of it.

As one paper noted:

"And so, much as how its base of editors and bureaucrats endlessly debate touchy articles and other changes to the site, Wikipedia's community churns with questions over how the nonprofit Wikimedia Foundation, which oversees the project, should get and spend its money.

Should it proceed on its present course, soliciting donations largely to keep its servers running? Or should it expand other sources of revenue -- with ads, perhaps, or something like a Wikipedia game show -- to fulfill grand visions of sending DVDs or printed books to people who lack computers? Is it helpful -- or counter to the project's charitable, free-information mission -- to have the Wikimedia Foundation tight with a prominent venture capital firm?And so, much as how its base of editors and bureaucrats endlessly debate touchy articles and other changes to the site, Wikipedia's community churns with questions over how the nonprofit Wikimedia Foundation, which oversees the project, should get and spend its money.

Should it proceed on its present course, soliciting donations largely to keep its servers running? Or should it expand other sources of revenue -- with ads, perhaps, or something like a Wikipedia game show -- to fulfill grand visions of sending DVDs or printed books to people who lack computers? Is it helpful -- or counter to the project's charitable, free-information mission -- to have the Wikimedia Foundation tight with a prominent venture capital firm?"

For a nonprofit, this is a good debate and one which staff and board should pursue regularly even if not facing the relatively huge challenges of Wikipedia.

Exceeded Bandwith

mikeb — Mon, 17 Mar 2008 09:39:42 -0400

Folks, I've exceeded my bandwidth on eponym. Please visit my new blog address: http://nonprofitboardcrisis.typepad.com.

Market Forces Rule

mikeb — Fri, 14 Mar 2008 10:31:12 -0400

Looks like the One Lap Top Per Child has another problem in the market place. The nonprofit is being sued for its keyboard design by an individual who says the nonprofit copied it from him -- it's a $20 million suit too.

Check out the San Francisco Chronicle for details.

This does make me think I am more right -- we don't need a nonprofit to pursue this effort -- good and bad market forces will ensure that technology gets around the world.

Nonprofit Exists To Support Arnold's Lifestyle -- Sort of

mikeb — Thu, 13 Mar 2008 11:32:25 -0400

The LA Times reported today on a foundation that is set-up to collect funds from private donors to send CA Governor Arnold and others on international field trips to bring home the bacon for California. The article essentially questions the legitimacy of charitable dollars used for this purpose which generally involves lifestyles that only the rich and famous (like Arnold) can afford.

You know, there are humongous numbers of nonprofits around that accomplish all kinds of missions serving all kinds of constituencies. I might be jealous of Arnold's lifestyle. I might be more jealous that Arnold has friends who he opens doors for. And finally, I might be jealous that the friends also get tax deductions (whoopti-doo) when supporting the Foundation that supports the friends who go on the trips. But, am I unhappy with the fancy museums and hospitals and universities who all spend really huge bucks doing stuff that only benefit the few, probably some of the same donors that support Arnold's foundation? Bottom line, we really should be looking at the whole charitable tax code but we probably won't. There are folks who gain enough to trickle enough to not want the apple cart to tip.

US Naval Academy Follow-up

mikeb — Wed, 12 Mar 2008 09:52:39 -0400

If you want to know more about the governance suit at the US Naval Academy (I referenced yesterday), a reader was good enough to offer the following link:

USNA Alumni Association - Litigation Update Thanks reader!

Boot Camp for Curators

mikeb — Wed, 12 Mar 2008 09:45:14 -0400

Today's New York Times reviewied a Mrs. Gund supported "Boot Camp for (Museum) Curators".

Great Idea! one that could be simulated in a number of nonprofit arenas. When you think about it, most directors who rise up to director positions are folks who have most of their strengths in their respective discipline: social work, health care, law, housing etc. With the bootcamp maybe the director of the future will actually have the skills to be a director. Ok, pushing a bit but you get the picture. This boot camp is a good idea.

Still, as the article ends, it is important to remember that training or no training, "There still has to be that magical fit between the candidate and the board that does the hiring.”

Serious Governance

mikeb — Tue, 11 Mar 2008 09:56:14 -0400

The Chicago Tribune reports today that the CEO of the US Naval Academy Alumni Association and the Naval Academy Foundation will resign from both posts this summer. A graduate of the Academy, he had a good record of raising some pretty large sums of money.

He said that he and his wife knew "it was always a matter of when, not if, we would move on", fair enough, but his resignation comes on the heels of a lawsuit filed by two alumni against "28 of the association's 29 trustees, alleging that the association's term limit rules were violated in the group's 2006 election."

Now I don't have more details but will poke around. It is so notably rare that members take governance so seriously as to sue over term limit rules or elections that when it happens, it is definitely worth noting. Would that more felt this passionate, right or wrong, about what it takes to seriously govern. My condolences to the CEO but my compliments to the two alumni.

Philanthrocapitalist

mikeb — Mon, 10 Mar 2008 10:25:12 -0400

Herb and Marion Sandlers are philanthrocapitalists (so is Bill Gates for a reference point). And, according to the New York Times, they are not that happy about how nonprofits are being managed.

According to the Sandlers, Human Rights Watch is a nonprofit they believe meets their standards: "It was effective. It didn’t waste money. It issued meticulous reports that tracked its results. And it was run at the time by someone whom the Sandlers trust."

Are these the standards that all philanthropists should hold nonprofits to? That's for each of us to assess, although I would argue they are reasonable enough.

Church Can't Find $400G

mikeb — Sun, 09 Mar 2008 19:17:08 -0400

The New Haven Register reported today that Rev Michael Moynihan, who resigned from his parish a year ago and was stripped of his priesthood after found living with another man, ripped off a wealthy Greenwich catholic parish some $400G which he used mostly to live a life style comparable to his parishoners. The Register says he spent $58,000 to buy a boat and that he also funded resturaunt and travel expenses.

Can you believe that a bunch of parishoners with lots of wealth, knowing how much they were paying this guy, didn't notice? This my firends is simply bad nonprofit governance -- no checks and balances on the part of the lay folks and on the part of the Diocese (his boss) who state now that they have made "great strides in implementing a new system of financial procedures and controls in all 87 parishes". These strides have even become a "model for other dicoseses" and, says the diocesan spokesperson, "I think people can have a great deal of confidence that the donations to the parishes are used well and wisely for the mission of the parish".

Sure, just like they have all along, before the new system of financial procedures and controls. Come on folks, bad governance does not regain trust over night!

To Improve Quality, Pay More?

mikeb — Fri, 07 Mar 2008 09:56:33 -0500

A New York Charter School opening next year is promising to pay high salaries under the premise that salary and quality are correlated (see New York Times 3-7-2008).

Of course, this is not a new premise but it certainly is one worth watching -- money makes a difference in attracting and keeping quality staff.

But does it really? I don't have to go far to see nonprofit execs and staff who are magnificent and being paid fractions of their counterparts in the corporate world. Not only are these folks magnificent in broad-brush emotive strokes but actually producing and making a difference in their spheres. So, how much does money matter is the real question. I can look at hospitals and universities on the other hand (the OTHER nonprofits) and be confident I can attract equally qualified leadership for less money.

So, this New York experiment is a good one to some degree but money, I believe, is not the ONLY bottom line.

$3.6 Million Lost on the Stock Market by Nonprofit CFO

mikeb — Thu, 06 Mar 2008 10:03:53 -0500

The San Francisco Chronicle reports today that:

The chief financial officer for the nonprofit that runs the recently opened, 800-car underground garage next to the M.H. de Young Memorial Museum in Golden Gate Park has been fired as investigators probe the disappearance of $3.6 million in garage funds - money that may have been flushed on the stock market.

The missing millions came to light a couple of weeks back when a vendor called the chairman of the Music Community Concourse Partnership board to complain that he hadn't been paid for his work on the garage, which opened in 2005, said Sam Singer, a spokesman for the nonprofit.

When garage chief financial officer Greg Colley was called in to explain, he asked for a little time to sort things out, Singer said. The next day, Colley turned up with an attorney and said he had borrowed the money to play the stock market, Singer said.

Colley said he had fully intended to return the money, but then the market took a nosedive.

With that, the nonprofit fired him, Singer said.

So again I must ask, where's the board and the good systems and policies? For that matter, where was the exec. I mean, $3.6 million dollars lost in the stock market -- just how does anyone even get to play with that much money without it being noticed? Bad governance and bad management.

For shame, for shame for shame!

Union Organizing -- the only way to get a fair shake in a nonprofit?

mikeb — Wed, 05 Mar 2008 10:03:48 -0500

The Lower East Side Tenement Museum tour guides want to organize (NY Times). I say hooray!

I believe the time, out of necessity, has come for many nonprofit staffs to organize as the only way to be valued and treated fairly by the nonprofit boards who "own" the organization and the exec who manages. And maybe I am not fair enough when I add the execs into the picture of those who need to be affected by union organizing, as I find many execs whose hands are tied by boards that are just not being responsible in establishing fair benefits and wages.

Nonprofit Boards, wake up, get responsible -- maybe accept unions but at least be fair employers, employers who are influenced by their very own missions which often are guided by principles of justice and fairness to those served!

Better Systems Indeed

mikeb — Tue, 04 Mar 2008 09:51:16 -0500

A juvenile diabetes organization in New York City, according to the New York Times, had hundreds of thousands of dollars stolen by the exec and a manager over the last five years.

An internal audit discoverd that receipts had been manufactured to pull off the heist. And get this, a board officer says: "we don't need better systems, we found the problem".

I don't think so. I think if it took 5 years, better systems are indeed necessary. And where's the nonprofit's external auditors anyway? At least the board has acted immediately to dismiss two of the top managers -- whether they did it or not, who's to trust them.

25 People, Trends and Events You Can't Afford to Ignore

mikeb — Mon, 03 Mar 2008 09:44:15 -0500

Entrepreneur March 2008 identified 25 People, Trends and Events entrepreneurs can't afford to ignore.

As a nonprofit strategic planning consultant, I can't help but think there's some lessons in this list for nonprofit boards, execs and managers. Here's the list:

Steve Jobs, 2008 elections, climate change, China, declining dollar (think fundraising), oil dependence, trust (in corporate products, companies and nonprofits too), mortgage crisis (think neighborhood housing), Oprah Winfrey (likes nonprofits), Bill Gates (also likes nonprofits and runs or will run a really big foundation), immigration issues, a generational shift (lots of trends here), emerging economies, Bill Drayton (Ashoka), Ben Bernanke, software as a service, shrinking middle class, auction of TV airwaves, Mark Cuban and IPTV (personalized TV -- an opportunity for nonprofits), health care, Google, Nydia Velazquez, Social Media, Socially Responsible Companies, Mobile Media.

Note how many of these are nonprofit related .......

off-line

mikeb — Sat, 01 Mar 2008 08:55:10 -0500

I was off-line yesterday and thursday 'cause my blog provider (eponym) appears to have gone awry - I am working on finding another blog provider but in the meantime can actually only blog about 28 days of the month. Thank heavens there was only 29 days in February.

Hospitals Gone Wild

mikeb — Thu, 28 Feb 2008 07:00:00 -0500

What's so "nonprofit" about the University of Pittsburgh Medical Center? Hard to say why it needs a nonprofit status when according to the Wall Street Journal the Medical Center "manages a transplant center in Palermo, Italy, runs two Irish cancer centers, provides consulting services and docs to a medical system in Qatar", and is now on its way to being the biggest health care provider in Ireland "paying $22 million for a 25% stake in Beacon Hospital. The company that owns that facility has plans to build three more hospitals in Ireland, which would be operated by UPMC under similar arrangements. The med center is also discussing new contracts with medical centers in Dubai and Cyprus". And, they are not alone, "The Cleveland Clinic, for example, is working on a project in Abu Dhabi and pursuing contracts in China, Guatemala, Brazil, Egypt and India".

Senator Grassley, where are you? We all know that health care systems are anything but nonprofit, including the nonprofit ones, so lets either make sure they need to be nonprofit to fulfill their missions or tax them -- we know it's not going to matter to the insurance companies.

Good old fashioned relationship fundraising

mikeb — Wed, 27 Feb 2008 07:00:00 -0500

Isn't all fundraising about "who you know"?

The New York Times reported today that one county in Tennessee is pretty fed up with their government grant making based on "who you know".

According to the times: "Earlier this month, the community services director resigned after the Knoxville News Sentinel reported her office had dispensed thousands of dollars to nonprofit organizations to which she had personal ties."

OK, so it's tainted money but it's getting the job done, isn't it? That's a question I believe the county residents should also be asking as they question the distribution of funds in this way. And what ever happened to relationship fundraising? Isn't the theory that you give to those you trust can get the job done? Maybe the county residents are over-reacting, at least on this count? I would like to see the results from these grants. And that's what the county residents should want to see before they move their employees out the door. Relationship grantmaking is most frustrating to those who don't have the relationship, and rightly so, 'cause it's not always fair. Good projects can lose out. But relationship grantmaking can also make for successful grants. Isn't this why we structure nonprofit boards with "who's connected". Or is the whole system just not right?

How will Boards stay focused: Social Capitalist Entrepreneur

mikeb — Tue, 26 Feb 2008 07:00:00 -0500

The failure rate for entrepreneurs — whether social or purely capitalist — is high. Still, ePals’ backers are betting that it is worth the risk. “These kinds of opportunities to do well and do good at the same time don’t grow on trees,” said Mr. Kapor, the ePals investor and a philanthropist. “But I do think that ePals could be one of them.”

That's the final thought in a New York Times Sunday February 24, 2008 article which discusses the for-profit ePals and reviews the brave new world of social enterprise and the lines being crossed to pursue social responsible outcomes.

It all seems too good to be true as noted at the beginning of my blog -- but is the risk worth it -- will socially responsible outcomes really result and at what cost and to whom? And where and when does philanthropy fit in? And does it? Also relevant is a Chicago Tribune article about the roles of the government and nonprofit sectors in caring for the poor -- really a story about competing missions. Isn't competing missions the story about social enterprise and nonprofits too?

Only thing wrong with tainted money....

mikeb — Mon, 25 Feb 2008 14:00:00 -0500

The Washington Post reported Sunday on a unique fundraising program that is raising steady bucks for a number of nonprofits through a form of gambling that was actually approved by the supreme court as "not" gambling (the element of chance is absent). It's called bingo but it's done through machines that are slot-like in that the action happens on a screen and cash is the ultimate prize. More interesting to me is how little money is made for the nonprofit -- about 10-20% if I am calculating correctly.

You know, the only thing wrong with tainted money is there tain't enough of it. And really, as many of these groups recognize, 10-20% of $1.00 is more than $0.

Grassley "pressure" produces results

mikeb — Mon, 25 Feb 2008 07:00:00 -0500

As I have followed here, Senator Grassley has been poking around in the college world suggesting that the mega-endowed schools ought to be doing more with their endowments. He even has floated the idea that large college endowments spend 5% of their earnings annually mirroring the requirements of private foundations (in order to maintain their nonprofit tax status).

In the race to avoid legislation (not necessarily the race to be better), Thursday's 2-21-08 Wall Street Journal reported that Stanford will "no longer require parents earning less that $100,000 to pay tuition. It said it also will not ask families earning below $60,000 to contribute at all to the cost of their child’s education, including expenses for room and board."

The same article noted that Harvard offers a similar package to Stanford for those earning below $60,000 plus students from families earning up to $180,000 pay 10% or less of income. Dartmouth has free tuition for students earning less that $75,000 a year. The University of Pennsylvania is offering loan-free aid packages to students with families under $100,000 annual income and Yale is giving everything to those families earning less than $60,000 and for those with incomes of between $60,000 and $120,000 the cost is 1-10% of family income. Families earning more than $120,000 pay about 10% of income (kinda like tithing).

So, have these schools avoided Grassley dreaded intentions?

As for me, I am not convinced by the college's offerings. For one thing, just how many students do any of these colleges admit that meet these criteria. These offerings look good on paper but what will this really cost the schools -- even 1/2% annually from the endowments? I think we must applaud the appearance but let's look closer at the real impact. Have the colleges just found a clever way to stave off regulation and continue to amass wealth -- just like their graduates?

Kudos for Jolie

mikeb — Sun, 24 Feb 2008 11:40:58 -0500

An AP article circulating in a number of papers has focused on the phenom of celebrities having babies. More meaningful to me is Angelina Jolie's establishing an exclusive photo op of her kid in exchange for a big donation to a charity. Jennifer Lopez did the same.

A wrap of the article noted that people tend to be influenced by what the press cites about celebs (e.g. what a wedding was like, how a baby is dressed or their room is decorated).

Let's hope, and maybe recognize this as a possible strategy, that celebs' giving to charity is also a habit or preference picked up by the rest of the world.