Trustees Behaving Badly: A Never-ending Saga

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July 20, 2015; Accounting Today

There are always entertaining, albeit troubling stories out there about nonprofit board members or trustees behaving just a little bit outside the norm of what their fiduciary and governance roles call for. Here are a few recent ones:

The nonprofit’s interests or your own? (Los Angeles Times)

In January, the website IfOnly.com, a San Francisco lifestyle company that organizes and sells so-called curated experiences, began to offer exclusive, one-on-one private tours of a socially connected photography collector’s Georgian mansion in Pacific Heights.

About a third of the collection’s roughly 300 photographs had been featured as a 2012 exhibition at the De Young Museum in Golden Gate Park. The company sales pitch touts the museum’s imprimatur.

The price of a 90-minute private tour: $3,500 and up.

A Wall Street Journal tech writer was frank in describing the company’s general marketing plan: “[You] get to do some shoulder-rubbing with the jet-setter of your choice if you cough up the dough.” Art museum pedigree adds luster.

So does another, far more troubling fact: The businessman-collector is also a De Young trustee.

The link between the art museum and IfOnly is emblematic of a disturbing transformation, which has been unfolding over a generation: Museums are being relentlessly commercialized.

Reverse racial equity (Columbus Dispatch)

Some Ohio University students and faculty members are calling for one of the school’s biggest donors to resign as an OU Foundation trustee and for the university to strip his name from its communication building after he sent an email they’re calling racist.

In an email exchange with Ohio University administrators, Steven Schoonover advised them to “play the race card” against those protesting a university plan to buy a mansion for President Roderick McDavis, who is African-American.

After hundreds spoke out in late March against spending $1.2 million for the home, Schoonover told administrators and other members of the OU Foundation’s executive board in an April 2nd email to “handle it the same way the Democrats do every time Republicans attack President Obama…They label them racists.

“So if you are worried about the petition by the faculty just play the race card and call them racists and make them defend themselves!”

Looking for evidence that the board is helping (Bozeman Daily Chronicle)

Heart of the Valley, one of the Gallatin Valley’s largest nonprofits and its only animal shelter, is once more searching for a new executive director—its fourth since 2011.

And, following the resignation of the shelter’s last director after only three months on the job, current and former staff members have begun to publicly question the leadership provided by the nonprofit’s board of directors.

“They’re not setting us up for success,” said operations director Maria Mulvaugh. “We’re not getting the support that we need in the executive director position to help the organization grow.”

“All of a sudden, we’re taking steps back, it seems like,” said Beth Harper, the shelter’s animal care manager.

The shelter’s board chose not to announce [Eleanor] Inglis’ departure [after only three months on the job] externally, and began to search for a replacement without posting the opening publicly. Shelter staff were discouraged from raising the issue with the nonprofit’s volunteers and donors, Mulvaugh and Harper said, and were provided with a prepared statement to use as a response to inquiries about the situation.

That approach has the shelter staffers, already frustrated with the board’s handling of Inglis’ tenure, concerned. They said board members have done a poor job keeping them informed about the director search, and they worry that rushing through a less-than-transparent hiring process won’t end up providing the shelter with an effective leader.

“The secrecy lends itself to a lack of accountability,” said Mulvaugh, who isn’t seeking the director position this time around. “They want to get this hire over and done with, but that doesn’t provide the best results.”

“We were asked for patience,” Harper said. “But we weren’t provided more openness this time around.”

Who’s on the board? (Civil Society UK)

The Charity Commission has announced plans to appoint a completely new board of trustees at a mosque under investigation for links to extremist preachers, after two separate groups both claimed to be the rightful trustees.

The regulator first opened a statutory inquiry into the Masjid and Madrasah Al-Tawhid Trust in May 2012 following a complaint that the charity’s mosque was being used as a platform to promote extremist views.

It said that two different groups of individuals had both claimed to be the trustees of the mosque, but due to “a number of procedural flaws,” the terms of office of all those claiming to be the trustees had expired.

When the question is allegations of rape—and defending the perpetrator (Arizona Daily Star)

Bill Cosby, once the very public pride of Temple University, parted ways with the school last year amid allegations that he had drugged and sexually assaulted women. Now that his own words show behavior that was at least unsavory, his lawyer is feeling heat for continuing to serve as the chairman of the university’s board of trustees.

In deposition testimony taken a decade ago and made public this month, Cosby acknowledged giving Quaaludes to women with whom he wanted to have sex—adding evidence that his lawyer, Patrick O’Connor, knew that Cosby had behaved in a way that could reflect badly on the university.

The president of the university’s faculty union is calling for O’Connor, currently chairman of the trustees, to step down, but university officials are standing behind O’Connor. A half-dozen trustees contacted by The Associated Press wouldn’t comment on the situation, though one, Joseph W. Marshall 3rd, expressed “full support” for O’Connor. Experts are split on whether O’Connor’s work for Cosby constituted a clear conflict of interest.

[Cosby] stepped down from the trustees board in December as public pressure grew when more than two dozen women came forward accusing him of drugging and sexually assaulting them. He didn’t give his customary graduation speech this year.

The first public accusations came more than a decade ago from Andrea Constand, a Temple employee who sued Cosby and later settled for undisclosed terms.

What’s yours is mine? (BBC News)

Samantha Rogers, trustee of the Last Chance Hotel, which rehomes dogs, stole the Gordon setter named Indi after it went missing from its home in February.

Rogers, 48, then gave permission for surgery to be carried out on the 10-year-old pet and renamed it Molly.

She was given a conditional discharge by Truro magistrates and ordered to return the dog but claims she no longer has it.

Prosecutor Gail Hawkley said the dog had a “particularly special place in the family’s heart” as she had belonged to Mr. Bennett’s late wife.

She said the family was desperately concerned for the pet’s health as it required constant treatment for a pancreatic condition.

Show me the money (Third Sector UK)

A Charity Commission inquiry has found that former trustees of a community charity committed misconduct by allowing the charity’s bank account to be used by an unrelated external project and by being unable to account for £130,000 of income.

The regulator has today published its report into the Manchester-based My Community UK, which has objects of relieving poverty, advancing education and promoting good health to people in need, in particular to those in the Muslim community.

Today’s report says that the inquiry concluded that there had been “misconduct or mismanagement in the charity on the part of the original trustees” – referring to the three trustees of the charity when it was registered in 2010, none of whom remain on its board.

In particular, one of the former trustees had allowed the charity’s bank account to be used by the Ikhlas Coalition Project, a fundraising appeal for a coalition of five charities, which My Community UK’s trustees said were “unrelated to the charity’s own charitable activities.”

What’s going on with these board members? “Board members at nonprofit organizations are too far removed from some of their key governance responsibilities, according to a new survey by the accounting firm Marks Paneth,” writes Michael Cohn in Accounting Today. “Only 15 percent of the 103 nonprofit leaders surveyed said the board closely monitors dashboard performance compared to peer organizations, while only 28 percent indicated board members are highly strategic in providing guidance. In addition, only 29 percent said the board connects the organization to external sources, and 47 percent said board members lend their professional expertise to the board.”

But that doesn’t explain most of these board-members-gone-wild stories. Rather, two things jump out to us. First, a lot of board members are on boards for reasons not really related to the governance of the charity in question but for the self-aggrandizement or even self-inurement of the trustee himself or herself. In almost all cases, the revelations about misbehaving board members came from external oversight or external inquiry, whether from the UK’s Charity Commission, or U.S. government agencies, or the investigative posture of the press, not from concerns raised by other board members. The mission connection of some board members to their nonprofits appears a bit tenuous.

The other point is that it seems that trustees who are supposed to be providing oversight to the nonprofits they manage often need oversight themselves. The task of holding trustees to fulfill their legitimate functions seems frequently to come not from the IRS or state attorneys general, but from staff (as in the Temple University faculty) or the public at large. This isn’t a matter of “stakeholder revolt,” but a need for a two-way street where board members realize that their nonprofit organization’s constituents need and expect to have nonprofit trustees operate credibly and honestly—and will keep an eye on them to make sure that happens. Unless people are mobilized to “own” their nonprofit community-based groups, there will be more out-of-control trustees.—Rick Cohen