Turmoil on Senior Staff Gives Funders Pause: Two Cases in the Arts

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Sundial

Sundial / Tanel Teemusk

December 12, 2015; Pittsburgh Post-Gazette and Los Angeles Times

The boards of two nonprofit arts groups—one in Irvine, California, the other in Pittsburgh, Pennsylvania—are facing difficult questions from philanthropic supporters in the wake of recent changes in senior staff leadership. While the underlying stories are somewhat different, in both instances board and staff leaders seem to have fallen out of step with one another, and funders are reacting to leadership transitions that have, at the least, been poorly explained, if not poorly executed.

At the Irvine Barclay Theatre, bad blood between the board chairman and the former president of the performing arts center have led one long-time funder to “cut all ties” with the organization, and others in the community to question the viability of the Barclay as an independent nonprofit. At Pittsburgh Filmmakers/Pittsburgh Center for the Arts, a $1 million deficit and the resignation of the longtime executive director have caused several local philanthropies to hit the pause button before making any new investments.

In Pittsburgh, executive director Charlie Humphrey resigned last week after a majority of employees expressed to the board a lack of confidence in his leadership. For now, a three-person team has been appointed to manage daily operations. Last June, Humphrey laid off 20 employees because of the organization’s budget challenges, and yet that gaping million-dollar hole still remains. Hanging in the balance in the short-term is a $250,000 grant from the Heinz Endowments and another $500,000 from the Richard King Mellon Foundation, plus the continued support of the Pittsburgh Foundation and the McCune Foundation.

As noted by Maxwell King, president and CEO of the Pittsburgh Foundation, nonprofits should expect that foundations will “pay careful attention to a situation where things seem to be in turmoil.” Spokesperson for the Heinz Endowments John Ellis explained, “We need to better understand what is happening at the organization and its plans for leadership transition before any payment is made…We don’t release funds to organizations in leadership transition and governance turmoil absent detailed information about how the organization’s operations are being managed and the reliability of plans to successfully navigate the transition.”

Board chairman of the Pittsburgh Filmmakers/Pittsburgh Center for the Arts Doug Gouge says he is prepared to outline a transition plan and a strategy for continued operations next week when he meets with executives from the four philanthropies. “All of the foundations have had the same basic communication with us. Their standard policy is that they don’t fund organizations that are in transition. They have the same questions I would ask if I were going to write a check,” Gouge said.

In Pittsburgh, the story is one of concern about finding a new executive director for a fiscally challenged organization, and everyone seems to be saying the right things. In Irvine, however, the story seems to be a bit more twisted, and the rhetoric less polite.

Following what has been described as a “clash” between Douglas Rankin, the former president of the Irvine Barclay Theatre, and board chairman Robert Farnsworth, four prominent donors have said they are withdrawing their support of the performing arts center, which celebrated its 25th anniversary this year as a collaborative venture between the city of Irvine and the University of California, Irvine. Rankin, who left last August and cannot comment publicly on his departure because of his agreement with the organization (never the sign of a happy departure), has been replaced with an interim leader while the board searches for a new president.

Jennifer Cheng, whose family has donated more than $2 million to the Barclay since its opening, and who resigned from the board last April, stated in a recent letter to Farnsworth, city leaders and officials at UC Irvine that her family and her late parents’ foundation are compelled to cut all ties with the organization, including removing the family name from the 756-seat Cheng Hall and from all brochures, programming and other material. Farnsworth not-so-graciously responded that while the Cheng family’s contributions have been generous, the withdrawal of their funds “is not a catastrophic loss to the theater. We still have good support in the community.”

Others may not agree: Founding board chairman Richard Sim and his wife have stopped their donations, and Sim noted that Farnsworth’s “rogue” leadership style, which includes making decisions without consulting the full board, is part of the problem. (The fact that Farnsworth’s girlfriend was hired as a consultant at the Barclay and next month will become the full-time director of development probably doesn’t help the board dynamics, even if, as he insists, he had nothing to do with her hiring.) Other major donors and board members have also defected, leaving the organization with only 11 governing and two honorary board members—down from a total of 21 trustees in 2010. Sally Ann Sheridan, former mayor of Irvine and another long-time supporter of the Barclay, says that the board is now “toxic.” “This has become such a mess, and the board has become so divided and nasty,” she added. Sheridan worries that unless the board and staff leadership can be stabilized, the Barclay may not be sustainable as an independent nonprofit, and may have to be taken over by the university—which would likely change its role in the community.

Leadership transitions are tricky business, under the best of circumstances. But when they are made under pressure, or in the glare of public scrutiny, they are even trickier. In both Pittsburgh and Irvine, funders and other stakeholders are watching carefully to see what will happen next.—Eileen Cunniffe