Board Stiffs

...Basically it was Aramony’s board,” says Pablo Eisenberg of the Center for Community Change, a longtime critic of United Way...

...It requires changing the structure-and the culture-of the boardroom...

...Such board detachment makes for a volatile situation...

...Unfortunately, in the nonprofit world, the buck often doesn’t stop anywhere...

...The two traditional independent watchdogs, the National Charities Information Bureau and the philanthropy division of the Better Business Ihreau, rarely scrape underneath the gloss...

...For proof, just track down any of United Way’s board members in Who’s Who...

...There’s no way to smell something like that,” says board member J. Fred Weintz, a Goldman Sachs executive...

...Which is exactly what happened at United Way...

...She has no problem with nonprofits’ tendency to pack boards with busy executives, and finds nothing lacking in their oversight...

...Ralph Larsen, by day the CEO of Johnson & Johnson, currently sits on five other boards...

...Bruce Ritter was the founder, the entrepreneur, the leader,” Shaw says...

...Adds San Francisco lawyer and board member Roger Clay, “I don’t think there’s anything in the world that anybody could have done to avoid the Stanford cost controversy...

...The real problem there was actually one of “appearance...

...Why so trusting...

...There were executives,” Hartogs recalls from her survey, “whose motto was, ‘[Board members1 don’t bother For the jet-setting CEO whose real job is generating quarterly corporate profits in tens of millions of dollars, the nonprofit world might seem a little like the Land of Make Believe...

...At the fist hint of the scandal, the board commissioned an investigation by a friendly firm and then quickly issued a unanimous vote of confidence for Aramony...

...Not all boards are simply laissez-faire when it comes to fraud and corruption--some get right in on the action themselves...

...But, clearly, even when things aren’t working right, boards don’t always notice...

...That guard dog needs a set of dentures...

...In the same story, Lyn Corbett Fitzgerald confessed that while she was an advertising project manager for Kraft Inc., she sat on the board of the nonprofit Future Homemakers of America as a way to test-market some of her ad ideas...

...he eventually resigned under a cloud...

...All of those [improper] expenses add up to a total of maybe one million or two...

...I don’t think there were any [real charges] floating around,” Shaw adds...

...And those board mem,bers, incidentally, were fully capable of reading a spreadsheet...

...While CEOs and lawyers are valued for their rainmaking capabilities, the priority in the search to fill a board seat should be quality and commitment...

...the presidents of several unions...

...The corporate model says that the board chooses the next executive and then steps back unless things aren’t working out right...

...Nonprofit boards meet once a month at most...

...In a recent survey of local United Way affiliates, the Not For Profit Leadership Project at Baruch College discovered that only a third of the nonprofits’ executive officers believed that their board members fully understood the mission of their particular liability for potential neglect or-abuse...

...Beware the hypnotic spell of the zealous nonprofit director...

...United Way board member Charles Peebler, CEO of Bozell Inc., estimates he’s on “seven or eight” different boards, but cautions that it might be more...

...But wait a second...

...In 1987, Texas governor Bill Clements admitted that as chairman of the Board of Governors of Southern Methodist University, he had for years encouraged illegal boosterism-private support of individual athletes by wealthy benefactors...

...But seat-stacking poses a far greater problem for nonprofits than abuse by crass career climbers...

...In general, people see sitting on a board as a real plum and don’t think about the work,” says Don Wilson, who raises money for several nonprofits...

...and the commissioner of the National Football League...

...Beth Daley of the National Committee for Responsive Philanthropy adds: “If the board isn’t diverse, giving won’t be significant for unrepresented [constituencies] .” In addition, board chairmen and directors should do their utmost to make the level of commitment required of all board members clear...

...Indeed, the point was to have a good time...

...The perception created by [Aramony’s] poor judgments has been damaging to the institution,” allowed United Way board member Robert E. Allen, CEO of AT&T, in an electronic letter to AT&T managers, as other board members scrambled to assure the public and potential donors that the cleanup was in effect...

...I like to get into the nitty gritty...

...They run like a secret society, and they all agree with each other...

...Without it, next year’s Aramony will have his Concorde rides on America’s charitable donations too, and no one will be responsible when he crashes...

...I thought they took me off...

...The executive director may have had reason for his resistance...

...So I don’t think that’s a matter of accountability...

...The time spent by board members is a major factor” in the crisis of nonprofit accountability, says Eisenberg...

...Basically, you’re only meeting three or four times a year, and they send you a few things in the mail...

...Banc One CEO and Stanford University trustee John B. McCoy takes a similar stance...

...the chairman of IBM...

...But perhaps there’s a more dramatic, less sugarcoated way to keep nonprofits in line...

...While the executive director and his tiny staff spent a quarter of a million dollars on travel and meetingsfigures stated clearly on the foundation’s IRS filings -the foundation’s fundraising well was running dry...

...Thomas M. James, a partner in Gorsuch, Kirgis, Campbell, Walker & Grover, a Denver law fm, explained to The New York Times not long ago why he spends an average of 25 hours a month on five nonprofit boards...

...Following the “Black Sox” scandal of 1919, baseball team owners, desperate to revive the game’s credibility, took the drastic step of establishing a virtually omnipotent post of commissioner...

...But after a few minutes’ discussion, he seems to reconsider...

...Krafty One of the great impediments to adequate board oversight is the very magnet that lures bigwigs to boards in the first place: social status...

...Boards might also want to consider creating separate honorary titles to confer social status upon those who seek only that instead of responsibility...

...As for nonprofit-sector umbrella groups, they’re almost as laissez-faire as the board members...

...And board members concede now that they had inklings of them...

...And she’s not just talking about the national headquarters of the United Way...

...The first step might be to consider putting different kinds of people on boards...

...To the casual newspaper reader, the post-scandal scenario seemed fairly reassuring: The renegade manager who duped his well-meaning board had been caught and duly punished...

...In the Land of Nonprofit Make Believe, you needn’t worry about rules until you bump into them...

...Real jobs require hands-on interaction eight or ten hours a day, five days a week...

...The more successful an organization is at raising money,” says Robert Bothwell, executive director of the National Committee for Responsive Philanthropy, “the more corporate the board is going to act-in other words, the more it’s going to let the charity alone...

...Tlhe governors were kept away from anything substantive...

...They’re here to feel good, and they don’t want to deal with tough problems...

...So, aside-from personal virtue, there’s often no incentive whatsoever for a board member to act responsibly...

...That’s not a lot of money...

...Even less interested in substantial reform is the organization that should be most concerned, the National Center for Nonprofit Boards, which is dedicated to advising board members of thair responsibilities...

...Monsanto’s Earle Harbison Jr.-six other boards...

...If things ing-you’ve got Aramony all over again...

...Imagine how little they knew about the travel expenses of their executive directors...

...For some in business, seat-stacking is a way to advance a career...

...There is a certain board-staff protocol, and players are expected to stay on their side of the line...

...Because neither the government nor the media displays much of an interest in the nuts and bolts of nonprofits, the entire nonprofit sector, which controls hundreds of billions of dollars, is left in the hands of a few administrators charged both with spearheading their organization and auditing their own actions...

...His travel and expense records were periodically available for board review, along with every other piece of relevant information about the management of United Way of America...

...In all these big boards, the executive selects the board,” says Nelly Hartogs, director of the Not For Profit Leadership Project...

...While real jobs are generally doled out one-per-customer, nonprofit board seats are coveted honorifics snapped up by the half dozen...

...After an initial stalling gambit, William Aramony, United Way’s embattled president, was sacrificed on the national media altar as the board came up with a comprehensive plan for public image renewal...

...And Stanford is an example of a board with relatively stringent requirements for its members, including a limit on the number of boards they can sit on...

...The tradition of benign neglect is fostered by the staffs of the nonprofits they sit on...

...The expectation that nonprofits will perform their charitable purposes scrupulously is what earns them their public trust and massive tax exemptions...

...The media is generally very inattentive to charities except when a big scandal comes along,” notes Robert Bothwell, adding that “all the press ever does is ask about [administrative costs...

...In addition to receiving no compensation and having no shareholders to answer to, board members are routinely indemnified against real oversight...

...An aberration,” Robinson says...

...That pervades the entire nonprofit sector...

...Board bylaws should include a rule against serving on more than one other nonprofit board simultaneously...

...A great number of nonprofits are entrusted to boards of directors populated by over-extended executives and status-seeking lawyers or financiers who have neither time for, nor interest in, in return...

...Who made these myriad “poor judgments” that so damaged the integrity of the United Way...

...As soon as she left that job she lost interest in the nonprofit, subsequently leaving the board...

...What we don’t know is monumental...

...He would not entertain the questions, he was very defensive, and he was not interested in talking about the center itself...

...The three for-profit spinoffs, responsible for much of the public outcry, had been explicitly approved by the board...

...At least Ralph J. Pfeiffer, Jr., the chairman, was penitent when the story came out...

...Board people like that only want to hear good news,” explains former United Way staffer Pat Barrett...

...Board Stiffs How William Gates and Paul Taglia bue belped William Aramony bilk America by David Shenk he United Way of America’s Board of The United Way of America’s Board of Governors may have been asleep at the wheel for a couple years while the world’s largest charity was billed for limousines, exclusive condominiums, and flights on the Concorde, but at least it knew what to do when its $3.1 billion bus wandered off the road and hit a telephone pole: Quickto the press release...

...What starstnick nonprofit executive wants to criticize William (fates or Paul Tagliabue for not giving enough...

...The Limited’s Leslie Wexner-thirteen others...

...As the Monthly has long noted, the IRS treats nonprofits with kid gloves, requiring only a smattering of financial disclosure and seldom following up even when it suspects malfeasance...

...When Low-Cost, a Boston low-income housing organization, ran into financial difficulties last year and its president Rutledge A. Waker was suspected of negligence and fraud, The Boston Globe documented how its board members, won over by Waker’s dynamism, had essentially served at his beck and call, refusing to question his actions...

...executive, admitted he hadn’t been to a meeting in more than a year...

...It was his creation, he raised most of the money, and like most entrepreneurs, he was the one who really ran things...

...You need good working people,” says Pablo Eisenberg...

...While his official work is compensated with six or seven figures, the nonprofit job is volunteer...

...Still, he thinks CEOs like himself fulfill their commitments in a perfectly responsible manner...

...What kind of advice do those board members get...

...Dent u red servants Sadly, when boards blow it, there’s no secondary defense, either governmental or private, to safeguard the public trust...

...After it was discovered that the Southern California Montebello Baseball Association, a regional little league group, had failed to file required financial statements from 1986 to 1990, Association Commissioner Larry Salazar said, “We have to admit those forms were not turned in...

...They included the CEOs of Microsoft, Exxon, Johnson & Johnson, J.C...

...Sure, I’m committed to volunteer service,” he said...

...It’s Izasier to stroke them for giving at all...

...Here, for example, was the official word from the Better Business Bureau in the wake of the United Way fiasco: “In past years, the national office, United Way of America, has met our standards, based on the reviewed materials they provided...

...Of course, board members don’t think they’re spreading themselves too thin...

...Taking Robert Bothwell’s suggestion, the independent sector could form a new national independent watchdog organization whose sole purview would be nonprofits, and that would have unprecedented access to financial records of participating groups and real punitive power...

...Some people are doers,” he explains...

...Consider the Community Foundation of Greater Washington, which boasted the support of Barbara Bush, Elizabeth Dole, and dozens of other Washington powerbrokers...

...Clay, it should be pointed out, came to the board only a month before the scandal broke...

...Only after the story erupted onto the front pages did the board accept his resignation...

...Logic dictates that a person with half a dozen board commitments could hardly cast more than an occasional glance at the books of any one organization, and that a board composed of seat-stackers would, de facto, be hands-off...

...He also admits he was much too busy to attend about half of his United Way board meetings...

...Penney, and Sears...

...But who can blame them...

...You’re not going to get involved in the day-to-day business of running the organization...

...After all, that’s the way the incentives are rigged...

...Thomas B. Kennedy, a former chairman of the board, called Waker “a modemday saint...

...A for-profit corporation has attentive shareholders who want a quick return...

...And if something does go wrong, the initial instinct is to circle the wagons...

...Of course, board members shouldn’t get all the blame for their hands-off behavior...

...Obviously, we failed,” he said of his board...

...nonprofit donors expect only satisfaction andor tax deductions me, and I don’t bother them.’ ” When California lawyer and former energy secretary John Herrington came onto the board of the nonprofit East-West Center in Hawaii, he wasn’t exactly impressed by the board’s oversight of $30 million in federal funds entrusted to its charge...

...Ten months before financial and sexual shenanigans made headlines in New York, the Los Angeles Times’ Kathleen Hendrix reported that rumors about Father Ritter’s indiscretions had floated around for years...

...Board member Ellen Levine, editor-in-chief of Redbook, notes that before the scandal broke, board meetings were “infrequent...

...It worked for all of them appear to be going well, it’s tacitly understood that the board will not interfere...

...Aramony’s salary and benefits had been set annually by the board...

...But let’s be honest - e x - posure to the business community certainly helps in developing clients...

...But none of the board members noticed until stories about the spending appeared in the press...

...I tried to raise some questions in the board meeting with the chairman...

...In fact, most board members already provide “excellent service-not perfect but pretty damned good...

...My impression of my first board meeting was that it had no substance whatsoever,” he told Hawaii Business magazine...

...But] if nobody tells you that you need to do it, you don’t think about it...

...Consider the megascandal at Father Bruce Ritter’s Covenant House in New York...

...According to Director Maureen Robinson, there is “nothing wrong with the system” as it stands...

...Board member Janet Phinney said of Waker, “If that man isn’t the most honest man I ever met, I don’t deserve to live another day...

...The meetings of the United Way board, which occurred three or four times a year, were marked not by organization...

...It’s fascinating to note how some of the most inspiring and reputable leaders by day in this country turn out to be world-class lemmings during nonprofit play time...

...Well, what about the United Way...

...But like the United Way governors, all members of Stanford’s board of trustees contacted for this story denied responsibility for that scandal...

...That way, Who’s Who retains its thickness, and nonprofits regain their integrity...

...And the press...

...I’m not just lending my name to nonprofit boards,” he says of the five or six (he also couldn’t be exactly sure) others to which he currently belongs...

...Such strictures might offend those elites who feel the gracious donation of their time should come with no strings attached...

...Some can be prestigious, but the board is not just there for fundraising...

...We were dependent on a process,” says McCoy, “and the process was flawed...

...How to make board members get serious about their philanthropic obligations...

...When you meet maybe twice a year, you don’t do a lot of micromanagement,” laughed board member Eleanor Holmes Norton when asked about the foundation’s budget, while another board member, a Washington Post Co...

...The United Way debacle might be the impetus for analogous action in the nonprofit world...

...Relax...

...The National Association of Letter Carriers’ Vincent Sombrotto-ten others...

...David Shenk is a Washington writer: Research assistance was provided by Mike McAuliff and Scott Greenberger: While Aramony may have been a sloppy president with expensive tastes, by law the buck was supposed to stop with that high-profile board...

...He put it together for his buddies...

...Instead, it drifts around aimlessly until it’s buried in a basement filing cabinet or shredded ?t la Aramony...

...The prestigious board also let its admiration for Ritter obscure its fiscal acuity, passing right over astronomical staff salaries, a secret Ritter-controlled trust (that even the IRS knew about), personal loans to board members, and loans and jobs to Ritter’s family...

...Oh, am I still a board member there?’ he asked innocently...

...Thus nonprofit boards tend to become paragons of laissez-faire management-worse, even, than the notoriously incestuous and disintcrested boards of major corporations...

...But if public good is really their interest, they’ll realize the urgent need for reform...

...They’ve got plenty [of problems] in their regular jobs...

...Still, admits board member and Chase Manhattan Executive Vice President Edward L. Shaw, the board didn’t take them seriously...

...Blind trust That’s too bad, because McCoy’s university was recently caught defrauding the federal government out of millions of dollars in grant money...

...But a review of board behavior in some of the eighties’ great nonprofit scandals-United Way, Stanford, Covenant House-suggests that turning that expectation into reality involves a lot more than the occasional removal of profligate leaders...

...If those administrators aren’t honest-and the temptation not to be is considerable when no one’s watchintense scrutiny of tax forms, but rather by good meals, a self-congratulatory sense of philanthropy, and a cursory review of the books and major issues...