The Buck Stops With The Board
One of the primary assets most nonprofits rely on is their good standing with the public, and the belief that their leaders are well intentioned and trustworthy. Malfeasance happens in the nonprofit sector, but it tends not to breed the kind of wide-spread cynicism the public often aims at politicians or corporate leaders generally in the wake of scandals in those sectors.
Here’s a story about how badly a nonprofit can behave behind closed doors. Ironically, protecting this organization’s good standing with a valued donor caused its leaders to act recklessly and dishonorably. They succeeded in covering up their misdeeds, and won back the donor’s trust. It’s unclear whether the experience ultimately brought about any positive changes in how this particular organization operates, but others can surely learn from it.
It began when the president of a very prominent company sent the organization a letter expressing his extreme displeasure with how the organization was characterizing his industry in a ballot measure campaign that involved an issue central to the organization’s mission. The letter indicated that the organization could no longer count on his company’s support. Senior management got together and came up with a set of talking points for staff aimed at addressing the donor’s concerns, but inexplicably no one from the organization bothered to answered his letter. Not yet scandalous, but clearly poor management.
The ballot measure campaign ended, months passed, and the angry company president who wrote the letter retired. The organization’s CEO set up a meeting with the new president at this company to mend fences. Beforehand she was briefed by her staff about the ballot measure campaign so that she’d have her facts straight and be ready to finally address the donor’s concerns. Well, it turned out that the new president really didn’t care much about the details of the campaign. He simply wanted to know how it could be that no one at the organization ever answered his predecessor’s letter. Perhaps recognizing that there was no good answer to his question, the organization’s CEO made one up – she told him that the letter had in fact been answered several months back. Still not a scandal, but it turns out she opened the door to one.
The CEO left the meeting believing that she had made some headway with the donor and asked a staffer to prepare a letter of apology, explaining that while the organization was committed to winning on the issue it allowed its campaign consultants too much leeway and they were responsible for the messaging that had offended the donor’s former president. Sure this would mean eating a little crow and rewriting a little history in the process, but she had to keep the customer satisfied. No scandal there.
After the apology letter was drafted but before it was sent, the CEO came up with a remarkably bad idea – date the letter as if it had been sent months earlier to the donor’s former president, and send a copy to his successor, explaining that this is the reply that had been sent at the time. And if that wasn’t strange enough, the CEO had the letter signed by the chair of her board, using her electronic signature without telling her what she was doing. Several senior managers knew what the CEO was up to but no one tried to stop her. Now that’s a scandal.
With scandals in general, so often the cover-up is worse than the crime. Here, the cover-up was the crime. The organization’s failure to reply to the angry donor’s letter was a misstep, but compounding the error by falsifying a reply months later was unforgiveable. The CEO’s decision-making would be considered amateurish is she were at the very bottom of the organization’s flowchart, but this was a highly compensated, seasoned veteran overseeing a multi-million dollar operation with well over a hundred employees in several states.
The story would be bad enough if it ended there, but there’s more. After a little time passed a staff member who was aware of what had happened filed a grievance against the CEO with the board of directors under the organization’s ethics policy. The board, including the chair whose electronic signature was affixed to the fraudulent letter without her knowledge, closed ranks behind the CEO (who had appointed most of them), and in a secretive process administered a gentle slap on her wrist. In time, the staff member who had filed the grievance was pressured to leave the organization, and the board member who took the lead in shepherding the grievance through to its inconsequential resolution ended up taking over for the CEO when she retire gracefully a couple of years later.
While the facts here are somewhat unique, the patterns of conduct are pretty familiar. The organization obviously should have directly and promptly answered the letter from the donor; the CEO should have quickly admitted to the donor’s successor that she misspoke when she told him a reply had been sent; staff aware of the CEO’s intent to send the fraudulent letter should have tried talking her out of it; the board should have taken serious action against the CEO even if it chose to do so quietly without disclosing it to the aggrieved donor.
Although a lot went wrong here before the matter reached the board of directors, perhaps the biggest lesson to be learned is that board members need to check their loyalty to the CEOs that recruit them at the boardroom door. Employees, even at the most senior level, come and go and ultimately are rarely the reason donors, volunteers, policy makers, the media and the general public hold nonprofits in high regard. Board members needn’t micromanage the day-to-day operations of the nonprofits they lead, but they must vigilantly safeguard the credibility and transparency of those operations.