In voting for the dissolution of the San Diego Opera last month, the organization’s board was attempting something that’s all but impossible in a cultural nonprofit: acknowledging insolvency before actual insolvency. General Manager Ian Campbell called the vote an attempt to close ”with dignity and grace, making every effort to fulfill our financial obligations, rather than inevitably entering bankruptcy….” Other constituents disagreed.
This week, in the face of labor, civic, audience, journalist, national, and internal board disputes, the board voted to give the enterprise another few weeks of analysis.
I will not post an opinion about what the board or the organization should do. They have plenty of advisors — invited and uninvited — and lots of evidence to inform their choice (whether they used that evidence effectively is a current point of debate). But I am intrigued by the larger question: How can you gracefully disassemble something that nobody owns?
Nonprofits exist as a special class of organization that nobody owns. In the private sector, private owners (founders, investors, etc.) define the decision structure of a firm. In the public sector, the citizens collectively ”own” the assets of their government, and elect representatives to decide what to do with them. But nonprofit corporations are “non-stock,” meaning that neither the public nor private sector owns them.
The governing board, of course, is charged with stewardship of the organization and its assets. They represent not the public, but the ”public trust,” which is wildly open to interpretation. Some boards interpret their job as ensuring the success of the organization at all costs. Other boards interpret their job as ensuring the success of their mission, within the context of the many ways (inside and outside the organization) that mission might be fulfilled.
Essentially, the nonprofit organization offers an intentional disconnect between ownership and control. There are many good reasons to do this (which I’ll describe another time). But there are many consequences of this disconnect that we have not deeply explored.
For example, what do you do as a board when it seems likely that your continued commitment to the organization will do damage to the community? When you are faced with selling subscriptions or advance tickets (both of which are contracts) to performances you are not confident you can produce? When you are subject to long-term agreements that you doubt you can fulfill? When you are soliciting donations that may well drop down a hole?
I’ve written before about the evolving view of an organization as a ”nexus of contracts” rather than an individual entity. In the private sector, those contracts are bound through private ownership, and guided by economic and legal consequence. In the public sector, those contracts are bound through public process, and guided by the consequence of public elections (in both positive and negative ways).
In the nonprofit sector, as we’re seeing in San Diego, the board is caught between its public trust contract and its direct contractors (workers, funders, audience members, public agents), without clear insight about which is paramount, or whether they’re even different things. One of those groups can yell at them and litigate. The other party, the public trust (which, of course, includes the direct contractors), is amorphous, mysterious, and silent.