Last week I read an article by Pablo Eisenberg in the Chronicle of Philanthropy in which he argues that greater oversight of nonprofits is needed because nonprofit boards can no longer be trusted to make sure the institutions they govern are serving the public interest, which they are legally obliged to serve. Eisenberg mentions hospitals and universities in particular, citing the recent debacles at University of Virginia and Penn State as evidence for why we can no longer put our faith in boards. However, I think it’s fair to say that the arts sector is not immune to “poor performance, corruption, and a lack of public accountability.”
Let me ask you: Do these seem to be reasonable questions to be asked of a nonprofit arts organization?
Why was the board unaware that the organization had been, for years, overspending? Who made the decision to spend funds that were restricted and on what were they spent? What is motivating what appears to be a radical shift in the programmatic strategy for the theater? How do you reconcile your mandate to be accessible with the fact that you are charging over $100 per ticket for this show? Why did you cancel the new play scheduled for this season and replace it with a revival? Can you explain why, over the past five years, administrative salaries and costs have grown at a faster rate than artistic salaries and costs? Do you think audiences may be declining because the quality of the programming has declined? Why did the board approve significant raises for the executive and artistic director even though the last three seasons have ended with deficits? Why are no female writers, or writers of color, featured in the upcoming season? Is it true that the work of a political artist was censored by your chief curator?
I think these are reasonable questions–difficult and complex to answer as they may be.
And yet, nonprofits often seem unable or unwilling to answer such questions directly, or they bristle at the idea that someone (a funder, a journalist, a new board member) would ask them in the first place. But one could argue that nonprofits shouldn’t need to be asked such questions at all–that they should be more transparent in the first place about the decisions they take, presumably in the public interest.
Which raises more questions: How seriously do nonprofit arts groups take their ‘public interest’ mandate? Do board members actually see themselves as representatives of the community’s interests (which they are)? Or rather do they consider themselves to be primarily advocates for the needs and goals of the institution?
Here’s Eisenberg on why boards cannot be trusted to look out for the public interest:
The reasons we can’t trust boards are most obvious at colleges and hospitals, which account for a large share of the assets of nonprofit institutions.
Most trustees at public universities and nonprofit hospitals are essentially political appointees, named by governors and state officials because of their political connections, as financial supporters, party members, or close allies to universities and the medical profession. The large majority are not experts in either health or education. Nor are they a cross section of their communities. They are among the wealthiest people in America, and they largely serve as lobbyists to attract more government aid to their institutions.
And at most colleges, public or private, it’s rare for boards to include students, professors, or members of the public in their boards, although some hospital boards include patients, nurses, and people who represent the community.
Also missing from the boards of most national and regional, and even community, groups are the blue-collar workers, teachers, small-business owners or grass-roots community leaders. It may be a cliché to say that we have become much more of a class society, but increasingly the nonprofit boards reflect that truth, and with it the problems of democratic representation and public accountability.
Instead, most trustees of large nonprofits mirror corporate America.
With the exception of the phrase about “political appointees” much of the same could be said of the boards of the largest arts organizations in the US.
Reflecting on Eisenberg’s article, I wonder:
- Is this failure of nonprofits to look out for the public interest a new phenomenon? Or is it possible that boards and executives have always used nonprofits to achieve institutional rather than public aims? Put another way, is the problem with the nonprofit form itself (and the fact that it lends itself to manipulation) or with board members who have become, perhaps, more likely (for whatever reason) to use it to misguided ends? Or both, perhaps?
- If a nonprofit fails to act in the public interest, what can the public reasonably do in response? If a community decided that a nonprofit was not well run what would its options be? A leveraged buy-out would clearly not be possible but is there an equivalent for nonprofits? And if not, why not, and do we need such a process?
Eisenberg’s suggestions for improving nonprofit oversight include: requiring all nonprofits with budgets over $5 million to appoint an inspector general or hire an ethics or compliance officer; appoint an independent ombudsman to investigate complaints by whistle-blowers; or appoint an oversight committee of citizens to communicate with boards about possible infractions.
The arc of the first five comments (each made by a different person) posted by readers in response to Eisenberg’s article made me chuckle:
“I’d like to be one of those new Ethics Officers. I would imagine that to be a $2m/year job, with the primary role being to not object to the Board’s or my own salaries.”
“No more regulators or regulations or layers of accountability.”
“Regulation on top of regulation is useless. As soon as one of Eisenberg’s ethics officers cheats or steals, we’ll need ethics officer overseers. Yes, some boards will be inept — so are some professors, and writers, and editors. Over-regulation solves nothing.”
“Sure…let’s pile bureaucracy on top of regulation on top of oversight on top of more bureaucracy. And while we’re at it, make sure we never, ever trust the private sector to govern itself. Typical academic clap-trap! I guess Eisenberg proves that when your only tool is a hammer (bureaucracy), then every problem looks like a nail. We already have more-than-sufficient regulation. Let’s start by simply enforcing the existing rules. The last thing we need is more government inserting itself into the situation.”
“I can’t help but think that the previous comments are not coming from people who provide the funds for the charities.”
Reading through the comments posted in response to his article, I noted that many people were skeptical of Eisenberg’s suggestions. Nonprofits are often offended or annoyed by the suggestion that greater oversight is needed, and assert that they are capable of self monitoring. But Eisenberg asserts that boards have proven over and over again that they are not.
In last week’s post I shared the Marshall W. Meyer and Lynne G. Zucker theory of permanently failing organizations: organizations that persist despite the fact that they are not achieving their goals. Arguably, permanently failing nonprofit organizations do not serve the public interest. But as the responses to Rocco Landesman’s 2011 supply/demand salvo showed, arts organizations seem to find it unacceptable that the NEA or the IRS or state arts agencies or any outside entity, really, would weigh in and mandate the closure of some organizations.
Thus, it seems that if permanently failing organizations are going to be encouraged to either take the necessary risks to become high performing, or acknowledge defeat and close their doors, board members are the ones that need to make that demand–on behalf of the public interest. Board members are in the driver’s seat when it comes to approving organizational plans, budgets, and (often) finding resources that allow an organization to persist.
Of course, if you were appointed to a board exclusively because of your ability to give or get money, or if you mistakenly believe your job is to keep the institution alive rather than on mission, or if you are reluctant to admit defeat “on your watch” … well, it’s easy to see why nonprofit board members may be prone to tolerate a permanently failing existence.
I’m not sure how to address the failure of nonprofit boards to, at times, do their jobs (and for the record I do not think all boards are failing in their responsibilities to the public); but it would seem that if the public is, indeed, losing trust in the ability of boards to act in their interest then we might very well expect increased calls for greater oversight to be imposed–for the ultimate good of the nonprofit and the public it serves.
Nonprofits and those who love them, eh?