I serve on the board of a nonprofit. 100% of our board gives in some form monetarily throughout the year through event sponsorship, general giving, donations at events, etc. With all the year-round giving, many of us were not making a gift to the annual appeal. Recently, we were informed that funders look at what percentage of our organization’s annual appeal total comes from board members. This has the board scrambling to make sure everyone gives a significant sum here at year’s end. It also has many of us questioning the timing of our gifts for the next year. Do we not sponsor the gala or give to summer programs, but instead save that donation for the annual appeal? There is only so much to give for many of us.
While I know that funders want 100% of board members to give, the desire for that giving to come in the form of the annual appeal is new to me. I find it especially surprising that they would ask what percentage of the annual appeal comes from board members. Have you heard about this stipulation? Is it widespread?
Obviously we all want what is in the best interest for our organization to be positioned for future funding. However, I don’t want to lose the help and momentum the organization gets from year-round board giving if it isn’t necessary.
Signed, Surprised and Scrambling
First, let the Nonprofiteer congratulate you on having a Board that gives 100%. It’s bizarre to imagine that some additional hurdle should be placed in the way of a Board which has already cleared that one. Institutional funders are notorious for always asking for one more thing; but this hoop is a brand-new one.
The Nonprofiteer suspects that what we have here is a failure to communicate*—that is, a misunderstanding of what the funder actually wants to know. If the program officer asks (or the guidelines say) “What percentage of your annual fund comes from your Board members?” the English translation is most likely, “What percentage of your annual donated income comes from your Board members?” NOT “Which appeal do your Board members respond to?”
The funder’s concern may be for institutions whose Boards donate 75% of the group’s contributed income, reflecting a failure to reach out into the broader stakeholder community. Conversely, the funder—which mostly doesn’t deal with Boards as generous and active as yours—wants to know if Board member donations are significant or merely pro forma: if every single member of the Board gave $1, that wouldn’t be the kind of Board participation the foundation wants to see, or intends to spark through its inquiry.
If in fact the funder cares about the Board’s response rate to the annual appeal, meaning the end-of-year solicitation letter, this is a classic example of a wider problem in the nonprofit community: the “it doesn’t count” syndrome. Oh, members of your Board buy and sell tickets to the benefit event? “It doesn’t count” because there might be something involved in the transaction beyond a straightforward check and tax receipt. “It doesn’t count” syndrome leaves Board members feeling unappreciated and nonprofit executives feeling unsupported; so repeat after the Nonprofiteer: money is fungible; IT ALL COUNTS.
And if the funder disagrees: so the funder is stupid! Having money is no guarantee of having brains, and that’s as true in the philanthropic sector as anywhere else, though it’s harder to remember when we’re spending all our time trying to please people with money.
The Nonprofiteer’s advice: call the program officer and say, “Do I understand you want to know what percentage of the response to our end-of-year solicitation letter—what we call the annual appeal—comes from the Board, or do you just want to know what percentage of our annual contribution income is donated by the Board?” If s/he really means the former, then yes, just shift the timing of your contributions in future years.
“Teach your funders well . . . . just look at them and sigh, and know they” don’t understand you at all.**
*Cool Hand Luke
**Crosby, Stills, Nash and Young: “Teach Your Children”
This is glorious: someone figuring out how to divert some of that pointless holiday shopping into social good. Go bust some charity’s door today!
Making the rounds at law schools for Good Counsel: Meeting the Legal Needs of Nonprofits, I’m heartened to meet so many students interested in serving on charities boards in their communities. My recent talk at Harvard Law School about how law students and young lawyers can start preparing for the trustee role is available here.
Dear Nonprofiteer, How do we reach consensus on our Executive Director’s performance while preserving every Board member’s perspective?November 20, 2012
What is the best way for a Board to review its Executive Director? Our current review process involves each Board member’s completing a review of the ED and then our Board president’s “averaging” the reviews (without further debate or discussion from the Board) into the final document. While this is an effort at broad input, in reality it results in producing only the most general review, with minority viewpoints often dropped.
As Board treasurer I work with the staff and Executive Director often in different ways than other Board members and this give me the opportunity to see areas of weakness and strength others may not see. Likewise I’m sure other Board members, due to their unique positions of involvement, are seeing still different weaknesses and strengths but because their observations may not be those of the majority, they never make it into the final report.
Signed, Minority Report
You’ve put your finger on an important but oft-neglected aspect of nonprofit management: the need (as in the wider political arena) to protect the rights of the minority while preserving democratic governance by a majority. Nonprofit Board members are often so averse to conflict that they unintentionally shut down opposition—even their own—to preserve the illusion of unity, or at least consensus.
But it’s not consensus if it doesn’t include acknowledgement of minority opinions, particularly when those opinions are informed by special expertise. Board members are charged with governing agencies, which largely means overseeing the work of the Executive Director. Many Board members ask how that’s possible when everything they know about the agency comes from that selfsame Executive Director; and the only good answer is to secure information from within the Board itself.
As Treasurer, you know whether the ED is a spendthrift or a penny-pincher; whether s/he manages cash flow well or whether every month is a festival of white knuckles; whether s/he is carrying the appropriate share (or much more, or much less) of the fundraising burden. If you don’t share these data with the rest of the Board, all the other members are operating in needless dark.
The Nonprofiteer suggests that you propose to the Board president a relatively minor modification of the current approach: that after s/he’s crafted what’s designed to be a consensus report on the Board’s behalf, s/he bring it back to the Board for final approval. At that time, every Board member should get to see the comments of every other Board member, which enhances the likelihood that someone will say, “Wait a minute–we can’t gloss over these comments about how the Executive Director abuses the staff in public.”
The Board president probably wants to make sure that the ED isn’t getting feedback from all directions, because that sort of cacophony is to no one’s benefit. That’s a fine goal, but it should be balanced with the goal of making the ED’s review as comprehensive and nuanced as possible. Your agency’s decision to gather all the Board feedback gets you half the distance to the goal line; sharing and incorporating that input as a group will earn you a touchdown.
Dear Nonprofiteer, Can a donor dictate the use of her gift? How about if she’s the Executive Director? How about if she’s also on the Board?October 11, 2012
I was wondering if it is ethical for an Executive Director to donate to the organization she runs, designating her donation to bonuses or pay raises for the employees that work for her. She is not paid, thus can remain on our Board. Seems like a conflict to me.
The Nonprofiteer sees a conflict of interest in the situation you describe, all right, but it doesn’t have to do with the donation. Any donor can specify the use to be made of his/her gift, and if those terms strike the recipient organization as too onerous it can simply refuse the gift. A donation from a foundation restricted to paying the salary of a particular staff member—or to giving salary increases to staff members across the board—would be unexceptionable, and in fact would represent a refreshing understanding by the foundation community that people who work for nonprofits need to clothe their kids and pay mortgages, too.
When the donor is the Executive Director, a gift of this kind might be seen as a way of buying (as opposed to earning) loyalty from the staff. On the other hand, who’s in a better position than the ED to know that her staff members are overworked and underpaid?
It’s the job of the Board to create and implement the agency’s budget, a budget which presumably includes a line item for staff salaries. It isn’t really kosher for the Executive Director to unilaterally override this governance decision by whipping out her checkbook.
If there’s a consensus on the Board that the staff is underpaid, and/or that it’s time for a raise if only there were money, the Executive Director’s decision to alleviate that situation (and capacity to do so) should be as welcome as a similar decision by any other donor.
The Nonprofiteer doesn’t understand “She is not paid, thus can remain on our Board.” The Executive Director, regardless of her compensation status, should serve as an ex officio member of the Board—that is, a Board member by virtue of her position and not in her individual capacity. If the Executive Director was on the Board first, she should have resigned when she took on the duties of Executive Director. The Board’s power is concentrated largely in its ability to evaluate, hire and fire the Executive Director, and if necessary to go into executive session to do so—that is, to kick the ED out of the room. But if the ED remains a Board member, she can’t be removed from the room, therefore she can’t be discussed frankly, therefore she probably can’t be removed, therefore the Board has no power at all.
So the conflict is between the ED-qua-ED and the ED-qua-Board member. These two roles cannot coexist, and the balance of the Board should demand that the ED choose one or the other. This is why it’s not even a good idea to permit a Board member to serve as ED on an interim basis—because the “interim” tends to become the “interminable” without anybody’s noticing.
Now we’re back to the question of the gift. If the ED remains on the Board, her contribution should be counted toward her mandatory give-or-get; but first the balance of the Board should vote on whether to accept the gift with the conditions she’s attached to it. The ED-Board member, naturally, would recuse herself from this decision on the grounds that she—what?—has a conflict of interest, in this case between her role on the Board and her role as an individual donor to the agency.
By the same token, if the ED leaves the Board but remains at the agency, the Board once again has the right (and the obligation) to vote on whether to accept the gift she’s offered with the conditions she’s attached to it. Naturally, this discussion would take place in executive session, with the ED excused from the room. If Board members think this is a great opportunity to enhance compensation, they should accept; if they think this is a sneaky maneuver to undermine their budget authority, they should reject; but in any case the ED has no right to have her gift accepted unless and until the Board approves it.
To review: the question of the ethics of the donation doesn’t even arise unless the Board neglects its fiduciary obligation to evaluate gifts for unacceptable conditions. The questionable ethics here are those of all concerned—Board members and ED/Board member alike—in permitting one person to fill two roles.
Once you’ve given someone a disproportionate share of power, you can’t be surprised when she makes a play for a further disproportionate share of power, in this case by brandishing a checkbook. But the power to prevent the gift lies in the hands of the remainder of the Board, and if they fail to exercise it, they’re the ones whose ethics are questionable.
Here’s a new wrinkle in the ever-popular saga “Taxation of the Tax Exempt”: members of the Scranton City Council threaten to withhold zoning changes from owners of tax-exempt property unless they make “voluntary” PILOTS (Payments In Lieu Of Taxation). The Nonprofiteer has long been open to the notion that non-charitable tax-exempt organizations should have to pay property taxes, even as she acknowledges that the definition of “charitable” remains contested.
But let’s settle these issues in open political debate, with nonprofits able to make their case that they are truly charitable, and/or that their contribution to the public good entitles them to property tax exemption whether or not they’re charitable in some strict definition of the word. Let’s not torture the concept of “voluntary” by suggesting that a payment extorted in return for rezoning is somehow a free-will contribution to the public fisc.
Cross-posted to samefacts.com