The Smithsonian Institution’s self-study report, summarized in yesterday’s New York Times, sounds like an effort to compile a comprehensive list of failures in nonprofit governance and management. Clueless Board? Check.
"…[T]he Board of Regents was largely in the dark about the terms of [the CEO’s] executive compensation, which included a housing allowance and enabled him to use institution money for personal expenses, the report said. The board was also inadequately apprised of negative reaction to some of [his] initiatives, it said, like a deal he made with Showtime Networks in 2006 to set up an on-demand cable station whose programming would feature Smithsonian programs and collections.
“The Regents did not routinely receive, nor did they demand, the information necessary to support vigorous deliberation and well-reasoned decision making,” the document said.
Inadequate communication between leadership and staff, producting competition instead of cooperation among departments, a lack of consensus on programming and a blurred vision? Check.
The report paints a picture of an organization out of touch with itself because of poor internal communications and a concentration of power at the top . . . . the nonuniform application of policies and procedures, objections to some practices of Smithsonian Business Ventures, morale issues identified through employee surveys and increasing tensions between the Smithsonian’s individual units and the central administration.
Omission of elementary safeguards and procedures to prevent fraud and conflict of interest? Check.
Nor did the board heed several efforts to sound the alarm. “The general counsel, the chief financial officer and the inspector general were without the necessary direct access to the board to be able to raise concerns or serve as effective resources,” the report said.
This spring [the CEO and the COO] came under tough Congressional scrutiny for serving as highly paid directors of the Chubb Group of Insurance Companies even as the Smithsonian renewed a contract last year giving Chubb more than $500,000 in business annually.
The good news seems to be that people are being held accountable–and what a remarkable phenomenon that is in George W. Bush’s Washington! The COO is following the CEO out the door, though the pleasant clubby atmosphere remains relatively undisturbed: a new policy prohibiting Smithsonian staff from serving on for-profit boards won’t take effect until after she leaves.
But before anyone decides that this constitutes an argument for the unique dishonesty and incompetence of the nonprofit sector, remember that a highly paid Board of Directors failed just as spectacularly in keeping executives from looting the Hollinger newspapers chain, and during the erstwhile chief’s trial the chair of its Board audit committee, a former U.S. Attorney and Illinois Governor, excused himself by saying he hadn’t really read the financial reports.
Still, when nonprofits look to Washington for leadership, leadership in corruption isn’t what we had in mind. And let’s get this straight once and for all: when we say the Board is responsible for oversight, we don’t mean that it should neglect its responsibilities and then say, "It was an oversight!"