Dear Nonprofiteer, Must Caesar’s Board be above reproach, too?

Dear Nonprofiteer,

For the last year I have chaired the 14-member Board of a nonprofit with a public health focus. My problem concerns our two lawyers on the Board, whom I’ll call Chet and Matt.

Maybe I should say 1.5 lawyers because a few years ago, about a year before joining us, Matt was indicted, convicted of a felony or two, and disbarred.  I never heard the full story about his crime.  Something white collar.  Matt’s never served as Treasurer, and doesn’t get a chance to spend our money.

Our bylaws do not bar felons from serving on the Board.  We do have a clause we’ve never had to use, about booting Board members on a two-thirds Board vote for anything on a vague list of bad behaviors.  Matt apparently has been obeying the law ever since he joined us, but rumor has it Chet has tried to pressure Matt to resign “voluntarily.”   

Now Chet is bugging me to “do something,” meaning expel Matt.  He says (1) Any Google search of our Board names will dredge up the disbarment & crime–a PR minefield and maybe bad for future fundraising or grant applications.  (2) Should Matt commit another financial crime related to our mission, we could get sued for harboring him and giving him a platform.  (3) With the possible exception of grandly rehabilitated ex-cons in a criminal justice organization (or high-cash funder types like Mike Milken I guess), felons don’t belong on nonprofit boards.  (4) What if Matt ever seeks a higher post on the Board, one that lets him into the checking account? 

I honestly don’t see any reason to inflict more pain on a guy who seems well intentioned.  Our D&O insurer knows about Matt and doesn’t care.  So am I a spineless, brainless crony, or is Chet mean and self-righteous?

One of my friends on the Board suggests a compromise: I should tell Chet we’ll have a Board discussion with Matt out of the room and take some action, PROVIDED Chet agrees to be bound by the outcome (which my friend thinks will be a decision to do nothing).  Sounds like a bad idea to me.  I don’t trust Chet to accept an outcome that doesn’t go his way, and if (2) above is a real threat, the more we talk officially about Our Very Own Criminal, surely the more liable for his next misdeeds we become.

What should I do?   

Signed, Kindness, Weakness, or In Between?

Dear Kindness:

Well, this wins the coveted Weirdest Question of the Month Award, though on second thought there’s nothing so weird about a pair of lawyers having a pissing match.  Because that’s what it sounds like: Chet can’t tolerate operating in a binary-star system, and is determined to eliminate his rival even if it means knocking everything else out of orbit.

The Nonprofiteer doesn’t know what "felons don’t belong on nonprofit Boards" means, though she can imagine it had a satisfying ring when Chet recited it in the mirror.  Felons are people who’ve committed crimes.  People who’ve committed crimes and completed their punishment return to society.  We expect them to hold jobs; they are, or can become, eligible to vote again (except where politicians find felony disqualification a convenient method for suppressing the African-American vote); the lawyers among them can, and frequently do, petition for the restoration of their law licenses.  It seems perverse to suggest that people who’ve paid their debt to society (as the saying goes) should thereafter be prohibited from making any further contribution to it through the voluntary sector.  You yourself cite Michael Milken, but he’s far from alone: you’ll find people who did time for Watergate, the 1980s S&L scandals, probably even Teapot Dome serving on charity boards.  (And tell Chet to get his face out of the police procedurals: "harboring a felon" is not having a social or business encounter with someone released from prison; it’s hiding a fugitive from the police.  It’s not like you guys are Dr. Mudd and Matt is John Wilkes Booth.)

This notion that prospective donors would Google your Board of
Directors, discover Matt’s name, investigate his felony and go to the
press–all without ever saying to any of you, "What’s going on here?"–
is just information-superhighway overload.  The Nonprofiteer has spent
20-plus years in this business; not only has she never heard of
anyone’s Googling a Board of Directors, she’s never done it herself.

As a Board, you’ve raised and answered all the relevant questions already: Matt has no access to the checkbook.  (No one should have solo access to the checkbook for more than trivial sums–two signatures is a good rule of thumb.)  You’ve made your D & O insurer aware, and it doesn’t care.  (The list of truly risky things insurers "don’t care" about is vanishingly short.)  So there’s nothing the Board actually needs to talk about in this closed/executive-session meeting your other colleague recommends.  That means your intuitive opposition to such a meeting is sound: holding it would do nothing but offer Chet the opportunity to say things he’s not willing to put on the record (including possibly defamatory observations about Matt) without satisfying him or anyone else that the "problem" has been "solved." 

That’s because the problem is Chet–which leads to one final piece of mostly unsolicited advice: Use that vaguely-worded statement in your bylaws on him.  Tell him no Board member gets to blackball any other; Board membership is by election, and Matt’s been elected.  If Chet doesn’t want to serve with him, you’re sorry but you’ll have to accept Chet’s resignation.  Make sure he understands that if he continues to agitate on this subject you’ll convene a [perfectly open and ordinary] Board meeting at which his–not Matt’s–behavior is evaluated against your standards of comity, civility and appropriateness.  If you think this is too high-handed a position for a Board president to take on his/her own, line up support for it from a majority of Board members through one-on-one conversations before you have the final one-on-one with Chet.

Comments from readers?  Especially the lawyers, ethicists and insurers in the audience?

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6 Responses to “Dear Nonprofiteer, Must Caesar’s Board be above reproach, too?”

  1. robert guinto Says:

    In my work with nonprofits and their Boards the bottom line is what is best for the organization. If a persons credentials would cause harm to the organization if made public then the board should remove said person. All of the nonprofits that I work with whom receive federal or state money would not allow a disbarred person to serve. It raises too many flags for the government agencies.

  2. Nonprofiteer Says:

    An anonymous commenter writes,

    Dear Nonprofiteer,

    You are hereby convicted of failing to keep up with the Internet and sentenced to Googling nonprofit boards of directors every day for a month. Seriously, funders do it, reporters do it, even lawyers do it. Regulators will no doubt start doing it soon.

    Still, your underlying advice is completely sound. As long as Matt is kept
    away from unsupervised temptation, his Board service presents no issues.
    Chet is the problem.

    Your reader might glean a bit more insight into the situation by reviewing
    the past year’s Board meetings and seeing where Matt and Chet disagreed.
    Chances are, Chet’s ox has been gored somewhere — or perhaps Chet is anticipating an upcoming opportunity where he’d like to eliminate his putative competition. For example, is the organization about to engage in a transaction where hired legal help will be engaged?
    Sincerely,
    A Taxing Woman

  3. Nonprofiteer Says:

    Robert: You may be right that government contractors can’t afford to have disbarred or convicted persons on their Boards (though I’d be surprised if that were the case with, e.g., prison ministries that get money from the Bush Administration’s faith-based initiative). Still, that’s a special case: if this public health agency is not a government contractor, I don’t see any reason for it to purge its Board. Of course you’re right that the question is what’s best for the agency–but it’s rarely “best” for an agency to permit one Board member to pursue a vendetta against another, and that sounds like what’s being described here.

  4. Nonprofiteer Says:

    Taxing Woman: You’re no doubt right that the Nonprofiteer is behind the times about Googling Board members (among many, many other things!). But I’m glad you agree about the substance of my reply–especially because your speculation (that Chet foresees an opportunity from which he wishes to exclude Matt) is almost certainly correct, and it’s a possibility I hadn’t considered, despite having written about that very topic (Board conflicts of interest) just the week before.

  5. Looking for answers... Says:

    So…what if Matt had been elected to the Chair position? What kind of issues would be involved? We have a nonprofit that just had an election with this same issue and placed into a chiar position, the group is just starting out so they are unaware of the hurdles they might come up against. Any one want to provide a list? that would help. Oh and they are also a Native American Tribe who is going for Federal Recognition.

  6. Nonprofiteer Says:

    I’m not familiar with the requirements for Federal recognition of Native American Tribes: certainly, if having a felon in the president’s chair would deprive the organization of that possibility, then the cost seems too high and the felon-president should be asked to resign, at least from the office. And the president’s chair may be a special case, in any event, as the president signs the group’s tax returns. But the original question was about a Board member who had no independent ability to affect the agency’s financial systems, and I stand by my view that he should be permitted to serve.

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