Trustee’s Lament: “We are accountable for what’s happened… We are deeply ashamed.”*
Like the Penn State trustee, who bemoaned the board’s inaction, other nonprofit trustees, directors and managers easily can find themselves in similar situations, if they fail to impartially investigate negative news or even rumors. In fact, those who serve on small and midsized nonprofit organization’s boards may even be in more perilous situations than larger nonprofits for four reasons. Small & midsized companies may be affected for some of the same reasons.
First, significant proportion of nonprofit organizations is relatively “flat”. Staff delivering services may be only one or two reporting levels below the board level.
Second, in these types of organizations, the staff and board often formally and informally interact in performing their duties. Faces become familiar and in community-based nonprofits, a staff member can become a board colleague, when both serve on another board. Consequently, those who observe a problem can more easily contact board members. (However this also can lead to communications issues for management in the organization where one person holds a staff position.).
Third, culturally nonprofits expect board directors and staff members to interact on committees and at social occasions. Unlike for-profit directors, nonprofit board members and board chairs change so often that many staff feel it is necessary to understand the dynamics of changes that may be generated by new board people.
Fourth, Sarbanes-Oxley suggests that directors and trustees have meetings with others, than senior management, to better understand the organization and its people. As for-profit boards adopt this method of acquiring information, their nonprofit equivalents will follow,
In this new nonprofit environment, small and midsized boards will have a difficult time explaining why they were unaware of significant problems, especially in light of the growing obligation to seek information beyond the most senior levels.
In the 21st century, beginning with the Penn State fiasco, directors in small and midsized nonprofits, and possibly companies will have enhanced responsibilities. Hopefully the changes will not lead to micromanagement.
* Kenneth Frazier, Penn State trustee, cited on the front page of the Wall Street Journal, 7-14-2012.
“All that is necessary for the triumph of evil is that good men do nothing.” (Edmund Burke)
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