Carnegie Hall Board Dissonance–What Lessons For Nonprofits?

By: Eugene H. Fram

Ronald O. Perelman (Carnegie Hall Board Chair) …was critical of trustees for placing “a premium on avoiding tensions and disagreement” and said he will leave (the board) in a month. The Problem: Clive Gillinson (Executive Director & Artistic Director) signed a $100,000 contract that might include a conflict of interest…to which Perelman (and two other directors) objected. The board agreed to engage an independent lawyer to investigate the situation, but Perelman, in apparent anger, reported progress has been too slow. *

Ronald Perelman’s abrupt resignation sounds a “clarion call” for all nonprofit board members. When an executive director appears to overstep his/h authority and/or when the board has not vetted a significant contract, nonprofit board members need to take proactive stands. Although the Carnegie Hall board is about 78 strong and tends to glitter with “star quality,” there are obvious parallels with nonprofit reactions to similar disruptions. How should directors of smaller nonprofits react to morale crises of this nature?

The Image Issue

With the breadth and depth of the Carnegie board, Perelman’s resignation will likely make little difference in its pursuit of the board’s cultural enhancement mission—nor will it impair the revered Carnegie reputation. But a smaller nonprofit with similar objectives can be thrown into a tailspin by the exit of a key director. Staff morale can be impacted, revenues and client services reduced. Example: A significant donor resigns her/h board position, in anger, and abruptly or quietly withdraws financial support. In turn, this can mean unattended homeless, poorly educated children and some elderly dieting on junk food. Unfortunately, many board members may take steps they shouldn’t to shelter the disagreement from staff and the public. **

In my opinion, nonprofits need to act with more professionalism, rooting out conflicts of interest, poor management and board structures that have been around for more than a century. But in making the changes, clients still need to be served effectively, efficiently. An image of discord will certainly reverberate throughout the organization and make offering high-performance services more difficult.

How can small nonprofit directors cope with board disruptions?

• Discussions with the Board Chair and other board members: Since nobody does her/h job perfectly, discuss the potential infraction to determine its seriousness. If there is consensus, seek the advice of outside counsel. Board charters may authorize boards to take this action.

If the infraction is modest, not one of a long series, ask the board chair to discuss it with the CEO, within the context of preventing such future occurrences. Example: As a board chair of a nonprofit (budget $6 million), I met with the new CEO who signed a six-year lease for additional office space—a board function–without prior approval. His position was that he was authorized to sign the agreement because it was only for $5,000 a year, and that he normally signs contacts for much more. After discussion, he saw the point involved, and I agreed to propose to the board that it formally approve of the contract. The process enabled the board to add anther plank in construction of a new trusting relationship.

• Following Perelman’s Example: This can be done in two ways: First, call for an executive session of the board to discuss the issue. This can be done at a regularly scheduled meeting or a special one if the matter appears crucial to the survival of the organization, e.g., a sexual harassment charge against a senior manager. Second, assuming that the issue will quickly be noted the media, have the board issue a press release, and prepare it for a crisis mode. (Example: Perelman discussed his departure with a group of trustees, likely in confidence, on Thursday. The results of the meeting were thoroughly reported by The New York Times on Friday!)

• Quietly resign using the traditional excuse of increased personal time pressures.

• Express concerns in writing, or at a board meeting (making certain the comments are in the minutes), and then quietly resign if board action isn’t acceptable. If a board member is on the minority side of discussion and feels his/h challenges are not being addressed, this is the best route to take.

The current discordance at Carnegie Hall is a reminder of the knotty problems that frequently arise within nonprofit boards. As with any body of passionate people, an interpersonal crisis is waiting to happen in the boardroom. Deft, thoughtful and professional board conduct is always essential in seeking an appropriate resolution to the best interests of the organization.

*Abstracted from: Ruth McCambridge (2015) “Carnegie Hall Chair to Step Down over Accountability and Governance Concerns,” Nonprofit Quarterly, September 18th.

** For a similar situation,involving a small nonprofit, see: Eugene Fram (2015) “Nonprofit Boardroom Elephants and the ‘Nice Guy’ Syndrome: A Complex Problem.” September 13th
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