Trustee Responds to Charge of Being Willfully Blind or Incompetent!

Trustee Responds to Charge of Being Willfully Blind or Incompetent!

By Eugene Fram

The organization in which Andrew Purkis served as a trustee had been dissolved. Purkis and his colleagues were cited as “…willfully blind or incompetent.” * Such strongly negative pronouncements inspired him to write an essay in which he listed four reasons why his British group had been unsuccessful in exercising their oversight responsibilities.

A review of his rationale provides some fodder for American nonprofit directors/trustees to consider the reasons that led to his organization’s downfall– and more importantly, to assess their own board strengths and vulnerabilities. The following, in my opinion, are areas that have relevance to the Purkis exposition.

1. Fear of interference in operational matters: In contrast to British trustees, U.S. nonprofit directors/trustees tend to have micromanagement in their DNAs. This arises from the need for considerable board involvement during the organization’s startup stage that continues to define the culture long after it is required Paraphrasing Peter Drucker; “Culture eats strategy for breakfast every morning.”

If the governance model is based on trust, transparency and an evolving clarity of the boundary between governance and operations, micromanagement should not be a board option. One successful governance model lists only seven major board responsibilities, with all tactical actions being the responsibility of the CEO. The model also calls for robust overviewing of the organization’s impacts as well as the CEO’s performance in achieving those impacts. Organizational process tactics are not considered in performance as long as they are ethical and legal. **

An in-depth assessment takes time, interest and creativity. It will involve reviewing financials monthly, reviewing internal publications, following key sites on social media and being well prepared for meetings. American nonprofit directors and trustees, in my view, are not willing to spend the time to accomplish. Rarely, for example, does one find any director/trustee interested in interacting with key staff people below the C-Suite level. Also rarely will director/trustee vote “no” on an issue that has majority support.

2. Ambiguous borderline between ‘operational’ and ‘board level issues’:
Purkis acknowledges, for example, that management has responsibility for messages to various stakeholders and the board must delegate responsibility to management. In this instance, he acknowledges that the board needs to make certain that the right policies and practices are in place to avoid disseminating errant messages that could taint or destroy the organization’s reputation.

Similarly, American nonprofit boards, as noted above, need to make certain that checks and balances are in place. This evidently is not the case–only 24% of American nonprofits have a standalone audit committee, a basic financial assurance tool.***

Crossing the borderline can involve two routes:–(1)the board micromanages some or many operations; (2)the CEO takes actions on a board related issues without board permission. In the first instance, the CEO has to be emotionally secure enough to diplomatically confront the board on the action. Otherwise it will quickly be embedded in the culture. In the second instance, the board chair needs to point out the error to the CEO. If the error is not material, it can serve as an educational guide to future relationships. If a significant borderline error, or the CEO has repeated small errors, the board needs to determine whether or not a new CEO is required.

3. Executing Fundraising Responsibilities: According to a 2015 study, 65% of nonprofit CEOs gave their boards academic grades of “C” “D” or “F” for their fundraising efforts. This is related to the same grade distribution for how boards go about composting (selecting) their members. ****

Every American board member/trustee has an obligation to support the organization financially, within his/h own personal settings. But not every board director needs to be a proactively involved with the CEO and development director, if one is available. A viable development partnership is workable if three or four board members take the lead, supported by the others with information and introductions . Without this partnership in place, American board members, like their British equivalents, can be leaving themselves open for criticisms of being “willfully blind and incompetent..”

4. Handling A Multitude of Risks: Nonprofit directors/trustees, for decades
have faced a multitude of potential risks—fraud, financial, board or staff disunity, etc. The 21st century technical and social environments have added quite a few others such as: political bias, sexual harassment, cyber security, etc. Few American nonprofit/trustee boards in my view, have had serious
discussions about their risk profile. None I have encountered has even designated an organization spokesperson in the event of a common casualty losses, like a flood or fire, let alone what might be a response if electronic medical records are stolen and then publicized by the criminals.

Andrew Purkis’ response has provided a platform for discussion on both sides of the Atlantic. The borderline and fundraising concerns are decades old and should have been put to rest in practice by now. But they require strong assessment practices and viable fundraising partnerships to become board norms. There is no question that the need for risk assessment has been escalated, and boards in Britain and America need to step-up to the plate to be prepared for change.

*http://www.civilsociety.co.uk/governance/blogs/content/21238
** http://amzn.to/eu7nQl
http://bit.ly/OvF4ri
*** BoardSource (2015) “Leading With Intent: A National Index of Nonprofit Board Practices,” January
**** Ibid.

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