Are Charity Boards Asleep at the Wheel?

I found this on the charity watch website and it is sound advice that is worth reading again.

Are Charity Boards Asleep at the Wheel? Nonprofit Governance Problems
http://www.charitywatch.org/articles/asleep.html
Boards need to have the power to hire, fire and set the compensation rate of the executive director or chief staff head and other key employees. The 1986 bylaws (most recently available) of Girls and Boys Town, also known as Father Flanagan’s Boys’ Home, do not allow for its governing board to select who they want for the two most important officers at the charity: the President, who has the power to chair all board meetings, and the Executive Vice President, who serves as the executive director or CEO and resides over the board in the President’s absence. According to the bylaws, the board must appoint as President whoever is the Archbishop of the Catholic Archdiocese of Omaha. The bylaws give the President, not the board, the power to choose who will be the CEO of the charity.
More and more boards are agreeing to multiyear contracts with their chief staff head. AIP discourages this practice because it “locks in” a poorly performing executive and takes away the board’s right to find a better successor or obligates a charity to keep paying a former employee. The United Way of the National Capitol Area, which has had a number of serious management and financial problems (see November 2002 AIP Guide), feels that it is contractually obligated to continue to pay its former CEO, Norman O. Taylor, his $225,000 salary through Feb 1, 2004 even though he resigned last February, according to the Washington Post. The American Institute of Cancer Research states in its 2001 audit that it has locked itself into five-year long contracts with key personnel.
Sometimes it appears that the CEO controls the board rather than the other way around. The Albert Einstein Healthcare Network, a struggling hospital system in Philadelphia, awarded in July 2001 its CEO, Martin H. Goldsmith, with a $2.5 million payment, in addition to his $768,000 salary, months before 200 employees were laid off, according to the Philadelphia Inquirer. An Einstein spokesperson told the Inquirer that “Goldsmith deserved the bonus because he had engineered 14 years of positive results before 2002’s loss.”
Many board members limit their communications with only the very top-level staff of a charity. This is a mistake because board members have an obligation to have a basic understanding of what is occurring in all levels of an organization and should periodically check-in with a variety of staff. It is also risky for board members to depend solely on the chief staff head (CEO) or his top lieutenants for intelligence on the organization. The CEO may be tempted to hide problems from the board if he knows that the board is too dependent on him for information about what is going on in the organization. Individual staff members should have an open line to communicate with board members on serious and pressing matters that are not being adequately handled by the CEO. The New York Times reported last year that the Markle Foundation, which helped to start the children’s TV program Sesame Street, tells staff to not speak to board members without first speaking with the CEO’s deputy. The Foundation also requires, according to the Times, that if an employee has “inadvertent contact” with a board member outside of the office, the employee must send the CEO an e-mail “describing your encounter.” Peter Kerr, spokesman for the Foundation, said it was true that an email had been sent to staff that instructed employees to inform management of any contact with Board members. But he said the intent was to keep management apprised, not to discourage contact.
In recent years AIP has seen nonprofits increasingly attempt to silence their employees. We believe that nonprofit groups should discontinue employee contracts or severance agreements that contractually disallow employees or former employees to speak to outsiders about serious organizational problems. This serves to stop most employees or potential whistleblowers, who could warn the public of mismanagement or serious ethical breaches that charity executives may be attempting to cover up. At Feed the Children (FTC) employees are required to sign a confidentiality agreement as a condition of employment. The agreement requires that employees not disseminate any information about FTC outside of the charity without prior written approval. Employees who violate this agreement face “disciplinary action, up to and including termination of employment and legal action, even if they do not actually benefit from the disclosed information,” according to the agreement. While it is a common practice in the nonprofit field for employees to respect the privacy of donors and clients and not to reveal the trade secrets of any for-profit subsidiaries, FTC’s confidentiality agreement is exceptionally broad, and it may deter the scrutiny that every charity needs.
Year after year many charities sign contracts with professional fundraisers that allow the fundraiser to keep by far most of the contributions collected. Sometimes charities also even allow the fundraiser to keep and control the names of the donors so that the charity is locked into an unfavorable arrangement. AIP believes that the board of directors should be required to approve all fundraising contracts. Hopefully, savvy board members will be able to keep well-intentioned charities from getting taken advantage of and keep them from continuing to violate the intentions of their donors.
AIP encourages the governing boards of all nonprofit organizations to recognize the serious responsibility of serving on a board and awaken to the fact that they are ultimately responsible for safeguarding our charitable contributions and regaining America’s trust in the nonprofit sector.