Smithsonian’s Recovery From Scandal Has Been Too Slow

PABLO EISENBERG

Four months after Lawrence Small, secretary of the Smithsonian, resigned in disgrace, nothing much seems to have changed at the institution, despite last month’s release of two reports that were supposed to provide a road map for change.

The Smithsonian’s Board of Regents is still intact. Two members of the board’s audit committee, which was especially derelict in its oversight of Mr. Small, are serving on a committee the regents appointed to review and improve the governance of the institution. Roger Sant, chairman of the executive committee, continues to serve in that role. Also still serving are the three protectors of the institution’s integrity and accountability — the inspector general, the chief financial officer, and the general counsel. The foxes remain in the chicken coop, and it appears that many of them want to stay there.

That is the case even though both of the new reports — issued in response to the Congressional concern and public outcry over Mr. Small’s excessive compensation and lack of concern for following standard ethical practices in the nonprofit world — fault the Smithsonian’s Board of Regents for its lack of oversight and passive approach to governance.

The reports offer many warning signs that would be good for nonprofit groups of all types to consider as they examine their own governance practices, but each report has shortcomings that show that fixing the Smithsonian will be a complex effort.

One report, produced by the committee of Smithsonian board members — plus the chief executive of Independent Sector, Diana Aviv — that is examining governance issues, primarily expressed the regents’ mea culpas and critiqued the board’s failure to maintain a sense of openness and public accountability. It is very much an insider’s study, one that plays down the egregiousness of the board’s shortcomings and neglect.

The members of the committee believe they have found religion and will help lead their colleagues on the Smithsonian board to more effective governance practices. To accomplish this goal, the committee recommends a set of principles and guidelines that are reasonable and could prove effective.

Among the specific changes it suggests are strengthening the role of the institution’s inspector general; developing a code of ethics for the institution; banning the service of top executives on corporate boards; bringing Smithsonian Business Ventures — a unit in charge of devising revenue-generation operations — in line with established Smithsonian practices; and ensuring better financial accounting and compensation practices. In addition, the report suggests establishing a chairman of the board, a new position that would include some of the duties not taken on by the chancellor, the role and title traditionally assumed by the chief justice of the Supreme Court. The board’s chairman would play the leadership role in making sure the board was conducting its oversight and strategic-planning role, while the chancellor would preside over meetings of the board and take on other duties.

The report recommends the creation of active standing committees, including one to deal with the institution’s seriously deteriorating facilities, which would be chaired by members of the current board.

While such committees make good sense, it is like shuffling deck chairs on the Titanic to put the current members of the board on those committee.

Just as alarming, the committee that wrote the report says it plans to continue to function through the rest of 2007, and possibly beyond, to devise a plan to alter the Smithsonian’s governance structure. Why take so long? Why not go out of business in the next few months to make way for a new board of regents, to be selected by a committee of outsiders?

Taking such steps would show that the board truly understood its missteps, instead of thinking that a few apologies and cosmetic changes will make enough of a difference to an organization that has been so poorly managed in recent years.

Under public and Congressional pressure, the Smithsonian’s board also asked a committee of experts not associated with the institution to review its practices, and that group has also issued a report — one that is thoughtful and thorough.

The independent committee, headed by Charles A. Bowsher, former comptroller general of the United States, was asked to focus on compensation, benefits, expenses, and ethics. Its report is much harsher in its assessment of the institution’s governance problems and the activities of Mr. Small.

The committee members excoriate Mr. Small’s “imperial and insular” management style and challenge the myth that he was a great fund raiser. It was, after all, his reputation as a great fund raiser that some board members used to justify Mr. Small’s compensation of more than $900,000 a year.

Accusing the regents of a gross failure to oversee Mr. Small’s office and the institution as a whole, the independent report says that “it appears that the board reported to him rather than the secretary reporting to the board.”

It goes on to criticize the Smithsonian’s lack of financial controls and inadequate audit procedures. It also mentions that the “gatekeepers” of the Smithsonian — the inspector general, the general counsel, and the chief financial officer — were not only marginalized but also lackadaisical in exercising their monitoring responsibilities.

In addition to recommending measures to increase effective financial controls, improve compensation decisions, and regulate expenses, Mr. Bowsher’s committee proposes a restructuring of the Smithsonian’s governance system, a design that is possibly its most controversial and least tenable recommendation.

The independent committee calls for the creation of a governing board within the Board of Regents that would have primary fiduciary responsibility for overseeing the Smithsonian and would meet at least six times a year. It would have its own chairman.

Citing what it believes to be the historic role of the chief justice of the Supreme Court and representatives of the three branches of government on the board, the committee suggests that the chief justice remain as chancellor of the board and the vice president continue as a regent.

Neither of those jobs would carry fiduciary responsibilities, although members of Congress who serve on the board would retain their fiduciary obligations. The chancellor would preside over parts of the regents’ board meetings. Neither the chief justice nor the vice president would have a vote.

This two-layered overhaul of the Board of Regents makes little sense from an organizational perspective. There is no reason the chief justice and vice president should remain on the board despite the chief justice’s interest in doing so. Neither of them has the time to pay much attention to the affairs of the Smithsonian. Without a vote, their presence would be largely symbolic.

Nor do members of Congress have the time and energy to be active board members with fiduciary responsibilities, as the committee proposes.

A better idea would be to establish an honorary or advisory board of government representatives that could meet once a year to review the policy and administrative decisions of the regents. The government might be represented on the Board of Regents by a high official of the General Accountability Office or by one member of Congress.

Congress should move quickly to pass legislation to establish a nonprofit, independent Board of Regents, composed of outstanding citizens, experts in the arts and museums, and public-service- minded people who have the interest and time to oversee the Smithsonian, unencumbered by Congressional and other government representatives.

The quality of the board will be key to the institution’s future. Board members should be nominated not by anyone now on the Board of Regents, but by an outside group of people not tainted by the irresponsible work of the current board.

Its chairman, perhaps serving half-time at a modest salary, should be somebody with a reputation for integrity and public service — somebody like Paul Sarbanes, the retired Maryland senator — who could help restore public confidence in the activities of the Smithsonian.

Both Congress and a new Board of Regents must keep in mind the historic and contemporary value of the Smithsonian and its 19 subsidiary institutions. It is America’s great national treasure, one that has always admitted visitors free to its Washington facilities, and it should continue to keep that tradition of service to the nation.

It is the federal government, not corporate America or private donors, that should be responsible for financing almost all of the costs of an institution that is so important to the United States. Instead of pushing for more private fund raising, Congress must find a way to support this cultural heritage with federal dollars. Getting a new board, filled with outside perspectives, is the first step to making that happen — and the institution should move quickly to get rid of all aspects of the apparatus that allowed Mr. Small to rule the Smithsonian in ways so contrary to the ethos of public service.

Pablo Eisenberg, a regular contributor to these pages, is senior fellow at the Georgetown University Public Policy Institute. His e-mail address is pseisenberg@erols.com.