Facing an Ugly Reality: Most Nonprofit Boards Don’t Work

To the Editor:

Pablo Eisenberg is right in saying that “many boards of directors of foundations and charities, both large and small, are still failing to exercise their responsibility in ensuring the financial and programmatic health of the organizations they oversee” (“The Buck Stops With the Board of Directors — or at Least It Should,” October 17). However, his call for board members to devote the necessary time and effort to their jobs is feckless. Boards, by and large, haven’t gotten better, and they won’t on their own initiative.

The key jobs of a governing board are to establish the strategic direction of the organization and to provide close oversight to the executive leadership they select. Many board members are incapable of carrying out these functions. In my experience, a large majority can’t even read financial statements. Of those board members who can do the job, most won’t, either because it takes too much of their time or because they don’t have the stomach to make tough decisions.

Does Mr. Eisenberg believe that more than 25 percent of nonprofit boards meet even minimum acceptable standards of performance? Based on my own service on many boards and observation of others, I don’t. The widespread failure of governing boards to do their jobs is the major weakness of the nonprofit sector. Instead of futile pleading that boards improve on their own volition, it is time to confront the reality that most nonprofit boards don’t work. The Chronicle would do a great service by admitting this unfortunate reality and sponsoring a wide-ranging debate about what can be done about it.

Stephen S. Weiner
Retired Executive Director
Western Association of Schools and Colleges
Piedmont, Calif.

To the Editor:

Pablo Eisenberg’s column on board accountability is right on principle but wrong on facts.

As Mr. Eisenberg knows, over the years I have written and spoken often about how important it is for nonprofit boards to pay attention to the affairs of the organizations in which they are involved. It is almost always the case that, when a nonprofit gets into trouble, it is the board’s inattentiveness that is the root of the problem. Unfortunately, Mr. Eisenberg is dead wrong when he alleges that the Markle Foundation Board of Directors failed to pay attention to its responsibilities. Apparently he based his comments entirely on a news report in The New York Times, and did not attempt to obtain substantiation of the allegations in that news article from anyone involved with the Markle Foundation.

The truth is that, rather than being inattentive, the Markle Foundation’s directors have been deeply involved on a continuing basis in Markle’s policy making and execution. Before adopting the major program goals now being pursued, the board thoroughly discussed them at a retreat, and it has repeatedly revisited those program goals, in one way or another, over the intervening three years. And of course the board acted to approve all grants that have been made pursuant to them, and participated in the decision to revisit the program in children’s interactive media. Both the board chairs who have been in office since Zoë Baird became president are in virtually continuous conversation with her on all aspects of Markle’s activities and performance, as are some of the other directors.

All but a few of the small expense discrepancies by an employee noted in the Times article had been discovered by Markle’s CFO, Karen Byers, a year before the article appeared, and action had been taken to prevent such occurrences from happening again. (I wonder how many foundations, nonprofits, or businesses have never had a single employee make such mistakes.) As of that period a year ago, all inappropriate charges had been reimbursed to the foundation.

At a time when foundations are routinely charged with being timid and conservative, the Markle Foundation has chosen another course. So far as we know, the Markle Foundation is the only philanthropy focused exclusively on attempting to enable the rapidly evolving interactive communications technologies to be used in solving society’s social problems. That focus in itself is a major departure from the norm of foundations, and that pioneering goal was put in place 35 years ago under the leadership of Lloyd Morrisett, Markle’s then president.

When Zoë Baird was recruited to become Markle’s president following Lloyd Morrisett, she consulted widely about program options, commissioned a number of studies by expert consultants, and then formulated a series of both program options and spending timetables for discussion with the board.

All but one of the ambitious program initiatives are succeeding impressively, and that’s not a bad record for any foundation, which, after all, is supposed to be engaged in fulfilling a mission as the principal pool of society’s social venture capital.

For example, The New York Times recently reported on the recommendations of the Markle Task Force on National Security. The program to use technology to empower individuals in the management of their medical needs is going strong. So is the policy program work, which focuses on the governance of the Internet and public-interest representation in Internet policy making. So is the joint initiative with the United Nations Development Program and other partners to figure out how to use digital technology in international development.

The fact that a foundation engaged in venture philanthropy makes one false start in a field of multiple programs is hardly evidence that its strategy and decision making are flawed. The fact that Markle has spent only $40-million of its $100-million program plan is hardly evidence of faulty decision making by the president, or of inattentiveness by the board.

In view of the profound changes in the financial markets during the period since Markle adopted the new program, and, even more important, in view of the dot-com collapse in the technology industry, it would have been imprudent at best and reckless at worst for Markle to have failed to manage prudently against its original plan and the assumptions underlying it.

With the board’s approval, and after considerable discussion, Markle deliberately has chosen to function more in the style of an operating foundation than a grant-making one.

During Lloyd Morrisett’s presidency, Markle was already operating some programs from inside the foundation, even while continuing to make a large number of grants to external organizations. With the decision to bring more operational responsibility for programs within the foundation, and with the choice of several major program goals requiring large expenditures, it was inevitable that fewer grant dollars would be spent outside the foundation.

There are bound to be many worthy organizations, therefore, that are rightfully disappointed by Markle’s inability to support them, but the test of Markle’s effectiveness has to be whether the program goals which are being pursued are indeed socially vital and whether Markle is succeeding in making a substantial contribution to their achievement. Measure Markle by what it is doing, and not by what it is not doing.

As part of the start-up phase of the new program adopted three years ago, many persons were engaged for short-term stints in helping formulate the new program so as to get it off to a fast start. From the beginning it was intended that most of those persons would work with Markle for a short time and then leave. The fact that there has been substantial staff turnover should therefore hardly be surprising.

The Markle board has been deeply involved in all the decisions made by the foundation. Its board committees — audit, personnel and compensation, nominating, finance, and executive — have participated in overseeing their respective areas of responsibility, with appropriate outside professional advice, and are, at present as always, assuring that they are close to all aspects of the foundation’s functioning and performance in order to be absolutely certain that they have not left anything unattended to. Markle’s directors have indeed been paying attention, and the board has been and is continuing to be alert, focused and involved, which has required a great deal of their time and energy, which the directors have cheerfully and readily given to the foundation.

I venture to suggest, with all due respect, that commentators such as Mr. Eisenberg themselves have an obligation to be attentive and careful rather than writing out of ignorance. I have long known and admired Pablo Eisenberg, and we have worked together on a number of occasions. I would have been happy to talk with him had he made any effort to contact me to ascertain the true facts. For him to have written as he did, without any effort to verify his allegations, must seem to anyone to be not only unfair but hardly in keeping with responsible criticism.

Joel L. Fleishman
Chairman
Board of Directors
The John and Mary R. Markle Foundation