February 19, 2012 | Read Time: 6 minutes
The avalanche of negative reaction Susan G. Komen for the Cure received when it sought to end its support of Planned Parenthood offers valuable lessons for nonprofits—especially those that occupy a prominent public platform.
The criticism about the Planned Parenthood aid is not what should command attention. Rather, it is the biting, visceral nature of that criticism that has been focused less on the merits of Komen’s decision- making process and much more on its fundamental standing as a charity.
In the past few weeks, we’ve seen below-the-belt stuff more suitable for political theater than discourse about important public policies. Look at what they pay their executives! They hire outside advisers and, even worse, lobbyists! They play hardball with their competitors! The horror!
I wasn’t in the Komen boardroom and don’t know what led to the fateful Planned Parenthood decision. But the frigid blast of public and political reaction tells us about the environment in which charities and other nonprofits exist. The Komen controversy demonstrates the public’s antiquated, inflexible, and unrealistic expectations of the role and function of a sophisticated charity in a highly competitive world and a slow-to-recover economy.
Among the lessons that all nonprofits should take away from the debate:
The erosion of trust is palpable. Charities no longer enjoy the unqualified and uncritical public support to which they have grown accustomed.
The debate about Komen’s ties to Planned Parenthood was prompted not just by the hot-button nature of women’s reproductive rights. It was also stoked by reactionary perceptions of what a charity can and cannot do.
The lack of trust in nonprofits is understandable, given the increasing news-media focus on nonprofits’ self-inflicted wounds—abuses of tax-exempt status, mismanagement, entitlement, and a blurring of the lines between what is nonprofit and what is for-profit activity.
Those kinds of shenanigans take the sheen off nonprofits and cause both the media and the public to view charities more skeptically.
But there’s also something more basic going on—increasing questions about whether the societal benefits charities provide are worth the cost of the entitlements they receive from state and federal governments. And that’s especially the case given the current government budget debates.
The Komen firestorm reflects growing public unease about the legitimacy of certain charity practices.
The public pays attention to financial disclosures.
In the Komen dispute, the charity’s backers and opponents both used the Form 990 informational return to advance their arguments.
While those forms offer plenty of data, they are prone to misinterpretation, depending on the sophistication and motives of the viewer.
Charity leaders and board members should take this experience as a reminder to be sure they are comfortable with the underlying messages their Form 990 sends about their mission, operations, and governance. Schedules that accompany the form often convey sensitive information and should be closely reviewed before filing.
It may be just a tax form, but it’s one with extraordinarily broad impact and influence. Everyone needs to think about the fact that the form can and will be used against a charity.
Going beyond the 990 is a smart second step.
Charities reduce the potential damage to their reputation, and possibility of legal penalties, when they aggressively make their case to the public.
The American Cancer Society offers an excellent example with its new stewardship report, which tells the stories behind the numbers and offers insights into the mission of the organization, its contributions and achievements, the oversight of its board, the vision of its executive leadership, and the commitment of its volunteers. (For more about the report, see The Chronicle, October 20.)
Seek good legal and ethical advice.
Some observers have speculated on the possible contribution a Komen general counsel could have made to the process before the fateful decision was made. (Komen’s Web site shows the organization currently has a search under way for someone to fill the job.)
That is because management and governance experts increasingly recognize that it’s important to ensure that general counsels work closely with senior leadership and the board on important matters.
A general counsel’s job is to participate in the organization’s governance and guard its reputation.
In this role, the general counsel acts as a counselor not only on the law but also on ethical concerns and how proposed corporate actions may be interpreted by journalists, regulators, donors, and the public.
Did anyone play that role at Komen headquarters? That’s hard to tell from the outside, but the controversy that occurred should be a reminder of the value of involving the general counsel in major decision-making.
Prepare to defend compensation levels.
Predictably, critics have taken aim at the compensation paid to Komen’s top officials, but few reporters or others seem to have asked whether the pay was reasonable given the size of the charity and the responsibilities of its leaders.
The organization has also been accused of spending too much on staff and administrative expenses, such as first-class air travel.
Such questions are not uncommon when groups face as much scrutiny as Komen has in the past few weeks.
Leaders of all big groups should work closely with their compensation advisers to devise a way to demonstrate to the public that top officials’ pay is reasonable according to market standards and show that the charity followed legal and ethical principles in setting salaries and benefits.
Review the independence of the board.
Nancy Brinker, who founded Komen, is now both a board member and the organization’s chief executive. It is not necessarily surprising, but it is increasingly infrequent that a founder plays a big role in governance decisions of a major nonprofit.
But it’s important that the board not feel compelled to march to the tune of any one particular insider, no matter how critical he or she is to the history of the organization.
Independent oversight of management by the board is essential to provide effective checks and balances. The board must not feel beholden to any one dominant trustee.
Charities of all missions face an increasing risk of public attack these days, given the polarized nature of our society. That makes it more important than ever that nonprofits take aggressive steps to publicize their accomplishments so that they will build up the good will they may need to draw upon during tough times.
Did Komen for the Cure get unfairly blitzed for its Planned Parenthood decision? That seems to be the case. But that shouldn’t diminish its significance.
Instead, large, prominent charities must heed the lessons from the pile-on.
Boards should digest the lessons of what has happened and get to work on plans to reduce their own risk of “getting Komened.”
