The Real Scandal at the Smithsonian Goes Beyond Executive Pay and Perks

Lawrence Small’s compensation as head of the Smithsonian Institution and his inappropriate spending of the organization’s money on personal items are only a part of the scandalous improprieties uncovered at the country’s most important and prestigious museum complex.

As the Smithsonian seeks to recover its footing, it is important to focus on the disturbing pattern of governance at the institution, as well as the potential conflicts of interest caused by top officials serving on outside corporate and nonprofit boards. In addition, the exaggerated expectations that government officials had for private fund raising at the institution have caused many of the problems the organization faces today.

After Mr. Small resigned in March in response to the controversy, the Board of Regents at the Smithsonian appointed a committee of five people to review the governance practices at the museum complex and make recommendations for change. But the composition of the review committee raises concerns about the seriousness and competence with which the regents will pursue this effort.

Four of the five people on the review committee, including its chair, Patty Stonesifer, chief executive of the Bill & Melinda Gates Foundation, are members of the Smithsonian’s board — the very body that failed so abysmally to oversee the operations of the organization. Why didn’t the board appoint a more independent governance committee made up of outsiders and ask a prominent nonprofit-governance expert, like Paul C. Light, a professor of public service at New York University, to serve as the chairman?

The organization would also be better served with the resignation of Roger Sant as chair of the Smithsonian board’s executive committee. Mr. Sant was a prime defender of Mr. Small, and his departure would signal that the organization is ready to change its ways.

On the day the Senate Rules and Administration Committee held a hearing last month, The Washington Post reported that both Mr. Small and Sheila P. Burke, who is deputy secretary and chief operating officer of the institution, each served on two corporate boards while working at the Smithsonian.

Both of them were members of the board of the Chubb Group, an insurance company that provides more than half of the Smithsonian’s insurance coverage. Mr. Small received $169,675 in cash and stocks from Chubb last year for his service on the board plus options to buy 105,943 additional shares. Ms. Burke received $194,676 in cash and stocks plus an option to purchase an additional 56,000 shares. It is clear that Ms. Burke, who sits on three committees of Chubb’s board, spent a lot of time on Chubb business.

The two Smithsonian executives also sat on other corporate boards, raising questions about how much time they spent on their Smithsonian duties. Mr. Small is a member of the Marriott International board, for which he received $208,697 last year, while Ms. Burke sits on the board of the Wellpoint health-care company, for which she received a total of $395,381 in fees and stock options last year.

The regents’ employment contract with Mr. Small stipulated that he could be a paid board member of as many as two corporations as long as such service did not impede his work at the Smithsonian.

Ms. Burke, whose compensation is $400,000, was told by Mr. Small that she, too, could sit on two corporate boards, the Post reported. In addition to her corporate responsibilities, which are considerable, Ms. Burke continues to serve on the faculty of Harvard University and as the chair of the Henry J. Kaiser Family Foundation, for which she is paid an annual fee of $33,750. According to a Kaiser foundation representative, she spends a good deal of time on foundation business.

The Smithsonian is a huge complex of 19 museums and galleries, the national zoo, and nine research facilities, with a combined budget of more than $1-billion. It requires the full attention of both its secretary and deputy secretary. That the regents permitted Mr. Small and Ms. Burke to each sit on two corporate boards, which demand a great deal of personal time, while supposedly serving full time at the Smithsonian, is a reflection of either their naïveté or negligence. It should be clear to anyone that such a heavy time commitment on outside boards affects executive performance.

The problem of corporate board service is not just an issue at the Smithsonian. At least one-third of college presidents serve on corporate boards, according to a survey conducted by The Chronicle of Higher Education in 2005.

Several foundation executives also serve on boards of corporations, including Zoë Baird of the Markle Foundation, Alberto Ibargüen of the John S. and James L. Knight Foundation, Edward E. Penhoet of the Gordon and Betty Moore Foundation, Rebecca W. Rimel of the Pew Charitable Trusts, Judith Rodin of the Rockefeller Foundation, Joan E. Spero of the Doris Duke Charitable Foundation, and William S. White of the Charles Stewart Mott Foundation.

Nonprofit groups of all types would be well advised to prohibit such service. Already generously paid, nonprofit chief executives don’t need the additional money. They should not be distracted from their primary missions: to run strong and effective organizations.

While the board-membership issue is serious, perhaps nothing is more important than revelations that the Smithsonian complex is decaying from neglect and inadequate financial support from the federal government.

At the Senate hearing last month, Sen. Dianne Feinstein, Democrat of California, pointed out that the Smithsonian required at least an additional $2.5-billion to repair and maintain the institution’s many facilities. Addressing the regents, she said “you have an endangered institution now,” The New York Times reported. “Unless there is clear oversight, I don’t know how you justify public funding. The whole oversight structure has to be rethought.”

She went on to exhort the Smithsonian to adopt a more aggressive strategy to raise private funds.

But this exhortation is totally misguided. Senator Feinstein might have more appropriately pointed the finger at Congress for not providing sufficient funds to maintain the museums in first-class shape.

After all, the Smithsonian is a national treasure. Unlike many other museums around the country, most of the Smithsonian museums are free to the public, enabling everybody to enjoy their offerings.

Federal funds support approximately 70 percent of the institution’s budget. Federal highways get 80 percent of their budgets from the federal government, while airports get up to 95 percent of their construction money from the government because Congress sees those expenses as enhancing the national interest. It should view the Smithsonian the same way.

In part, it is the inadequacy of federal financing that drove Mr. Small to start entrepreneurial ventures that ultimately damaged the institution’s integrity. His deals with the Showtime cable channel, which limits access to the museums’ archives by historians and filmmakers, and with Corbis for exclusive rights to photographic images, has damaged the Smithsonian’s reputation. Senator Feinstein’s call for greater private financing could well lead to greater, not less, commercialization.

Senator Feinstein and her Congressional colleagues should be more concerned about the tens of billions of dollars they waste on subsidizing corporate agriculture and pork-barrel projects, on reducing taxes for the wealthy, and on failing to collect taxes from tax cheaters. At least the Smithsonian is in our national interest. Congress should give it the money it needs, but only on condition that its governance and oversight structure is totally overhauled.

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.