It has been difficult to avoid the news about allegations of exaggeration and mismanagement that have swirled around author and nonprofit director Greg Mortenson and his Central Asia Institute (CAI) over the last month. Speaking in a 60 Minutes interview, author Jon Krakauer called Mortenson’s bestselling memoir, Three Cups of Tea, “a lie.” Critics have alleged that Mortenson was neither kidnapped by the Taliban nor nursed back to health by Pakistani villagers after a failed attempt to climb K2, as he stated in his book. CNN has reported that only 41% of the millions of dollars CAI received in 2009 was used to build schools, and that $1.7 million was spent to promote Mortenson’s books.
For those involved with nonprofits, the negative publicity regarding one of the voluntary sector’s high profile success stories has elicited both disappointment and fear that the public will lose trust in the sector as a whole. It is still too early to know whether the Mortenson situation will reduce charitable giving as a whole. But for nonprofit professionals and boards of directors, the controversy serves as a cautionary tale and an opportunity for reflection. CAI has illustrated, in a very public way, the consequences of inadequate governance.
Adequate Governance Prevents Mismanagement
Some – including Chronicle of Philanthropy contributor Leslie Lenkowsky – have suggested that government officials should more closely monitor nonprofit organizations to ensure that they operate in furtherance of their missions. But this is not how the law governing charitable organizations in the U.S. and Canada was designed. Further, given that there are now approximately 1.6 million public charities registered in the U.S. and 80,000 charities registered in Canada, it would be simply untenable to make state government officials responsible for ensuring that every organization’s charitable donations are used in accordance with the organization’s mission.
Rather, the U.S. and Canada already have an oversight mechanism that is supposed to prevent the kinds of mismanagement alleged against CAI: boards of directors. Charitable organizations are required to have a board of directors to serve as their governing body, ensuring that the charity operates consistently with the public interest and applicable tax law. Indeed, if CAI’s board of directors had been paying close attention to the organization’s operations, its executive director’s activities, and its finances, it is difficult to imagine how the organization could have arrived in its current predicament.
Under-Involved Boards Cannot Provide Adequate Oversight
Anyone who has spent much time in nonprofits knows that under-involved boards of directors are a common problem. Having served as an attorney and board member in various nonprofit organizations, I have noticed that this frequently occurs in organizations with charismatic and ambitious executive directors (Mortenson is a good example). Under-involved boards are often found where an organization’s executive director is also its principal founder, where the board size is small, and where the directors are the executive director’s family and friends. (CAI lists only three board members, one of whom is Mortenson himself.) These boards tend to be ill-equipped to adequately oversee the organization. Because they are busy, inexperienced, or have a close relationship with the executive director, these boards tend to meet infrequently and ratify the executive director’s decisions without question. Under these circumstances, adequate oversight is impossible.
The lack of oversight by a qualified board of directors chips away at organizational quality. It results in executive directors who remain in their positions far too long, fail to recognize their own shortcomings, and sometimes, make ethical shortcuts along the way. Indeed, we all know passionate and idealistic founders who – as Nicholas Kristof suggested in his defense of Mortenson – lack the discipline and organizational skills needed to run those organizations professionally.
Characteristics of an Involved and Adequately Governing Board
It is both a legal requirement and an ethical imperative that boards of directors adequately oversee their organizations. Now is as good a time as any to remind ourselves of the fiduciary responsibility we have to our organizations and our donors. Here are a few qualities of an adequately governing board:
- All board members attend every meeting unless they have a pressing reason not to.
- Board members insist on a board size that is large enough to encompass a broad base of expertise.
- Board members regularly visit the site of the organization’s operations.
- The board solicits information not only from the executive director but also from other members of the staff.
- The board’s approval is required before an annual budget can be finalized.
- The executive director submits regular reports to the board regarding actual expenses.
- The board formally evaluates the executive director’s performance at least annually.
- When the executive director ceases to effectively run the organization, the board terminates him or her.
Ultimately, it is the board’s duty to preclude the kinds of allegations that surround CAI from occurring. Let those of us who serve as directors take this opportunity for self-evaluation and a renewed commitment to the principle of good governance. The public’s trust in our industry depends on it.
Anne Andrews is a legal strategy consultant and LGT Venture Philanthropy Fellow currently based in New Delhi, India.