Nonprofits are in the news again. A series of front-page stories in the Washington Post has highlighted a long list of compensation and expense abuses at the Smithsonian Institution, an important—and prominent—national cultural institution. And once again, the actions of one nonprofit organization have introduced one more element of mistrust and suspicion among the public and the media, affecting us all.
An independent review committee linked the problems at the Smithsonian directly to governance. The committee's June 18 report stated, "The root cause of the Smithsonian's current problems can be found in failures of governance and management. The governance structure of the Institution is antiquated and in need of reform."
A newly released study from the Urban Institute confirms that governance is a problem at nonprofits throughout the country: "Substantial percentages of boards are simply not actively engaged in various basic governance activities."
Ouch. Those are powerful statements, ones that should concern anyone involved with the sector. The Smithsonian's organizational and governance structure is peculiar, but not unique, among American nonprofit organizations, and the Urban Institute study illustrates the pervasiveness of the problem.
The issue is critical to everyone in the sector. Poor governance makes it much easier for unscrupulous persons to benefit from nonprofits, and, as we all know, when nonprofit controversies happen, the rest of us have to work harder to demonstrate that we are dedicated to our missions and deserve the public's confidence.
How can those of us in the sector—at any level—address the governance problem? Most of us know how difficult it is simply to recruit capable board members. In fact, the Urban Institute report notes, "Seventy percent of nonprofits are having difficulty recruiting board members, and 20 percent are finding it very difficult. Greater difficulty obtaining board members was negatively related to board engagement in every board practice."
What can we do to demonstrate that we are doing our jobs the way they should be done? (As my GuideStar colleagues and I firmly believe most nonprofits strive to do.) Do we need to create set standards for governance? If so, who should develop those standards, and who should enforce them?
How can GuideStar be of more help to the cause of better governance? Right now we encourage nonprofit organizations to supply us with the names of their board members. Is there additional information we could be collecting to demonstrate nonprofits' governing and administrative practices? Is there a tool or a service that could help you benchmark your organization's governance?
We'd like to know.
President and CEO
Bob Ottenhoff, on 7/2/07 8:00 AM