Pride - A Cautionary Tale For Boards |
Aug 26, 2010 |
The story starting to come out about Vanguard Public Foundation’s recent
implosion is stunning if for no other reason than it provides a
cautionary tale to all of us. I appreciate Rick Cohen's effort over at Blue Avocado (http://www.blueavocado.org) to unravel the events that have lead to the downfall of one of the leading foundations. (Check out his investigative report Decline and Fall of the Vanguard Foundation here.)
In
short, a flashy, over-the-top businessman sweet-talked and defrauded
the foundation while the board went to sleep. Reading though the
financials, it’s incredible to me that the board didn’t see they were
bleeding cash like they were.
There is an amazing amount of
things to be learned from the whole sordid affair, but among Cohen's
observations were two big points that stand out in light of this month's
focus on board governance (BTW -if you haven't registered for our free workshop The Board's Greatest Gift,
now might be a good time). The principles seem obvious in hindsight,
yet somehow we manage to overlook them. Each of them on their own, are
recipes for disaster, but combined add up to some serious flaw's in the
foundation's structure, and reinforces some of the key points in our
board workshop. (My comments below in italics.)
- “Non-attentive trust in the CEO is not a healthy governing model: With warning signals in abundance, observers suggest that the board was even a little mesmerized with the CEO and his celebrity friends. And board meetings were reportedly very rare.” If the board get’s so enamored with celebrities or with a “superstar” CEO that they forget THEY are the legal owners of the nonprofit, they are doomed to failure. The old adage “Trust but verify” works not only for nuclear disarmament, but also for keeping your nonprofit from going up in a mushroom cloud as well. The board ignored the financial situation of the foundation, trusting in the celebrities to carry the vision, their “superstar” CEO to pull off the miracles, and the flashy to-good-to-be-true salesman to raise money.
- “Some have suggested that Vanguard's moves to turn over some decision making to community leaders left donors disengaged, and resulted in board members who were less attentive to grantmaking decisions and governance responsibilities.” Second big DUH! When the board relinquishes control over their responsibility to safeguard the vision of the organization and turns it over others (especially those with personal self-interest in changing the vision) the organization is doomed. Donors saw the vision creep and withdrew. There’s nothing wrong with including the community in the process, but boards need to guard against letting the community become the (sole) owners of the organization just as they need to guard against ceding control to the CEO.
I’m sure there will be a lot more information coming out about what transpired along with additional dissection of how they failed, but there is one cautionary part of the tale so far that all of us need to remember – watch out for pride.
Look at how many times Cohen highlights “even progressive foundations” or asks “are progressive groups vulnerable” as if they are somehow immune from the siren song of riches. Others are stunned that this could have happened to this foundation, once championed as a pioneer and new model for philanthropy. But this isn’t about left/right, progressive/conservative – both groups could equally share in the same type of pitfall. Rather, it’s about the overwhelming sense of pride and superiority, the “We know what’s best” and “We’re on the moral high ground therefore we’re above X (x = seduced by riches or making mistakes, or needing to have safeguards, or regular board meetings) that stands out the most.
In their pride, they had it all figured out. And it was that exact
same pride that allowed them to buy in to a charlatan’s scheme and
ultimately topple one of the largest foundations.
Pride DOES go before destruction, and a haughty spirit before stumbling.
May the Lord keep it far from us.
