Woods Bowman’s Amazing Article on Non-Profit Ethics

Here’s an article called “Nonprofit Accountability and Ethics: Rotting From the Head Down,” by Woods Bowman. I’ve heard snippets here and there since it was posted in October but didn’t actually sit down to read the whole thing until yesterday. This was a mistake on my part. Go read it now – go, go, go.

Here are selected passages and my reactions.

The article starts off:

Arguably, the public holds nonprofits to higher ethical standards than government or businesses. Over 25 percent of Americans report having “a lot” of confidence in charitable organizations compared to 9 percent for government and 7 percent for major corporations,1 but do nonprofits deserve that confidence?

Interest: piqued.

Also: no. No, they do not deserve that confidence. Not automatically, anyway.

An article earlier this year and many newswires published by the Nonprofit Quarterly have reported stakeholder rebellions in response to nonprofits ignoring their responsibility to stakeholders.

Stakeholder rebellions?

WE’VE REBELLED! We’re, like, the national poster children for stakeholder rebellion!! Starting up our own orchestra advocacy groups, analyzing 990s, making blogs go viral, selling out lockout concerts, mobilizing to testify in front of the state legislature. Guys, this article is talking about us!

I think this accurately portrays us. Except we have a cause.

Does Susan G. Komen for the Cure sound familiar? These responsibilities extend well beyond checks and balances in the financial system or misreporting performance statistics—they extend to governance. Do nonprofits listen to stakeholders?

Not in the Twin Cities orchestra world.

Are they in the habit of taking money from them—and in their name—and then ignoring them until they shout?

YESSSSSSSSSSSSSSSSSSSSSSSSSSSSSSS.

AND SOMETIMES EVEN WHEN WE SHOUT AND/OR WRITE IN LARGE BOLD CAPITAL LETTERS, THEY STILL DON’T LISTEN TO US!

Okay, so I’m not going to parse the whole article sentence-by-sentence. (I only do that for MOA press releases and Doug Kelley Almanac appearances.) But it really is a fabulous beautiful article, and it puts into words so much of what I’ve been attempting to express here, in much more measured, professional, useful language.

Here are several more tidbits that stood out:

A sense of autonomy easily leads to a disregard for actively seeking input from stakeholders. Revealing a distressing lack of concern, “over 70 percent of nonprofit board members believed that they were accountable only to their board or to no one.”

How can we get in touch with the MOA board of directors and assuage my sudden paranoia that over 70% of them believe that they are accountable to no one but their fellow board members?

Most nonprofit organizations may not discern the general public as a major actor, let alone the dominant one, yet it is the ultimate source of every privilege they enjoy.

Thank you. THANK YOU. THANK. YOU. This is a point I’ve hammered home again and again here. The audience is the reason that Minnesotan orchestras exist. AND WE DESERVE A VOICE, PREFERABLY A LOUD EXTREMELY INFLUENTIAL ONE.

There are many ways to identify responsible organizations, but three are particularly relevant to nonprofits.

Marker 1: Responsible organizations are true to their missions. Nonprofits are increasingly relying more on earned income and less on donations and grants. Consequently, “missions of nonprofits engaged in commercial activities will grow more ambiguous through time. New demands on senior management to pay attention not only to nonprofit but to for-profit goals, the adoption of new structures such as joint ventures that create mixed missions and messages for participating entities, and the tendency of senior management to look at activities from the perspective of their contribution to revenues may create an environment in which nonprofits must work especially hard to keep their charitable mission in daily focus. Increased responsibility will likely fall on boards of directors of commercial nonprofits to ensure that a dilution of charitable mission does not occur.”7

Yes. YES.

dilution

Potential dilution of charitable mission?

This is not to say that nonprofits should avoid commercial ventures or changing their missions, but they should do so deliberately after a process of soul-searching that respects their stakeholders’ interests.

YES. In fact, I said this just a week ago:

I would think that before the MOA changes its mission statement to or from anything, they should think long and hard, and, most importantly, make such change very public. Because, believe it or not, the public is actually the reason the MOA exists.

More from Bowman’s article:

Nonprofits should keep this in mind: actions and methods that are acceptable in for-profit businesses may be grotesquely inappropriate for nonprofits to practice…

Marker 2: Responsible organizations act as if outcomes matter. Doing good requires doing the right thing, not just the easy thing…

Marker 3: Responsible organizations are candid. They do not wait for others to reveal suspected misbehavior. They police themselves, and they share the results of their investigations with the public…

Can you imagine how wonderful it would be if we trusted the Minnesota Orchestra and St. Paul Chamber Orchestra to police themselves? Can you imagine how bright and shiny and happy and glittery that world would be?

Here’s the most interesting part of the article: “Four Trends Already Shaping Future Ethical Standards for Nonprofits”:

Trend 1: Small donors will demand that charities pay the same deference to their wishes and expectations that these charities have always accorded large donors…

YES, WE WILL DEMAND. HEAR US ROAR.

Trend 2: Courts will become less tolerant of sweeping generalizations and vaguely misleading statements made by charities in the course of fundraising.

Say it with me now:

On the financial front, we have announced balanced budgets over the last three consecutive years, and we are facing the current economic downturn with stability. Michael Henson, in front of the Minnesota State Legislature, asking for millions of our dollars, and openly lying to get them

Moving on…

Trend 3: “The nonprofit community in the United States (and increasingly elsewhere) has begun to shift its attention from measuring outputs as indicators of progress to measuring outcomes.”…

Trend 4: More regulation. A minimal ethical standard is obedience to the law…

And that of course immediately brought to mind Jon Campbell speaking in Graydon Royce’s Bombshell Article:

“We spent countless hours with attorneys to make sure we understood the state law about how endowments work, and the accountants had to agree with our approach to give us an unqualified audit.”

Campbell! A. Minimal. Ethical. Standard. Is. Obedience. To. The. Law. If the MOA had a forehead, I’d recommend that sentence be tattooed on it.

Anyway. It appears that other organizations are having the same problems we are. Is that comforting or depressing? Maybe a little of both.

Here’s the note from the Bowman article that I’ll close on:

More and more often, however, perhaps aided by social media, stakeholders are realizing that they can protest unaccountability.

Yeah, you’d better believe it. We’re on a train, and the next stop is Patron Stakeholder Rebellion Town. All aboard!

In consideration of other passengers, please do not put your feet on the seats. Please leave designated seats open for the elderly and handicapped. Next stop, Patron Stakeholder Rebellion Town. Connecting routes at Patron Stakeholder Rebellion Town include New CEO Avenue, Board Shakeup Lane, and the Stronger Better Awesomer Minnesota Orchestra and SPCO Highway, as well as the Nicollet Mall Free Ride bus. Please keep hands and feet clear of the doors. Thank you.

6 Comments

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6 responses to “Woods Bowman’s Amazing Article on Non-Profit Ethics

  1. Sarah

    The Minnesota Orchestra “made” THE ECONOMIST in a remarkably balanced article which hits the nail on the head in the last paragraph (but doesn’t specifically tie it to the MOA):

    http://www.economist.com/news/united-states/21569446-trouble-pit-lamentoso

  2. Terry

    I think “grotesquely inappropriate for nonprofits to practice” pretty much sums up the tactics of the orchestra boards and managers in the Twin Cities these days.

  3. Terry

    Oh, this article just keeps on giving! “Formally, nonprofits are answerable to state attorneys general and (if they are also tax-exempt) the U.S. Internal Revenue Service …. Nonprofit status, tax exemption, and deductibility of charitable contributions are legal artifacts — privileges granted by the public’s elected representatives to organizations run by law-abiding, personally disinterested [!], socially minded individuals performing socially desirable activities.”

    Well, “privileges granted” could then be taken away, one presumes, by said public’s elected representatives. This might be one way to get rid of the current board: simply rescind their nonprofit status, while authorizing a replacement organization (and new board) to take its place.

  4. “…nonprofits are answerable to state attorneys general…”

    Has Lori Swanson, Minnesota attorney general, said anything about the situation? Maybe a letter or two in that direction….

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