BOARD ISSUES AND ACCOUNTABILITY
ADO Philanthropy Day Keynote: Board Responsibility for Oversight is Vital
By: Arli Epton

New York State Attorney General Eliot Spitzer’s keynote remarks at ADO’s National Philanthropy Day Conference challenged not-for-profit organizations to live up to the American ideal of philanthropic spirit. The conference was held on November 15, 2004 at the Music Conservatory of Westchester in White Plains.

Spitzer cited Alexis deTocqueville’s early description of Americans, after de Tocqueville had visited the Colonies. As history would have it, the Frenchman wound up explaining our forefathers and foremothers to the rest of the world at that time. In the quoted passage, de Tocqueville refers to the American penchant for causes, springing up on what would seem like every corner—to become solidified into “associations” (the forerunners of nonprofits), as the American population and its needs multiplied and as history progressed.

However, something has gone awry during that progress. A “credibility gap” now exists between the nonprofit world and the general public. Spitzer went on to address that serious problem. He put it in the same category as the problems he has been addressing with Wall Street brokerages, mutual funds, and the insurance industry. Why wouldn’t it be, when his much-publicized legal battle with the New York Stock Exchange was actually one between the Attorney General and a nonprofit agency? Yes, that’s correct—the NYSE is a not-for-profit organization! (As fascinating as the topic is, we’d be straying from the subject at hand to delve into the reasoning behind the Stock Exchange’s status in this article.)

If you’ve followed the NYSE’s case at all, you probably know that it focuses on the Exchange’s CEO as well as the Stock Exchange’s board. And it was the issue of nonprofit leadership that Spitzer emphasized, when he spoke before the ADO.

Spitzer is not on a broad campaign to prosecute wayward not-for-profits. Such a campaign, Spitzer felt, would discourage nonprofit board participation. Rather, he spoke forcefully in favor of educating the boards of charitable organizations regarding proper leadership. Such leadership should focus on providing the oversight that keeps nonprofits operating within the law.

The purpose of any board is not the daily management of an organization. Rather, a board must provide the objective overall parameters within which an organization should run. It is that very objectivity which is so hard to come by, be an organization for-profit or not-for-profit. With a nonprofit agency, however, Spitzer seemed to be saying that such objectivity, bound together with serious commitment, is even more difficult to come by, because nonprofit boards are so often made up of major donors. [These trustees are often volunteers—not the case with for-profit board members, who are generally paid.) Such board members might prefer to limit their service just to making donations, rather than being in the position of asking their agency’s management the difficult questions that need to be posed.

Among the ways to educate one’s board “away” from such behavior, Spitzer spoke about his own office’s Charities Bureau. The Bureau produces many informative brochures, some of which were distributed at the event. As a member of the audience, in my packet, I received: Right from the Start: Responsibilities of Directors and Officers of Not-for- Profit Corporations, The Regulatory Role of the Attorney General’s Charities Bureau, Tips on Charitable Giving, Information for Charitable Organizations Conducting Raffles in New York State, Tips for Charities Raising Funds in New York State: Questions To Ask Before Signing a Contract with a Professional Fund Raiser. The Bureau’s NYC telephone number is 212-416-8400. You can also visit the Attorney General’s internet site at: www.oag.state.us.ny/charities.

(Other ways to educate one’s board include workshops by the Pro Bono Partnership - www.probonopartnership.org – as well as the Executive Directors/ Board track that will be part of ADO Day on April 8.)

Spitzer also spoke about the use of professional fund-raising consultants, specifically for telemarketing. Many of us have read about such firms, which charge much more than 50% of whatever money the telemarketing campaign brings in. This leaves little in actual donations for the charity on whose behalf they call. As the New York Times of August 18th mentions, many professionals in fund-raising find such practices heinous. However, there are some charities that turn to such consultants and accept such paltry return rates, because they feel they would not receive donations at all without them. Needless to say, Spitzer’s office does not look favorably upon these practices, and his description of them seemed to make most of the ADO audience squeamish. However, as Petra Bartosiewicz, in her aforementioned New York Times article, points out, the solution is not simple.

Still, however, the Attorney General’s talk was uplifting. It presented concrete ideas that ADO members could take back to their organizations and did not focus entirely on negative issues. Spitzer gave the instructive example of Hale House, a group whose leadership had overstepped the law in the past. Today, however, it has metamorphosed into a better organization that fully deserves the name of its selfless founder.

The author, a certified paralegal with a substantial background in fund-raising, wishes to thank Rick Hobish, Esq., Executive Director of the ProBono Partnership, for reviewing this article.