Keeping secrets from your nonprofit board may increase legal risksKathryn Engelhardt-Cronk, MissionBox co-founder and CEO, offers her advice and opinions for the MissionBox DoubleTake — a column that offers opinions about the peskier aspects of working in the nonprofit sector. The opinions offered here are based on the author's personal nonprofit experience and may not reflect the opinions of MissionBox, Inc. These opinions should not be considered legal advice or used as a substitute for professional legal consultation. MissionBox readers are invited to submit alternative responses, which may be published here as well.
Our executive director withheld critical information from the board!
Until just recently, I served on the board of one of my community's very active nonprofits. Its mission is to promote community theatre arts.
Recently I learned that at a post-production party about a year ago, one of our male board members allegedly groped a female event patron. The next day, the alleged victim and her lawyer contacted our executive director threatening legal action if the offending board member was not immediately removed from the board.
Rather than bring this serious issue directly to the entire board, the executive director chose to confide only in one board member, who also happens to be a close friend of his, and the two them tried to handle it without alerting the board.
Fast-forward one year — the alleged groper is still on the board, the situation is still unresolved, the victim is still angry and now there is a lawsuit looming. When our board was fully informed of the incident, the accused declared that the allegation was false and the executive director explained he was only trying to protect the theater’s reputation by keeping the incident under wraps.
Whether the allegation is true or false, the executive director failed to grasp my primary complaint — the cover-up. If our theater is successfully sued by the victim, our nonprofit might have to close permanently and all eight board members (including the seven of us who had no knowledge of the situation) could potentially have some personal liability as well. I dropped off the board with a strongly worded letter of complaint.
Why would this smart, well-educated, committed and long-serving executive director make such a terrible decision?
Kathryn says ...
Your last sentence that contained the phrase “long-serving” confirmed what I was thinking as I read your letter.
Sometimes, executive directors who have served many years and lived through many board rosters, begin to assume that they, and only they, know best. From their point of view, they have a deeper investment in their nonprofit, knowledge of how issues were handled (or mishandled as the case may be) in the past and a sense of personal entitlement when making all-important decisions. It sounds like this may be the case in your scenario.
Next, you’d be surprised how many executive directors of smaller, close-knit nonprofits have an unclear understanding of the role of the board. They may not understand that the board is the executive director’s boss, not the other way around.
Board governance is a serious responsibility. While the Sarbanes/Oxley (SOX) governance standards were not designed to specifically dictate how nonprofit boards are run, most nonprofits agree that SOX requirements are considered best practice for nonprofit boards. These standards include specific requirements regarding financial oversight and legal compliance by board members. It sounds as though the nonprofit you describe overlooked both categories when the executive director failed to reveal this potentially damaging, if not catastrophic, situation to the board.
There also may be some “good ol' boy” cover-up (wink, wink) going on regarding the groping accusation, which is indicated by the continued presence of the alleged abuser on the board. Both the accused and the accuser deserve the right to a resolution of this matter, which was not supported by the executive director's actions.
Finally, as a community member who supports the theater, the accuser isn’t going to be singing the praises of this nonprofit. More likely, the rumors regarding this incident have already been spread far and wide, with potential negative impact on audience attendance, fundraising and grant eligibility.
I am glad you resigned. If I were on that board, I would insist that the executive director be fired immediately.