The Center for Ethics, Governance, & Accountability

I love charitable organizations and what I like to call the non-profit sector. Of course, there is also the public sector and the private sector. For a number of years I have spoken and written on the important role (a potentially unique role) that the non-profit sector can play in solving challenging issues in our communities.

But I am also a capitalist. I expect a lot from non-profits organizations (NPOs) and I have not been shy about expressing my opinion, whether it be in the role of a volunteer board member, a consultant, or in conversations with civic leaders. For me, matters of ethics, governance, and accountability are foremost; and, as my organization, The Center for Ethics, Governance, and Accountability (CEGA) espouses, we believe excellence in these three key areas will further the success of the NPO in fundraising, community popularity, and support.

I must admit I am frosted – I am in the middle of reading a really well-researched and well-written article, “Why Isn’t Wall Street in Jail?” in the March 3, 2011 edition of the Rolling Stone, authored by Matt Taibbi. The article points out – in considerable detail – the shenanigans that have been permitted on Wall Street between the private sector and the public sector. His question is a good one: why aren’t these folks in jail? Albeit a capitalist, it is indeed fair for me to be disgusted at the lack of ethics, governance, and accountability that has been paraded on Wall Street, in DC, and across America for far too long.

So, I got to thinking. If I believe the NPOs have so much to offer, why can’t they lead the way in terms of performance, accomplishment, and plain old just doing what’s right?

The truth is, they can.

As a nation (I will leave globalization out of this article), we are very much in need of leaders in organizations that can get the job done and show others how to do it appropriately.

Sure, the NPOs have had their share of noteworthy failures and embarrassments over the years, but could the non-profit sector hold a candle to the public and private sectors in the scandal arena? I think not. Look at what is still taking place on Wall Street. Look at what is still taking place in DC. And look at the myriad of smaller examples in communities all across the country. We desperately need improved and enlightened leadership.

There is an instructive (hopefully) point to this article.

Organizations do not make things happen – it’s the people who do. One of my strict rules is that I do not like to see non-profit employees serving on other non-profit boards. And, as many of you know from my previous articles, I expect a lot out of volunteer boards and the individuals that sit around that board table. In order to be consistent with my ‘no non-profit employee on a non-profit board’ rule, that means that the boards of our NPOs will be comprised, almost entirely, by members from the private sector. (Generally, as a rule, I also don’t like to see a public-sector employee serving on boards either.)

So, now we are focused on the individual: private-sector, volunteer, business-oriented, with a specific skill (or skills) that landed them on the NPO board (hopefully). What can they accomplish in the non-profit sector that they may not be able to accomplish in the private sector? Well, how many of the $100 million Wall Street types do you think are serving on boards of NPOs? (Doubtful more than a scant few.) So, who are the NPO board members? I would submit they are the ‘average’ citizen volunteers who hold jobs in the private sector. I would also guess, by and large, they are the up-and-coming leaders in their private sector firms. By virtue of the fact that they are serving on an NPO board – to do ‘good works’ for the community – and do not likely have anybody in a superior role telling them how to behave on the board – they are free to combine all the skills and talents they possess and apply them, with passion and fervor, to improve the mission of the NPO. Maybe the NPO does have as much purpose for establishing the character of an individual as that individual does for the NPO? Think about it; this is quite an opportunity.

The IRS reported 1.36 million tax-exempt organization in 2000 (this figure includes religious groups, although few even file with the IRS and fewer still submit Form 990s – because they are not required – separation of church and state – to do so). If you include the number of organizations that do not register, the IRS estimated in 2000 that 1.6 million were NPOs. (Still only about 6% of the total organizations in the U.S.) We will soon see the 2010 census updates that will give us a better feel for how the number of NPOs grew over the past decade, but the ‘charitable non-profit organization’ (501(c)3) numbered 819,000 in 2000. (Source: The Nonprofit Sector: A Research Handbook by Walter W. Powell and Richard Steinberg, copyright 2006.)

For purposes of illustration, let’s assume that the 2010 figure will be 1 million NPOs. And let’s assume the average NPO (charitable) board has 15 members. When you do the math, we have 15 million individuals (note: focus on individuals) that have the ability to do what’s right and teach others around them by example. In a best-case scenario, each board member would be able to weigh the issues facing the non-profit, make good decisions, see the positive outcomes and then compare his or her behavior in the workplace (presumably a for-profit). A board member could also learn a lot from fellow board members who come from different backgrounds and philosophies – whereas people in the private sector tend to surround themselves with like-minded people.

I’m still frosted! What is happening (and being rewarded) in our financial institutions and our government entities is unacceptable. I feel I can do little to change the direction of either one; but, however, I do feel that I (and many others – 15 million?) can participate in guiding the non-profit sector to lead the way and change future behaviors by providing positive examples in our communities where people can see them and learn from them. I certainly hope it can be so.