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Sunday, 16 April 2017 12:54

Nonprofit execs bristle over national group’s push to pay board members, empower CEOs

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To date, nonprofit leaders have looked skeptically at the concept of compensating board members for their “volunteer” service. 

But the National Association of Nonprofit Organizations & Executives (NANOE) is backing the move to financially compensate board members, as well as give more oversight to those paid professionals who manage nonprofits. 

The movement is cause for concern for many leaders in the nonprofit industry, including in West Michigan. 

Executives at NANOE suggest that boards be disbanded and re-established to include only four board members — an “enterprise development” specialist, a mission specialist, a CPA, and a lawyer, each of whom will be charged with responsibilities such as managing an organization’s CEO. These board members would be compensated for performing their duties.

In addition, under NANOE guidelines, CEOs would be given more authority, including acting as the chair of board, setting board agendas and voting on board matters. They also would have full authority to act on all organizational matters and have sole responsibility for building relationships with stakeholders.

“What NANOE is proposing goes against every teaching out there, whether it be from the Standards for Excellence or Board Source,” said Daniel Billingsley, vice president of external affairs at Oklahoma Center for Nonprofits. “We have volunteer boards that are officially and legally responsible for organizations. When payments are involved, those board members are not going to be able to exercise transparency or impartiality.

“How easy would it be to overlook something in the financials or with compliance issues? Other board members might be reluctant to bring attention to it because they don’t want to lose their seat on the board.”

NANOE representatives maintain that “nonprofits have clung to their traditional structures to their detriment.” NANOE board member Jimmy LaRose, who serves as president and CEO of the National Development Institute and architect of the Major Gifts Ramp-Up Donor Cultivation Model & Online Cloud headquartered in South Carolina, thinks nonprofits are emphasizing ethics and accountability in a way that prevents them from growing their organizations.

“It’s not that we don’t want ethics and accountability,” LaRose told the Chronicle of Philanthropy for a March report. “But you don’t want to design your best practices based on that as its cornerstone.”

MiBiz was unable to reach LaRose or other NANOE leadership for comment.

Paul Knudstrup, president and founder of Lawton, Mich.-based Midwest Consulting Group Inc., said donors will not look favorably on a nonprofit that uses its money to compensate board members. He said what NANOE is proposing is a “recipe for disaster.”

“The notion of scaling up a nonprofit to serve a wider audience certainly makes sense, but I’m not persuaded that this would be a way to do that successfully,” Knudstrup said.

NANOE registered as a general business in 2015 in Washington, D.C. It launched its website in January 2016 and began posting Facebook messages in June. 

Amy Coates Madsen, director of the Standards for Excellence Institute at Maryland Nonprofits, said she has been following NANOE’s progression and is still trying to understand the organization’s mission and purpose. She wrote a blog about the group’s draft guidelines and her organization’s concerns, which prompted a lengthy response from NANOE about the merits of its methods.

To elevate its profile, NANOE has sent emails to thousands of people at nonprofits and other organizations — including in West Michigan — telling them that they’ve been nominated to serve on NANOE’s “board of governors,” an advisory group that’s separate from the paid board of directors. The governors are meant to review and critique new “guidelines” that NANOE has drafted on how nonprofits should restructure their organizations.

Coates Madsen is among many nonprofit leaders who think these emails and other communications are thinly veiled promotional stunts designed to give the appearance that people are being honored by their peers.

“There are a lot of people who were recruited to join their body, including many people in my organization and around the country,” Coates Madsen said. “They seem to have cast a wide net and we understand that some of these new recruits aren’t even real people. We have shared our concerns with them.”

Coates Madsen said widely held standards specifically state that board members should serve without compensation. It’s a practice to which an overwhelming majority of nonprofits adhere.

“One of the hallmarks for the nonprofit sector in the United States is that these organizations with public purposes are led by people with a dedication to the mission,” Coates Madsen said. “We don’t want to encourage situations where there are conflicts of interest in any way. We don’t want to appear as organizations masquerading as small businesses.”

Rob Collier, president and CEO of the Michigan Council of Foundations, said the nonprofit charitable sector is one built on trust and accountability.

“To think that we would compromise those values over money is very shortsighted,” Collier said. “When we see this kind of activity, this would simply undermine the work that nonprofits are trying to do.”

He said the nonprofit sector in Michigan employs about 450,000 people and its strength can be directly tied back to ethical practices that don’t align with NANOE’s mission.

“I can’t imagine literally that there’s a group of folks who think this is a new way of doing business,” Collier said. “In my career in philanthropy, people want to know that the leadership of an organization is solid and people are being fairly compensated for their work. This is why we have a strong nonprofit sector, because there is a trust and familiarity.” 

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