When Boring is Better

Posted by Laura Otten, Ph.D., Director on October 8th, 2010 in Articles, Thoughts & Commentary

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Developing policies are a bore and a waste of precious time.  At least that seems to be the thinking of most board members, as demonstrated by the amount of time and energy boards commit to their creation, reliance upon and monitoring.  And yet, they are among the most important things a board should be doing as they provide for clarity, increased efficiency and, most importantly, allow the board to ensure that an organization’s values are both practiced and protected.  Along the way, they do a helluva job of protecting an organization’s reputation.  And what could be more important than that?  But if you are still thinking boring, then this will be a boring blog!

Two key policies that are often neglected by boards, but truly deserve some serious attention are gift acceptance and conflict of interest.  If you have both of these policies AND the board spent considerable time discussing what should be the content of these policies, then you have my admiration.  You, also, can stop reading now.

If you don’t have both or have both but didn’t spend considerable time on them, then get to work.  It is much better to develop any policy before you need it.  A policy developed in response to a particular situation for which you need that policy becomes reactive and narrow, and not the thoughtful, comprehensive guide that you will need—and should want—going forward.

A gift acceptance policy, as the name suggests, identifies what gifts and from whom you will accept gifts.  Will you accept stocks, deeds to property, works of art, other goods, etc.?  Corporate in-kind gifts or cash only?  Will you accept gifts from any source, or do you care whether the gifts were gotten with money made producing items that challenge your mission or from companies that will benefit from your work, etc.?

Senator Charles Grassley, the Senator from Iowa who has lead the charge lowering the microscope on nonprofits, and who recently seems gunning for hospitals and other health care nonprofits, has been asking these nonprofits to disclose their gifts from medical companies.  Specifically, he asked 33 health care nonprofits to tell him how much money they’ve received from medical companies and/or their foundations from 2006-2009.  He asked how much they got and to what purpose the money went.

The Chronicle of Philanthropy asked those 33 organizations to provide it with the same information.  Of the 26 companies responding to The Chronicle’s request, 14 “disclosed the most” (The Chronicle’s categorization) and said how much money they received; of these, only one has a “do not accept from pharmaceutical companies” policy.  Of the 12 companies The Chronicle said had “limited disclosure” eight “declined to disclose” how much they’d received from medical companies.  That’s almost a third of the 26 responding nonprofits, and that’s a third too many.

What kind of gift acceptance policy do these organizations have that they are unwilling to share how much they received from their donors?  If they are in anyway ashamed, uncomfortable, embarrassed by receipt of these gifts, then why did they accept them in the first place?  And why did their gift acceptance policy allow such acceptance?  Yes, the Fifth Amendment to the Constitution allows any person facing criminal charges not to answer questions if s/he fears it might self-incriminate, and the rest of us are not supposed to allow someone’s taking the Fifth to influence our thinking in any way.  Yea, right!  Being honest, we know it too often does.  In the case of these nondisclosing health care nonprofits, the failure to disclose who, how much and for what absolutely makes us think the worst.  Harm done, reputation tainted!

Which brings us to the second key policy designed to protect our good names:  conflict of interest.  Yet it would seem, from reading hundreds of organizations’ conflict of interest policies (or paragraphs, more often than not) that most are designed to protect the business interests of board members and not the organization.  Based on these readings, I would not join 97% of these boards as their conflict of interest policies allow for some pretty odious smells!  Odious smells pique the nose of reporters—and others.  A good conflict of interest policy should protect the organization from both real and perceived self-interest dealings.  Yes, it is perfectly legal to award a contract to a board member or her company or her spouse’s or parent’s company.  It becomes a stronger position to defend if that award was the result of a competitive bid process.  The operative word there is “defend”.

Did your board member really have the best price for the best quality work?  Really?  Wouldn’t it be better for the perception of the nonprofit in the community—that community of funders, consumers, peer agencies, media—if you wouldn’t even consider working with any company with ties to a board member?  Wouldn’t it be better if you made it clear that board members were there to do the business of the board and not to do their business?

Unless your organization is in the most underdeveloped of areas, is there really no other company who does, for a comparable price and quality of work, the same thing as the company with ties to the board member?  Why not do the utmost to protect the reputation of the organization whose mission you, as a board member, have promised to protect and steward?  Why risk being tomorrow’s headlines?

So here we are, back to the importance of policies.  Not policy for its own sake, but policies that are well thought out, carefully considered and always protect the integrity of the organization.  Policies that when followed, reveal the nonprofit to be totally admirable and completely trustworthy.

The opinions expressed in Nonprofit University Blog are those of writer and do not necessarily reflect the opinion of La Salle University or any other institution or individual.