The entire country was alarmed by the
Penn State scandal when it was exposed in November 2011. The events and their
repercussions have implications for various nonprofit sector stakeholder
groups, one of which is board directors. It undoubtedly left many wondering
whether or not something like that could overtake their organizations.
perspective, the answer is an obvious yes. To be clear, we are not referring
specifically to the allegations of sexual abuse. The indictment of Jerry
Sandusky and other Penn State staff happened to be the precipitating cause that
exposed the university’s tragic flaws. It easily could have been something
else. That scenario is what is called a “black swan” event.1 A black
swan event has three components. It’s an event that:
- no one thought would or could ever happen;
- does actually happen with devastating impact
and effect; and
- in retrospect, is perfectly predictable.
All the components were there; it was just
that no one saw them. Penn State must be an example for all nonprofit board
Identifying the Missteps
The university’s president had been in his role for 16 years. In addition, Joe
Paterno had been in the role of head football coach since 1966, and was
employed by the university since 1950. Generally speaking, when someone has
been an executive for 10 or more years, he or she is more likely to take on the
characteristics of a founder.
Symptoms of “founder’s syndrome” include the
exclusion of others and greater control over decision making. This is evidenced
in the Penn State situation by the trustees’ reports of hearing about the scandal
through the media, rather than university leaders. They also reported that the
outside crisis management support team was hired by the university without
input from the board.2
Lack of Crisis Management Protocol.
The trustees were somewhat lost at sea. This was, in part, because of the lack
of timely, frank communication from Penn State’s leadership team. The trustees
have since expressed frustration over a lack of adherence to protocol. They
accused Penn State’s president of softening the language around the promised
investigation in their press release.
Mutual Exploitation within the
University. A mutually exploitive relationship existed
between Joe Paterno and the university. Both saw opportunities to benefit from
each other to the detriment of the overall institution.
the situation particularly problematic was his iconic status. His significant
donations to the university and considerable tenure created an atmosphere where
many could not conceive of a time without him as coach. The blurring of the
identity of a leader and his organization is another critical symptom of
Because of these three points, we believe the
university was poised to be undone by a crisis. Iconic and comfortable staff
prohibited preventive actions around change in the university’s staff and
operations, the reported lack of communication made trustee oversight more
difficult, and a reported lack of adherence to protocol led to difficulties in
Board directors must learn from the trustees’
lessons and avoid the same blindness by taking an active role in governance.
Adhere to Standards
Boards should set clear standards for the
kinds of information they want and need. All too often, especially with
long-term leaders, the agenda is driven by the executive. Actually, it should
be the trustees that drive the agenda. They are the custodians of the
organization’s mission. In fact, the board’s primary responsibility in serving
mission involves hiring a chief executive who manages the organization’s assets
to attain and fulfill the mission.
Furthermore, it is the board’s responsibility
to hold the chief executive accountable in a structured way, regardless of how
long he or she has held the position. More and more, the courts are being
involved to assure or challenge this accountability.
Avoid Relationships that Are Too Cozy
Beware of the spider web of relationships
that long-term executives may enjoy. We feel that 10 years is, generally
speaking, a good term limit for a chief executive. This implies having a solid
succession plan. We are not saying that board members intend to be overly
supportive of their organizations’ executives. However, political scientists
have noted that the relationships between “regulators” and “those who are
regulated” tend to become cozy over time.
Directors also need to be aware that these
improper relationships can emerge early in a chief executive’s tenure. In fact,
a case that happened on the West Coast about 25 years ago blew up because of a
board’s lack of responsibility in the hiring process. The candidate hired for
the position of executive director of a large, religiously affiliated, social
service organization listed, on his resume, that he was a religious minister
with a master’s in social work. In actuality, neither was true. The board never
checked the veracity of this information. Eventually, the executive committed
some outrageously unprofessional and illegal acts that put the agency’s
reputation in jeopardy.
some courageous staff reported the activity to the United Way, rather than to
the board of directors. This entire matter could have been avoided if the board
had handled the search process with due diligence.
Emergency Response Plan
It is critical to have an emergency response
plan for various crises that involve the organization’s most valuable assets.
This includes a succession plan for the chief executive. The importance of this
principle is highlighted by The Chronicle of Philanthropy
in its marketing materials, which say, “One out of three current nonprofit CEOs
will be terminated by a board during his or her career.”
Nonprofit boards and their chosen executives
can learn significant lessons from the sad events that happened last year at Penn
State, and they must if they are to avoid lawsuits, destruction of reputation,
and even bankruptcy. The good news is that there is a real reward for doing
things the right way, namely, a successful nonprofit enterprise that continues
to benefit the community.
Black Swan by Nassim Nicholas Taleb was
published April 2007.See a detailed account of the board’s
deliberations published by the
New York Times:
Read the article and download a PDF on the Alliance for Children & Families' Nonprofit Director website.
This article, written by Thomas Harvey and John Tropman, originally was published in On Board, a publication of Nonprofit Director. Thomas J. Harvey, MSW, is director of the Master of Nonprofit Administration Program at the University of Notre Dame’s Mendoza College of Business. John Tropman, Ph.D., is professor and associate dean for faculty affairs at the University of Michigan School of Social Work. He’s also an adjunct professor at the university’s Ross School of Business. Harvey and Tropman are co-authors of “Nonprofit Governance,” a book published in 2009 that offers modern information and practical guidelines for directors and executives of nonprofit organizations of all sizes.