Are Nonprofits "Follow the Money" Obsessed?

Are Nonprofit follow the money obsessed?Have the leaders of nonprofits been overly incentivized to “follow the money,” resulting in a troubling shift in the composition of boards? The answer is yes according to a recent article in the Stanford Social Innovation Review. The trend may be “distort[ing] organization priorities” and may “dilute charitable values.”

According to the author, Garry W. Jenkins, nonprofits board are becoming overly reliant on financial industry executives. Among organizations surveyed in New York, they comprise just under 40% of board members, and between 44% and 56% of board officers. Anecdotal experience suggests this trend, while perhaps not as pronounced elsewhere, is national.

“Boards and board governance are inevitably shaped by the identify and background of those who make up the boards themselves.” Thus, the large portion of financial industry executives on boards has at least two effects feared by the author. Groupthink is dangerously prevalent among nonprofits boards according to some. As The Board Book suggests, lack of “industry diversity” among a nonprofit’s board squashes discussion. By way of example, it holds that the best boards “take care that there is ample inclusion and weighty voices of” diverse values “to ensure that those values are woven into the guts of the institution.

Groupthink exacerbates another alleged ill effect, a board that increasingly incorporates “finance practices” into decision making. These include “data-driven decision-making, an emphasis on metrics, prioritizing impact and competition, managing with three- to five-year horizons and plans, and advocating executive style leadership . . .”

As one who advises hundreds of nonprofits annually and also sits on boards, I see both merits and problems with Prof. Jenkins’ concern. I am a firm advocate that entrepreneurial thinking has a place in almost every nonprofit, especially when it comes to good management technique. Notwithstanding, too much emphasis on entrepreneurship, especially when it translates to building earned revenue programs rather than good management practice, can result in a emphasis on earning and raising money. A focus on recruiting finance executives (because of the money they presumably will bring to the organization) both overtakes the charitable purpose of the organization and can even threatened exemption.

Many factors are constantly shaping and reshaping the nonprofit sector. If the trend Prof. Jenkins and others report on is real, should we be concerned? Share your thoughts.

What has been your experience as a nonprofit board member, advisor, or otherwise? Is there overrepresentation of finance executives on nonprofit boards. Is that bad or good? Does it depend? And has the emphasize of some boards shifted too much from mission in order to “follow the money”?

NOTE: The information contained herein is not intended to be legal advice and the reader should know that no Attorney-Client relationship or privilege is formed by the posting or reading of this article which is also not intended to solicit business.

Casey Summar, Partner, The Law Firm for Non-Profits,1812 W Burbank Blvd, #7445, Burbank, CA 91506

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