BOOM Went The Gavel

It happened so close to the New Year holiday you may have missed it but the decision by Judge David T. Stosberg denying the Louisville Orchestra’s (LO) filing for Chapter 11 bankruptcy as means for temporary relief from its collective bargaining agreement (CBA) is, to put it mildly, a big deal. At the same time, it hardly serves as the final punctuation in the narrative that is the LO’s financial condition…

There are two excellent articles from Elizabeth Kramer in the 12/29/2010 edition of the Louisville Courier-Journal (here and here) that cover the reasoning behind Judge Stosberg’s decision but in short, he felt the organization failed to demonstrate that abiding by the CBA would inflict irreparable harm. In fact, he felt that failing to honor the CBA would produce a “loss of good will” among the community.

That’s a particularly interesting notion and is perhaps rooted in the core definition of nonprofit board service, which is to serve as stewards of public trust (sometimes referred to as “guardians of public trust”). Of course, defining what it means to be a good steward of public trust is arguable but in this case, Judge Stosberg may be looking at the relationship between stakeholders (board, administration, patrons, and musicians) as something that is not mutually exclusive from the business plan.

From this point forward, the orchestra’s board may opt for altering their filing to liquidation (Chapter 7), buckle down and fundraise like mad to meet financial obligations and/or use endowment funds, or even disregard the ruling and wait to see what happens. Regardless, the organization is approaching the end of its current CBA, which continues through May 31, 2011, and that means musicians and the association will have to engage in regular bargaining sessions and those talks are all but certain to focus on the sticking points from the ruling.

In the meantime, I’m interested in hearing about what you think of the notion behind board members serving as stewards of public trust. One would have to be fairly dense not to see the parallels with what is going on in Detroit where the Detroit Symphony Orchestra board has remained steadfast on insisting that the fixed cost structure of the orchestra they’ve implemented is needed to for it to survive, regardless of positions otherwise from stakeholders or public officials.

Do you think there is a point where strategic decisions motivated predominantly by fiduciary responsibilities outweigh all other considerations?

About Drew McManus

"I hear that every time you show up to work with an orchestra, people get fired." Those were the first words out of an executive's mouth after her board chair introduced us. That executive is now a dear colleague and friend but the day that consulting contract began with her orchestra, she was convinced I was a hatchet-man brought in by the board to clean house.

I understand where the trepidation comes from as a great deal of my consulting and technology provider work for arts organizations involves due diligence, separating fact from fiction, interpreting spin, as well as performance review and oversight. So yes, sometimes that work results in one or two individuals "aggressively embracing career change" but far more often than not, it reinforces and clarifies exactly what works and why.

In short, it doesn't matter if you know where all the bodies are buried if you can't keep your own clients out of the ground, and I'm fortunate enough to say that for more than 15 years, I've done exactly that for groups of all budget size from Qatar to Kathmandu.

For fun, I write a daily blog about the orchestra business, provide a platform for arts insiders to speak their mind, keep track of what people in this business get paid, help write a satirical cartoon about orchestra life, hack the arts, and love a good coffee drink.

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3 thoughts on “BOOM Went The Gavel

  1. I think it’s imperative to comsider the mission separate from the structure to accomplish that mission. We in Louisville have often talked about the board having a neutron bomb strategy, in which the institution adopts a policy that results in the people dying but the institution being left standing. That’s what is truly remarkable about Judge Stosberg’s ruling. It assumes there is a fiduciary value in the institution’s good will in the community. The musicians were adament in advocating this value on the eve of the Louisville Orchestra’s Diamond Anniversary, in which they believed there could be a tremendously successful development and marketing effort launched.

  2. Although I’m from Louisville as well, I won’t comment on the specific of the LO situation. But to address Drew’s question, absolutely yes, the members of a governing board are indeed stewards of the public trust. The real balancing act is weighing the public’s right to have access to any nonprofit organization and the trustee’s need to ensure that the organization is also operated not only appropriately, but also in a manner that ensures it’s longevity. For so many organizations in the past year that has meant finding ways to do “more with less,” and the less includes programming, public services and, unfortunately, people. An interesting parallel question may be: should every cultural organization assume it should operate in perpetuity? I think most of us that serve on nonprofit boards, especially arts boards, assume so and lead the organization with that in mind. However, I’m not sure that’s always the absolute best answer. Thoughts?

  3. That’s a good perspective Todd and there are rarely easy answers but I do think it is worthwhile for boards to consider working relationships with stakeholders as much as financial responsibilities. Granted, they shouldn’t be beholden to any group but adopting a deaf and dumb approach can lead to serious institutional problems.

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