The 10/26/2012 edition of the Nonprofit Quarterly published an article by Woods Bowman titled Nonprofit Accountability and Ethics: Rotting from the Head Down which examines the current state of nonprofit accountability, governance, and responsibility. Although applied to the broader nonprofit field (with particular attention toward charitable nonprofits), key elements from Bowman’s article can be applied to the orchestra field.
In the wake of recent and ongoing stakeholder disputes in orchestras such as Detroit, Atlanta, Philadelphia, Louisville, Denver, Minneapolis, St. Paul, and Jacksonville over strategic planning, mission designation, and governance it would be worthwhile for the field as a whole to examine whether these public relations driven and institutionally catastrophic quarrels are simply a natural byproduct of financial pressures or if ethics play a greater role.
Bowman asserts that accountability involves being answerable and responsible, with the latter characteristic described as a “felt sense of obligation.”
For charitable nonprofits, this is comparatively easy to define but for performing arts organizations, there’s far greyer than black or white. What should an orchestral organization feel obliged to accomplish, carry out, or complete? Similarly, are those priorities flexible or fixed; if the former, what conditions necessitate change?
Questions such as these have dominated national discussions over the past several years with criticism directed toward traditional missions focused exclusively toward artistic excellence. It has been argued that, at best, artistic goals are subjective with tendencies that move organizations toward the type of autonomy Bowman describes in his article as “[leading] to a disregard for actively seeking input from stakeholders.”
In response to the economic downturn, strategic commitments (and even some formal mission statements) have moved more toward including language highlighting fiscal responsibility. However, in some cases, these commitments have served as the impetus for shifting Bowman’s disregard for actively seeking input from stakeholders to the inverse side of an extreme.
The ongoing Jacksonville Symphony, Minnesota Orchestra, and St. Paul Chamber Orchestra labor disputes are what some might consider archetypical examples of this phenomenon in that the respective boards are responding to what they have generally defined as irresponsible financial practices designed more to support artistic accomplishment with new mission directives that focus on economic prudence regardless the immediate impact on artistic standards.
The Hard Part
In Bowman’s article, he cites a lack of accountability among nonprofits in the form of not feeling as though they are “answerable to the people they serve and to the public as well” (emphasis added).
Nonprofit status, tax exemption, and deductibility of charitable contributions are legal artifacts—privileges granted by the public’s elected representatives to organizations run by law-abiding, personally disinterested, socially minded individuals performing socially desirable activities. Most nonprofit organizations may not discern the general public as a major actor, let alone the dominant one, yet it is the ultimate source of every privilege they enjoy.
The personally disinterested characteristic is particularly relevant to the orchestra field in that labor disputes tend to draw out the exact opposite qualities among board stakeholders.
Bowman points out the clear challenge in this sort of situation.
…nonprofits aspiring to be ethical organizations must shoulder greater responsibility.
Bowman also points out the Catch-22 involved with letting constituents (i.e. patrons and ticket buyers) have any effective means of influence beyond paying for concert events.
Nonprofit constituents often cannot vote a nonprofit leader out of office, nor can they necessarily stop using the service. Thus, nonprofits have a greater power advantage relative to the people they serve than for-profit businesses have relative to their customers—or than politicians, arguably, have vis-à-vis constituents.
In this illustration, orchestra patrons arrive at the Catch-22 during labor disputes when faced with whether or not they should cause additional financial damage, and as a result institutional stress, by withholding donations and/or returning tickets for a refund.
Ultimately, and in a very real sense, the current system only provides patron stakeholders the ability to impart influence by means of negative reinforcement whereas an ideal ethical environment within the institution should preclude that sort of scenario. Consequently, no alternatives currently exist.
Nevertheless, one potential solution capable of providing a positive means for self correction among board and artist stakeholders would include applying existing regulations governing involuntary bankruptcy currently applied to commercial enterprises.
But that’s a topic for another post.
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Good morning Drew. This post caught my eye. The problem with accountability in our business relates to the lack of transparency and candor we see coming from our leadership. When it is finally determined that management was ineffective, the culprits have already moved on, leaving the survivors the mess to deal with. Often, these people take a huge payout on their way out. So I think we need to start talking about clawback. If it happened just once, it would send a clear and chilling signal to any who would follow this path. Accountability needs to be more than just a watchword, because donors will run away from us if they think their money is being mishandled.
I agree with you Tom. The organization for which I work is still paying the price among our local donor community for over 25yrs of poor leadership and management. The culprits (spanning several administrations) have since moved on to other orchestras or other fields but we were left with the wreckage and the albatross around our institutional neck.
We, the survivors, have had to endure decades of yo-yo finances and recent painful recalibration. We have managed to have 5yrs of financial success recently but many in the donor community remain wary due to our less than stellar past. Hopefully we can continue our current path, regain insitutional credability and begin to realize our potential.
Clawback is certainly worth considering but in the end, it’s simply another treatment that focuses on symptoms as opposed to curing the disease. One of the very real problems in nonprofit management is how much compensation lags behind the for profit field. Granted, the gap is substantially larger for non profit middle managers and entry level positions and nonprofit executives have made far sharper increases in compensation than other administrators, but the disparity still exists.
At the same time, simply removing the gap doesn’t really solve the problem either because of the outcomes from situations the field is already witnessing. Consequently, barring any sort of regulatory agency with enforceable powers, the only way to begin improving the situation is to change internal culture. And at this point in time, I don’t see the necessary pieces in place to bring that transformation about.
Excellent article as always Drew.
As one of the founding members and officers of Save Our Symphony in Detroit, I was very vocal and critical of DSO Leadership during the DSO’s recent labor dispute for exactly the things you talk about in this article.
Since that time, the DSO has made huge efforts to address these issues, even to the extent of using an outside consulting firm specializing in corporate culture issues. Changing the culture of the organization to be more inclusive and transparent has been in the forefront of all decisions during an ongoing reorganization of DSO Governance. All constituents have been involved in the process, and the results, although not fully realized, are dramatic. SOS is proud to have been welcomed and included in this work.
Keep your eye on the Detroit Symphony Orchestra, I think there are important and positive changes in the works!
This is exactly what is going on here in the Twin Cities. Stakeholders, however, are no longer satisfied with being ignored. Interesting comment about how stakeholders have more power in for-profit industries. How many businesses would succeed if they destroyed their product and insulted present and future customers.
The SOSPCO is getting involved and is taking cues from Detroit’s SOS. And FINALLY the local media is standing up and taking notice:
http://www.minnpost.com/political-agenda/2013/01/despite-nhl-agreement-state-rep-atkins-will-go-ahead-hearing-lockouts
http://www.twincities.com/music/ci_22335720?source=rss
http://minnesota.publicradio.org/display/web/2013/01/08/arts/spco-lockout-petition/
Lots of good points in your article and the underlying article. Frankly, I was somewhat shocked by the statistic in the underlying article that 70% of board members thought their only responsibility was to themselves. And I couldn’t agree more with the assessment that non-profits have more power in these situations because the only option currently available to stakeholders is to negatively impact the very thing they care about the most.
I’m intrigued by your proffered solution and will look forward to that post. I’m particularly intrigued by the thought of having a “Trustee” of some sort, like there is in bankruptcy actions, with oversight over the organization as a whole…one who has to take into account everybody’s interests..and the organization’s as a whole. I’m trying to visualize the practicalities and implementation of that now.
Drew, I just touched on this issue in an essay about leadership for a business school application. Thanks to some trusty editors, the essay morphed from a late-night, last-minute, quasi-research paper/rant about the Minnesota Orchestra Catastrophe to honing in on some areas in our sector that need to be improved — including ethics, accountability, and transparency — both internally and externally. I cited you in the full essay, so I’m happy to share that with you if you’d like and I may post it on my blog at a later date. But here’s an excerpt of the final result, which I think pertains to your excellent article above:
“As a fundraiser focused on seeking grants from corporations, foundations, and government agencies, I am particularly interested in how improved organizational transparency can also serve as a solution [to fix underlying issues that led to crises at some leading institutions]. Despite many advances in nonprofit transparency mandated by Sarbanes-Oxley, there is still room for improvement to ensure the responsible stewardship of public and private contributions. Many of the recent crises at American orchestras seem to indicate that the musicians and many donors are largely left out of board and executive conversations related to financial management. The multimillion dollar deficits so prominent in the headlines do not generally happen overnight, and it is usually too late when musicians and supporters other than the board are informed. At that point, there is little opportunity to offer solutions—other than, for example, musicians agreeing to drastic concessionary contracts that sustain the organization for the short-term, but jeopardize its quality and long-term viability.
“Organizational policies that establish stronger internal communication—or new organizational structures that eliminate the traditional barriers between musicians and management—[may help] head off such problems before they occur. Continued improvements to transparency and exemplary stewardship of contributed resources will help ensure the donor confidence that will ultimately sustain and grow the sector.”
PS: I agree with the commenter above about being very surprised by the 70% statistic in Bowman’s article.
I see you are quoted in the Economist about this: http://www.economist.com/news/united-states/21569446-trouble-pit-lamentoso/comments#comments
That’s correct Sarah, many thanks for noticing!
Amy, I hope you get a full scholarship . . . I’m considering dusting off my MBA myself in the wake of all of this, um, ethical absence.