Senate Finance Committee Staff Hosts Governance Roundtable

On March 3, 2006 the Senate Finance Committee staff hosted a roundtable to explore issues of nonprofit governance and accountability. The more than 90 attendees included leaders from charitable organizations, scholars, legal experts, and key government officials.

The morning session focused on the general structure and responsibilities of nonprofit governing boards. It began with a panel discussion featuring Diana Aviv, IS President and CEO, as well as several participants from the Panel on the Nonprofit Sector. With the governance recommendations of the Panel serving as a framework for this discussion, the panelists and audience participants engaged in a very constructive discussion of a range of issues related to nonprofit governance. They recognized the government’s important and needed oversight role over the sector, but generally agreed that the charitable sector itself must implement strong governance practices to ensure accountability and ethical practices throughout the charitable community.

Two main themes were emphasized in the discussion. First, while most organizations strive to be ethical and accountable in their practices, governance failures are often at the core of problems or wrongdoing encountered in the sector. Second, effective governance is not likely to be achieved through a “one size fits all” approach. This is particularly true for determinations of board size and structure. Some participants expressed their belief that smaller boards are generally more conducive to good governance but others noted that there are many fine examples of larger boards that have implemented structures and mechanisms to provide effective governance. However, there was agreement that in general board compensation should be discouraged, but that there can be notable circumstances (such as a board that needs medical, scientific, or legal experts to serve as directors due to the organization’s mission) where compensation is necessary.

The afternoon sessions focused on specific issues that the committee has raised about the American Red Cross and American University, both congressionally-chartered organizations. Following a presentation by a representative of the American Red Cross on its efforts to address its governance challenges, a panel consisting of Brian Gallagher, President and CEO, United Way of America, and other experts addressed the unique and critical governance challenges confronting the American Red Cross, which has a board structure dictated by congressional charter. The panelists and many audience participants urged the Red Cross to engage in a thorough assessment of its governance and management structure utilizing independent advisors before a new CEO is put into place.

The final panel and discussion focused on the governance issues at American University related to alleged misconduct by former President Benjamin Ladner. There were presentations by an American University board member about the reform efforts already being undertaken by the board, faculty group leaders, undergraduate and graduate student leaders, and various scholars. It is clear from the discussion that many groups are trying to meaningfully address concerns about American University’s governing body and structure to correct polices and procedures that led to problems with President Ladner.

While the outcome of the roundtable is difficult to gauge at this point, it is clear that nonprofit governance and accountability will continue to be a focus of the Committee’s work.

Last Updated: March 7, 2006

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