CEP’s Benchmarking Foundation Governance report is an important step forward in transparency, as already noted by Anne Wallestad, president and CEO of BoardSource. Having worked in and around foundations for almost 30 years, I believe governance matters uniquely for these institutions. CEP has taken an important step in elevating governance as a vital factor in foundation effectiveness by conducting this benchmarking research.
One of the primary responsibilities in nonprofit governance is the interpretation of an organization’s mission and purpose over time. This is particularly salient for the vast majority of foundations that have been established to operate in perpetuity. The chances are quite good that most foundations will: 1.) never face insolvency; and 2.) will see dramatic changes over generations that beg continuous monitoring of mission and purpose. Moreover, foundation CEOs are often given extraordinary latitude to set strategy, and that process may butt up against mission. How the governing board works with the CEO to hold and reinterpret a founding donor’s intent over time is consequential for the nonprofit sector in many ways.
Perhaps the most critical responsibility exercised by a foundation board is its governance oversight for leadership transitions. While evaluating the CEO was the greatest reported area of board involvement in the CEP study (88%), one can extrapolate that how a foundation board engages in the hiring of new leadership represents a vital governance moment. In my experience, however, foundation boards are not always as diligent as they might be in articulating programmatic — and even mission-related — boundaries and non-negotiables in their hiring of a new CEO. What nonprofit leader has not weathered the dramatic pendulum shifts from one foundation president to another (and sometimes back again with the next CEO) without some degree of weariness and frustration?
Conversely, I was disappointed to see that developing/approving operational policies was one of the lowest reported areas for board engagement (18%), with only involvement in operational decisions ranking lower (7%). No one would ever argue that a board should micro-manage operational decisions. But understanding how a foundation’s operational platform (its people, systems, and finances) supports (or doesn’t support) its programmatic ambitions is an essential stewardship responsibility. This is where many nonprofit boards struggle. Yet, weakness on this front may be that much more prevalent among foundations, where a failure to understand the business model will likely never translate into a failed organization. It will, however, almost certainly contribute to a chronically underperforming philanthropy, which is simply unacceptable.
And finally, in any next iteration of research on foundation governance, I suggest including a focused question that probes the number of board members who have had experience: 1.) working in another foundation in a senior role; and/or 2.) leading a fundraising nonprofit. If philanthropy is professionalizing with each passing year, why don’t we see more respect for the invaluable role that board members with foundation experience can play in providing wise and informed oversight? And if nonprofit grantees are indeed a respected stakeholder group, why are their voices not being heard more in foundation boardrooms?
Nadya K. Shmavonian is director of the Philadelphia-based Nonprofit Repositioning Fund, and works as a consultant to foundations and nonprofits nationally and internationally. She also serves as a member of the CEP Board of Directors.