Good afternoon.
It’s an honor to be here and speak with you today. I am delighted that you are meeting in Chicago.
We are a city of contrasts.
For those who follow politics: We are the hometown of Democratic Congressman Rahm Emanuel...and Defense Secretary Don Rumsfeld.
For those who follow football: We are also the hometown of the good and bad Rex Grossman.
We are a city of consistencies.
Even with enormous change from a manufacturing to a service economy and a shift to national and international ownership of many of our iconic institutions, Chicago maintains a consistent tradition of civic leadership.
So much of the quality of our life depends on this leadership. Our museums, our theaters, our orchestras, our schools, our parks, our communities—all depend on not for profit leadership.
Leaders like you.
Today I want to talk with you about board responsibilities in what I believe is an emerging era: what I call the” post-post Sarbanes–Oxley world.”
What do I mean?
For the last five years, in anticipation of and in the wake of the Sarbanes-Oxley Act of 2002, nonprofit organizations have spent much time and energy focusing on internal governance.
You have reacted to revelations about abuses in the sector. You have worked with associations to develop governance standards, and have implemented many changes.
The nonprofit sector has been- in new phrase -“Sarboxed”—and we are the better for it. We are better governed than we were five years ago.
It is now time to move past the post Sarbanes –Oxley world and to turn much of the time and energy devoted to fixing governance to other matters. In other words, we are entering a post-post period.
Effective governance in this new period requires board members to continue ensuring accountability—but also, I believe, to give more attention to how your organization functions is part of the larger domain of civil society.
This governance incorporates working not only with fellow board members, organization staff and with the mission, but also asks:
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That you become more knowing of those you serve.
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That you extend your understanding to the wider field of endeavor that your organization is part of.
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That you consider your organization’s mission as part of civil society.
Governing in this new world still begins with accountability.
As a funder of civil society institutions—in fact, more than 4,200 of them in our almost 30 years of grantmaking—MacArthur wants to make sure that our grantees are accountable....and that begins with the board.
Financial oversight, legal compliance, ensuring that money is spent in intended and proper ways, safeguarding the organization’s financial condition are critical board responsibilities.
MacArthur looks at the quality of governance as part of its due diligence.
We ask a series of questions:
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How does the board oversee finances?
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How does it review the performance of the CEO?
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Does the organization have conflict of interest and whistleblower policies?
We don’t make judgments about the proper policies, but we do believe that having these policies is an important indicator of an organization’s attention to governance.
But, if your role begins with financial accountability, it doesn’t end there.
As the Yale School of Management’s Jeffrey Sonnenfeld puts it: “A strong board does much more than monitor business and watch for trouble. Otherwise, we could just hire retired auditors for every seat."
I believe that governing effectively in a post-post Sarbanes-Oxley world asks you to both to look at your organization and beyond to, the larger civil society.
Civil society as, I am using it today comprises the totality of voluntary civic and social organizations and institutions. Examples include public charities, foundations, NGOs, religious groups, trade unions, and even book clubs.
As a leader of a nonprofit you are also a governor of civil society, and as civil society continues to increase in size and importance your role as a governor also increases.
Let us look at the sector:
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There are more than 1.6 million nonprofit organizations in the United States. According to BoardSource, each has an average board size of 17 members. This suggests that your fellow board members number in at least the tens of millions.
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Nine percent of all working Americans, more than 11 million, are employed by nonprofits. This is more than the finance, insurance, and real estate industries combined.
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Between 1987 and 2005, charitable organizations in the nation experienced more than double the growth rate of the business sector.
• On a global scale, if the civil society sector were a separate national economy, it would be the 7th largest economy in the world, just behind France and ahead of Italy. According to the Johns Hopkins Institute for Policy Studies, the rise of the civil society sector across the world may prove to be as significant a development of the late 20th and early 21st centuries as the rise of the nation-state was of the late 19th and early 20th centuries.
Learning about the breadth, diversity and importance of work being carried out by other civil society organizations, here and abroad, is essential if you are to understand your organization’s potential contribution to a larger whole.
MacArthur recently sought to highlight this when it celebrated nine of your colleague organizations as the inaugural winners of the MacArthur Award for Creative and Effective Institutions.
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One of your colleagues finds permanent jobs for ex-offenders in Chicago. Another uses technology to help low-income families.
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One fights corruption in Mexico. Another fights to preserve Peru’s environmental treasures.
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One preserves affordable housing in Chicago. Another saves the lives of mothers and their babies in India.
Each of these groups has board and staff leaders that govern beyond their organizations.
Consider, as one example, the CLEEN Foundation in Nigeria. They support those affected by crime and corruption in Africa’s most populous country. But their moral voice and practical wisdom reach beyond the usual boundaries. They’re convening a coalition of NGOs to work with the Nigerian government on police reform. They’re working with civil society representatives from several West African countries on public safety issues. And, they’re a founding member of the Altus Global Justice network, which works across five continents to share models for police reform and promote change in justice systems globally. They truly extend their governance to join together with others.
In lamenting the difficulties of providing assistance in Afghanistan, a British diplomat described his frustration by saying “there is nothing to bolt on to.” Civil society provides the places and structures “to bolt on to.”
We sometimes take that for granted in the United States. You are all part of the “bolt on to” organizations in civil society—organizations crucial to providing important services, and also vital to the diverse conversations of democracy in this country and, increasingly, abroad.
I believe that in this age, boards cannot bowl alone.
Many of you will recognize the reference. Bowling Alone is Robert Putnam’s book on the decline of social capital in America. He sees the plummeting number of bowling leagues as a symptom of social isolation.
The equivalent problem in the world of boards would be overly focused or isolated governance. Call it “Governing Alone.”
Here, I’m not referring to how you work with your fellow board members and with organization staff. Many of you are creating interesting new models for dealing with this. Rather, I am thinking about boards who govern as if a deep moat surrounds their organization—a moat filled with regulatory or competitive creatures.
It is time I believe to lower the drawbridge and to think of governance as a series of relationships outside the castle. I refer to this as “Governing Together”
Picture governing as a series of concentric circles radiating outward, with your organization’s financial accountability in the center. Governing together asks you to continually look and venture beyond that center to other people and organizations.
Circle one is mission.
Circle two is those you serve.
Circle three is your field.
Circle four is your funders.
And circle five is those outside your field, and even outside the nonprofit sector.
I’ll take these circles one at a time.
First, look beyond operations to mission.
In thinking about today, I talked with some colleagues about the question of what makes a good board member.
One critical variable rose to the top: relationship to mission. Do you believe in the mission?
I have seen an organization where the mission changed from direct service to policy research. A number of board members remained committed to the old mission, and the transition was bumpier as a result.
Warren Buffett, after his recent gift to the Bill and Melinda Gates Foundation, was asked, now that he was joining the Gates board, how was he going to change the Gates foundation? He said he wasn’t joining the board to change it but was joining because he agreed with the mission and how the board was pursuing that mission. A wise observation by the holder of the most expensive board seat in history.
That doesn’t mean that you don’t seek to improve, and at times seriously reexamine, a mission. But, I believe you should join groups you support and remain in a steady, committed relationship with their mission.
Include your mission in your governance.
Many of the most effective board members I’ve served with continually bring the conversation back to two things: mission and customers. “Who do we serve?” That’s the second circle of governing together: looking to your customers.
Learn from them. Meet them. Listen to them.
As a board member for the Illinois Humanities Council, one of the most powerful learning experiences for me was going to the graduation of students in the Council’s Odyssey Project. It’s a free, eight-month program of college-level humanities courses for people living in poverty.
I remember one student, reflecting on her reading of Plato, saying, “Not only was I able to come out of the cave; I could bring my children with me.” It was a moving testament, and it helped me and other board members to better understand the impact of the Council’s programs on people we were seeking to serve.
A recent listening tour conducted by the Illinois Arts Council is an example of an organized learning experience for board members. A group of board members visited towns and cities throughout the state, asking what the Council does well and what can it do better.
What would the equivalent of a listening tour be for your organization?
Look to customers. Then look even further: to your organization’s field of work.
Look to mission. Look to customers. Then look further-to your organizations field of work.
This is very familiar territory for those who work in foundations. We are charged with understanding, supporting, and improving fields of practice. The grantmaker thinks in terms of the broader network of organizations working in those fields—their relationships, opportunities for synergy, and potential to learn from one another. I believe that in the post/post world board members should, at least in this regard, think more like grantmakers.
This is always the problem of finding the opportunity and time. I believe that today it is part of you board governance responsibility: to scan the broader world of your field and learn from it.
MacArthur recently convened a series of meetings of its arts grantees to discuss common problems in the field. Joint projects emerged from these discussions: A group of classical arts organizations was concerned about the lack of a place to share information. They decided that they would form a web site for classical music groups and artists. Another group is meeting to consider how they might form a cooperative to share services.
It’s ironic: in an age of constant communication, we hear more and more about not knowing each other and not knowing what others are doing.
The fact that it’s all on your new website simply doesn’t do it.
I encourage you to ask not only: what is our individual organization trying to achieve, but also: who does it better—and how? That requires you to seek out others to learn from.
Another aspect of governing with your field of work is supporting that field. One organization asks board members to commit a day a year to advocate for the field—in that case, child welfare. Think about the impact of the tens of millions of board members, leaders in your communities, speaking out for child welfare, criminal law reform, the arts, education, and on and on.
There are many ways board members can learn more about the field in which your organization works.
Include other voices such as leaders of other groups at your board meetings.
Hold joint meetings with other boards.
When you travel, learn about similar organizations. Next time you’re going to a conference, or having a business meeting in another state, or taking a trip abroad, arrange a site visit to another organization in your field. Sit down with staff or board members...ask questions…..listen….and learn.
Include your field in your governance.
You can even help funders.
Tell us how we can be more effective in helping—not only your group, but also your field of work, and nonprofits generally.
One of foundations’ most important capacities is to convene—to bring people and organizations together from the same or different fields.
Tell us how we can help organizations to work together.
Be willing to talk with us about your field’s needs, and beyond.
You hear much about the role of funders in advancing exceptional governance. I want to suggest that you have a reciprocal role to help us become exceptional funders.
Include your funders in your governance
But don’t stop with your field.
Connect outside your field.
Connect with government agencies.
Connect with corporations.
Govern with those outside the orbit of your organization—even the unusual suspects.
In Chicago, the Albany Park Theater Project, an ensemble of teenagers from an immigrant, working class neighborhood and the Chicago Global Donors Network, a civic group whose mission is to encourage more global giving have reached out to each other.
This small theater group is learning about the work that these internationally-minded donors are doing - sometimes in the teenagers’ countries of origin - and the donors are learning about their international giving can have impact on people and communities in Chicago.
Both are learning.
At West Point, the U.S. Military Academy is using MacArthur funding to expand a program of overseas internships for cadets. The cadets will spend time abroad with non-governmental organizations learning different cultures and about NGOs, a crucial experience for future military leaders.
There’s a two way benefit here—while future military leaders are gaining greater cultural knowledge and developing an understanding of NGOs, the NGOs are learning about how the U.S. military operates.
Both are learning.
Include others beyond your field in your governance.
Finally I want to point out that governing together can be a personally fulfilling thing to do. It makes being a board member much more stimulating. It broadens your intellectual horizons. Board service should be a continuous learning experience.
A colleague recently retired after 20 years of successfully leading an arts advocacy group. Her valedictory message: “Doing it together is fun!”
It is also the way that you will better meet your post/post governance responsibilities to both your organization and to civil society.
With some trepidation, I’d like to leave you today with some predictions.
When you meet five years from now, hopefully again in Chicago...
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The verb “Sarboxed” will be forgotten, but nonprofits will be even better governed in all ways.
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The voluntary sector will still be growing in number and in size in the world.
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Civil society organizations will be even more important in providing places to “bolt on to.”
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Foundations and others will be looking even more carefully at the quality of board governance, which will include judgments about the commitment of the board to a broader concept of governance–to governing together.
Peter Drucker told us that the best way to predict the future is to create it.
That is all of our challenge.
Thank you for what you all do.