Tuesday, April 19, 2011

Greg Mortenson Must Step Down

Greg Mortenson must step down.

It is hard to say, but since none of my colleagues in the nonprofit industry have said it yet, I must take a stand for nonprofit business best practice.

To start with, here is a quick primer on the key legal responsibilities of nonprofit boards of directors (Boardsource, Legal Responsibilities of Nonprofit Boards):

Duty of Care, or, "care that an ordinarily prudent person would exercise in a like position and under similar circumstances." A board member must exercise reasonable care when he or she makes a decision as a steward of the organization.

Duty of Loyalty is shown when a board member gives undivided allegiance when making decisions affecting the organization. “This means that a board member can never use information obtained as a member for personal gain, but must act in the best interests of the organization.”

Duty of Obedience requires board members to be faithful to the organization's mission and central goals. “A basis for this rule lies in the public's trust that the organization will manage donated funds to fulfill the organization's mission.”

Three facts, which can be drawn from the Central Asia Institute (CAI) website alone, bring all three of the above duties into question:

1. Greg is one of only three members of the CAI Board of Directors. The legal minimum is often five and sometimes (apparently in Montana where CAI was formed) three. By comparison, the average size of a nonprofit board is 16 members, and organizations with budgets of $10 million or greater (CAI's income was at least that every year since 2008) have an average size of 18 members (2010 Governance Index Survey). Anyone who has worked with a nonprofit organization of any size knows that there are hundreds of questions to consider annually with the three above duties in mind - so a reasonably sized board ensures due diligence, simply by way of managing the workload.

2. Greg is a board member and the organization’s highest paid executive. This is extremely rare in the nonprofit industry for two reasons: The executive has a long list of responsibilities already as the organization’s operational manager without also adding on board member work, and, the separation of board and staff simplifies board decision making because of obvious and constant considerations around conflict of interest when a paid staff member is voting. For example, one major board responsibility is to select and evaluate the executive director. So in the case of CAI, only two other board members are able to evaluate Greg’s performance and make salary decisions (assuming he takes himself out of those votes because of a conflict of interest/duty of loyalty).

3. The Montana Nonprofit Association, where CAI was founded, published as part of its nonprofit principles and practices that “a nonprofit with annual total revenues in excess of $500,000 should subject its financial reports to an annual audit by a certified public accountant.” The more regularly accepted best practice is to undergo an annual external audit once the budget hits $1 million. CAI has had annual revenues in excess of $500,000 since 2003, with only one external audit, ever. This does not follow duty of obedience, and shows a clear lack of transparency and accountability to thousands of donors.

Greg, as chief executive AND board member, IS responsible for these issues. There is no one to pass the blame to. I don’t care how shy he is or how quickly the organization grew. By agreeing to be executive director and board member, he took on the very highest duty of care.

These concerns, coupled with the fact that the organization was so dysfunctional as to not have, at the very least, a PR professional instantly on the ground seeking out 60 Minutes the moment they learned of the investigation, make me very worried about the overall health of CAI.

As a donor to CAI, I got a form email from Greg on Sunday night in which he answered none of the questions raised by the 60 Minutes story or Jon Krakauer, or even simply about the above concerns over generally accepted nonprofit best practices. It is clear to me he is unfit to run the organization, no matter how well intended he is, not matter how much good he has done in the past.

What he has done right is create a strong, timely mission that CAN survive this huge bump in the road – IF he and the other two board members have the sense of duty to step down right now.