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Tuesday, May 24, 2011

Predicting Nonprofit Board Behavior with Research Dependency Theory and Institutional Theory: A Case Study in Virginia - Tori

Although mild when compared to some of his more controversial decisions, state
Attorney General Ken Cuccinelli’s January 28, 2011 advisory opinion that declared direct state appropriations to nonprofit organizations unconstitutional nevertheless created a maelstrom that stirred considerable debate amongst lawmakers and interested stakeholders. This issue was reignited recently as members of the House and Senate Finance Committees evaluated the implications of Cuccinelli’s ruling during their annual spring budget meetings. Interestingly, the genesis of the issue begins with blogger and conservative activist Norm Leahy asking Richmond Delegate John O’ Bannon to request an advisory opinion on this issue from the Attorney General . According to this article by Washington Post staff writer Anita Kumar, legislators had requested more than $23 million worth of appropriations for non-profit groups prior to the 2011 session of the General Assembly. Governor Bob McDonnell specifically requested amendments to the biennial budget that would have provided $500,000.00 to Operation Smile, a medical humanitarian non-profit, and $500,000.00 to the Federation of Virginia Food Banks. Leahy, a member of the Tertium Quids, a group that supports strict adherence to the America’s founding documents, including the Constitution of Virginia, argued that McDonnell’s budget amendments were quite clearly unconstitutional because state funds would be appropriated directly to non-profit groups. Agreeing with Leahy’s argument, Cuccinelli found that the Virginia Constitution forbids the General Assembly from making “an appropriation of public funds, personal property, or real estate . . . to any charitable institution which is not owned of controlled by the Commonwealth.” Some lawmakers claim to have discovered a legal end-around the Cuccinelli ruling by pointing out that the state could appropriate funds to a state agency. The nonprofit could then enter into a contract with the state agency to provide goods or services. In fact, Cuccinelli did observe in his advisory opinion that “The Virginia Constitution does not prohibit categorically all payments to charities from the state. The General Assembly can establish a program to provide services to its residents, and make appropriations to state agencies that, in turn, result in payments to charitable entities for goods purchased or services provided.” This issue will continue to generate debate as the state Department of Planning and Budget in consultation with the Attorney General’s office reviews existing appropriations to nonprofit organizations. Ending a practice that helps lawmakers bolster their re-election chances is unlikely to simply disappear.

This tempest over the constitutionality of state funding for non-profit organizations provides an interesting case study for scholars examining nonprofit governance. In her 2003 journal article, Understanding the Behavior of Nonprofit Boards of Directors: A Theory Based Approach, Judith Miller-Millesen suggests that an integrative approach that combines multiple theoretical frameworks is needed to develop a more complete understanding of board behavior. Following Miller-Millesen’s theory based approach, one could use tenets of both Research Dependency Theory and Institutional Theory to examine the causal impact of the Cuccinelli ruling on nonprofit board behavior. Research dependency theory posits that that the more boards are dependent on external resources, the more likely the board is apt to engage in boundary spanning activities. As the legal wrangling over the Cuccinelli opinion continues, a research dependency theorist would hypothesize that non- profit board members are more likely to seek information on how to access state funding in order to diminish uncertainty. In addition, an Institutional Theory based approach would examine coercive external pressures, such as legal requirements or regulations in the state contracting process, to understand and interpret board behavior. Conforming to meet state contract eligibility requirements could produce institutional isomorphism as similar nonprofit boards compete for a share of state funding. Using the explanatory framework of either approach to bridge the gap between theory and practice, in this case using Research Dependency Theory and/or Institutional Theory to find a causal link between the Cuccinelli advisory opinion and nonprofit board behavior, is fraught with difficulty. Miller-Millesen correctly warns her readers to remain cognizant of how context influences board behavior.

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