Who Has The Power? – Brian C

Recently in class, we read an article by Murray, Bradshaw, and Wolpin on power in nonprofit boards. Specifically they list five types of boards: CEO-dominated boards, chair-dominated boards, fragmented power boards, power-sharing boards, and powerless boards. I recently read an article about the brouhaha with the Fiesta Bowl board concerning the outlandish expenses of the CEO, John Junker. Junker spent $1,200 on a visit to a strip club, $33,000 on his 50^th birthday party, and other items. He also was involved in a scheme to reimburse employees for improper campaign contributions. The Fiesta Bowl is one of the premier bowls in college football. Per the article in The NonProfit Times, the board of directors for the Fiesta Bowl is made up of four nonprofit entities. I find it interesting that the Fiesta Bowl could ever be considered a nonprofit. However, that discussion is best left for another time. I was curious about the governance of the board of directors. Clearly they were asleep at the switch. The article mentions that it appears board members were just attending meetings and not involved in oversight of the CEO and the operations or the organization. Duane Woods, Board Chairman, stated in the article that “Clearly, the board placed too much trust in a single executive without proper oversight, and has already acted to put in place new bylaws, policies, and controls that will ensure such activities do not happen again.”

So was this a CEO-dominated board? The CEO clearly was in control, and the board had little to do with the governance of the organization. However, I think this could also be a case of a powerless board. If the board had to create new bylaws, policies, and controls, I’m not sure they were ever even aware of how the organization operated or what the board members’ roles were. The board members may not have even read the bylaws before the scandal. They are clearly more engaged now. I find it interesting that Junker’s 2003 performance review suggested that he improve internal controls. Clearly there was an assessment of the CEO’s performance, and there were suggestions made for that performance. This would lead you to believe that there was some oversight. Apparently, no follow-up ever occurred to ensure Junker had acted on these recommendations. The Murray, Bradshaw, Wolpin article mentions that CEO-dominated boards “were more likely to have been selected because of their prestige” (p. 174). The Fiesta Bowl would definitely be a prestigious board. It stands to reason that board members were clearly satisfied to just be associated with the board and not get in the way of the CEO. Due to the crisis, this will no longer be a CEO-dominated board for a little while. The board enacted changes to shake up the audit committee by adding more accounting and financial experts, requiring board review of compensation to senior-level staff members, and adopted a whistleblower policy. This is a classic example of the crisis cycle mentioned by Reid and Turbide. The organization has been established since 1971, and the board had become complacent over time. Then, because of that complacency, the CEO was allowed to circumvent the internal controls and make improper reimbursements and payments. Now the board has stepped in and will be heavily involved in the management until there is a comfort level with the CEO and then the board will more than likely slip back into complacency. Who has the power? That seems to depend on where in the cycle you are. During the complacency stage, the CEO seems to have the power. After the crisis has erupted, the board takes control. Finally, the board relaxes again after sufficient time has passed and changes have been made from the lessons learned in the crisis. The ultimate goal should be an engaged board and a professional and ethical CEO sharing power. Can this power-sharing be maintained? Time seems to change everything, including the best laid plans. Nonprofit organizations are bound to repeat the cycle, eventually having periods of organizational synergy.

References

Hrywna, M. (2011). Fiesta Bowl’s Board Fumbled Oversight. The NonProfit Times.

Retrieved June 17, 2011, from http://www.thenonprofittimes.com/article/detail/fiesta-bowl-s-board-fumbled-oversight-3890.html

Murray, V., Bradshaw, P., & Wolpin, J. (1992). Power in and Around Nonprofit Boards: A

Neglected Dimension of Governance. Nonprofit Management & Leadership. Vol. 3, No. 2, 165-182.

Reid, W. and Turbide, J. (2011). Board/Staff Relationships in a Growth Crisis:

Implications for Nonprofit Governance. Nonprofit and Voluntary Sector Quarterly, 1-18.