Opinion
July 30, 2014

After a Nonprofit Financial Crisis, the Board Needs to Step In

News that a senior financial officer at Greenpeace made a reckless investment decision that cost the organization $5.2-million has sent a jolt to all nonprofits. Combined with further revelations of mismanagement and allegations of hypocrisy by a top leader, the organization’s credibility is in jeopardy.

Greenpeace’s leaders have acknowledged the employee’s "serious error in judgment" and fired him. They’ve told members that the group’s board is "deeply concerned" but maintain that the loss of $5.2-million won’t affect any essential advocacy work.

Still, how could this be anything but a sign that the Greenpeace International Board of Directors was asleep at the switch? That’s why this bad investment rightly has donors seriously worried. It doesn’t help matters that the board has been silent about the incident. All public statements have been made by the staff.

[Update: Read a response to this column from Greenpeace's board]

What’s happened to Greenpeace isn’t unusual. Nonprofit organizations often don’t anticipate that bad things can happen, don’t plan for them, and often don’t have the expertise or consultants on hand to prevent them. So instead they dispense with the problem employee or employees, issue a heartfelt apology, and consider their work done.

That’s why it would be wise for all nonprofits to think about what they would do and should do in cases of crisis, and in the case of Greenpeace, what it can still do now after its initial response fell short.

Take responsibility—together. The buck stops with the board, most specifically the committee that oversees financial and auditing matters. How could such a committee have allowed such a risky investment to be made?

The answer is simple. Most nonprofit board members join boards with a lack of clarity about the role of the board or their own obligations. The larger the organization, the more a board becomes a fundraising engine and the less engaged it is in strategy and policy. In a big organization with a big staff, it’s easy for a board to detach from its critical role in providing real oversight of the resources of the organization. When that happens, it’s also easy for the CEO to let that board avoid taking responsibility.

To turn things around, the board and CEO must acknowledge their mutual responsibility—and then work as partners to fix what’s broken.

Be honest and transparent with your donors and staff members. The loss of $5.2-million is big for any organization. To restore confidence, you’ve got to put that amount into some context and be honest about what it means.

Don’t say you can just move some "infrastructure funds" around. If you have to let some people go, say so. If you have to start a new fundraising drive or cut a program, say so. Being honest will give people confidence you’re actually taking action.

Restore the board’s critical oversight capacity. Board members need to do more than raise money. They’ve got to create a structure for overseeing investment strategies and reviewing audits carefully to unearth any concerns about lax financial controls. That responsibility does not rest solely with the board treasurer. I’ve been at board meetings and watched the trustees fall asleep or check their email during reports on finances. If you’re on a board member and you’re serious about preventing another meltdown, put down your iPhone and pay attention.

Communicate early and often—through both board and staff messengers. Don’t assume one statement or some bad press is the end of it. Remind everybody who has a stake in the organization as often as you can about the steps you’re taking to heal the situation and prevent it from happening again. At the same time, demonstrate your work is continuing and showcase your victories.

Be sure those communications don’t come from one or two staff members alone. Donors must hear continuously from both the board (the ultimate stewards) and the CEO (the day-to-day person in charge) that they’re fulfilling their oversight duties for the organization and concretely addressing what led to the crisis. Hearing the same message from both the board and the staff will reassure supporters that a dedicated team is at work. Let everyone know early and often that you’re collectively committed to rebuilding their trust—as committed as you are to your mission.

Joan Garry, a consultant to nonprofits and an adjunct professor at the Annenberg School of Communications at the University of Pennsylvania, spent nearly a decade as executive director of Glaad, the gay-rights organization.