Board stiffs.

AuthorShenk, David
PositionUnited Way of America's Board of Governors

How William Gates and Paul Tagliabue helped William Aramony bilk America

The United Way of America's Board of Governors may have been asleep at the wheel for a couple years while the world's largest charity was billed for limousines, exclusive condominiums, and flights on the Concorde, but at least it knew what to do when its $3.1 billion bus wandered off the road and hit a telephone pole: Quick-to the press release. After an initial stalling gambit, William Aramony, United Way's embattled president, was sacrificed on the national media altar as the board came up with a comprehensive plan for public image renewal.

"The perception created by [Aramony's] poor judgments has been damaging to the institution," allowed United Way board member Robert E. Allen, CEO of AT&T, in an electronic letter to AT&T managers, as other board members scrambled to assure the public and potential donors that the cleanup was in effect. To the casual newspaper reader, the post-scandal scenario seemed fairly reassuring: The renegade manager who duped his well-meaning board had been caught and duly punished.

But wait a second. Who made these myriad "poor judgments" that so damaged the integrity of the United Way? Aramony's salary and benefits had been set annually by the board. His travel and expense records were periodically available for board review, along with every other piece of relevant information about the management of United Way of America. The three for-profit spinoffs, responsible for much of the public outcry, had been explicitly approved by the board. And those board members, incidentally, were fully capable of reading a spreadsheet. They included the CEOs of Microsoft, Exxon, Johnson & Johnson, J.C. Penney, and Sears; the chairman of IBM; the presidents of several unions; and the commissioner of the National Football League.

While Aramony may have been a sloppy president with expensive tastes, by law the buck was supposed to stop with that high-profile board. Unfortunately, in the nonprofit world, the buck often doesn't stop anywhere. Instead, it drifts around aimlessly until it's buried in a basement filing cabinet or shredded A la Aramony. Why? A great number of nonprofits are entrusted to boards of directors populated by over-extended executives and status-seeking lawyers or financiers who have neither time for, nor interest in, real oversight.

"Board people like that only want to hear good news," explains former United Way staffer Pat Barrett. "They're here to feel good, and they don't want to deal with tough problems. They've got plenty [of problems] in their regular jobs." And she's not just talking about the national headquarters of the United Way. In a recent survey of local United Way affiliates, the Not For Profit Leadership Project at Baruch College discovered that only a third of the nonprofits' executive officers believed that their board members fully understood the mission of their particular organization. Imagine how little they knew about the travel expenses of their executive directors.

Such board detachment makes for a volatile situation. Because neither the government nor the media displays much of an interest in the nuts and bolts of nonprofits, the entire nonprofit sector, which controls hundreds of billions of dollars, is left in the hands of a few administrators charged both with spearheading their organization and auditing their own actions. If those administrators aren't honest-and the temptation not to be is considerable when no one's watching-you've got Aramony all over again.

The expectation that nonprofits will perform their charitable purposes scrupulously is what earns them their public trust and massive tax exemptions. But a review of board behavior in some of the eighties' great nonprofit scandals-United Way, Stanford, Covenant House-suggests that turning that expectation into reality involves a lot more than the occasional removal of profligate leaders. It requires changing the structure-and the culture-of the boardroom.

It worked for all of them

For the jet-setting CEO whose real job is generating quarterly corporate profits in tens of...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT