Governance Matters Conference
November 1, 2005

Summary of Proceedings

I. Ethics Hot Seat Moderating Panel Discussion

Moderator: Jane Hanson, NBC Anchor and Correspondent,

Panel Members: Laurie Bilik, Corporate Ethics Officer and Consultant

Zachary W. Carter, Board Chair, Hale House, Dorsey & Whitney LLP, former United States Attorney, Leonard Easter, Attorney at Law

Julie Floch, Partner and Director of Not-for-Profit Services, Eisner LLP

Robert M. Franklin, PhD, Presidential Distinguished Professor of Social Ethics, Emory University

Elba Montalvo, Executive Director, The Committee for Hispanic Children and Families, Inc.

William T. Newlin, Executive Director, Jacob A. Riis Neighborhood Settlement

Hildy Simmons, Senior Fellow, New York Regional Association of Grantmakers

They knew only that they were to act as board members of the Midway Youth Detention and Diversion Agency (MYDDA), a 20 year-old non-profit that works to reduce delinquent behavior in at-risk young men throughout New York Citys five boroughs. MYDDA provides counseling, job readiness training and self-esteem building programs to over 1500 youths and their families and has been widely recognized for its success.

Jane briefed the panel: MYDDAs major funder, who had provided an annual $1.3 million grant representing over 65% of the organizations budget, had just died without leaving anything in her will for MYDDA. MYDDA would have to quickly make up the shortfall, or close its doors.

Luckily, BK, a friend of one of the board members, had approached MYDDA, expressing interest in joining the Board, and offering to designate MYDDA as the beneficiary of his golf clubs upcoming charity golf outing. The events anticipated proceeds of $1.5 million would more than make up for the budget shortfall. The golf club needed an immediate answer or would designate another organization. In the discussion that followed, the Board debated the pros and cons of the opportunity, and asked a number of questions, including:

• What is known about BK? In addition to bringing money, is he prepared to carry out the fiduciary and other duties of a Board member? Can the Board audition him by putting him on a committee prior to offering a seat on the board?
• What do we know about the golf club? Who are its sponsors, what organizations have been beneficiaries in the past, and what are its policies?
• Is there a risk of accepting money from a source that could embarrass us?
• Although this offer might solve the current years cash crunch, how will the organization survive going forward?
• At the end of the meeting, the Board adopted a resolution to tentatively accept the offer, subject to further research on the issues raised.

Some weeks later, the Board reconvened. Jane had troubling news: The golf club has a restrictive membership policy and does not extend full membership privileges to women or people of color. While BK had proposed to the clubs board that the policy be changed, and was working hard to have it changed, the vote would not take place until after the tournament. And, to add insult to injury, the highly valued MYDDA executive director had threatened to quit if the organization took the money raised from the golf outing.

A long and lively discussion ensued. The Board weighed the evil of being associated with an organization with restrictive policies (particularly given that many of MYDDAs clients are from minority communities) against that of closing down abruptly, in the middle of a program year, depriving its clients of vitally important services.

Would this be setting a bad example for the kids MYDDA serves? On the other hand, the clubs allowing women and people of color as guests and choice of MYDDA as beneficiary could signal a trend in the right direction, and perhaps MYDDA could use the opportunity to influence them. But was that MYDDAs role? On the other hand (again), perhaps the Board was being too principled. After all, no institutional donor is perfect put under a microscope, almost every one has some problem where do you draw the line?

As the group worked through the possibility of compromise, certain actions were considered: drafting a statement of principles and using it to try to influence the golf club; using publicity to influence the club and provide transparency for MYDDAs decisions; having a serious conversation with the staff; using the experience as a lesson for MYDDAs kids.

During this sharing of solutions, many board members were still concerned that this board "was taking the easy way out." They also recognized that it was "important to help our kids understand how complicated the world is, not try to oversimplify it."

Finally the Board adopted, by a vote of seven to one, a resolution to go forward with the golf tournament with the caveat that MYDDA discuss the policy change with the golf club and better understand where it stood; suggest a special event with the golf pro and some of the youth MYDDA serves; persuade the program director not to quit; and involve MYDDAs young people in the discussions.

The audience was then asked to share how they would have voted. While the vast majority concurred with the Boards decision, a small number of attendees would have voted against, and even fewer were just not sure!

Here are some of the lessons we have taken from this discussion - perhaps you have some others.

• Create an environment where everyone can express themselves freely, without fear of criticism. This will allow a consensus to evolve, resulting in a more effective decision-making process.
• Adopt important policies in advance of a crisis: an ethics policy, a gift acceptance policy, qualifications for Board members. These need not be etched in stone, but provide a solid starting point for decision-making.
• Do not let your organization become dependent on one funding source for a significant portion of its budget; constantly work toward diversifying the funding base.

II. PlenaryWorkshop

Marty Taylor, Institute for Global Ethics
Marty Taylor provided insight into the complexities of dealing with ethical dilemmas and shared the Institutes process for making ethical decisions. He noted that most ethical dilemmas involve making a decision between two equally valid choices, and resolving a conflict between two different values, such as truth v. loyalty, justice v. mercy, etc. Mr. Taylor presented several different methods for resolving ethical dilemmas: ends-based (greatest good for the greatest number), rule-based (using principles without regard to the ends) and care-based (do unto others).

III. Keynote Address

BenCohen, Co-Founder, Ben & Jerrys Ice Cream

The energetic Ben Cohen enriched lunch with the story how he and Jerry, who became friends in seventh grade gym class (both liked desserts better than athletic endeavors) founded Ben & Jerry's Ice Cream as an ice cream parlor in Burlington, Vermont and grew it to a large publicly-traded company. He highlighted some of the ways Ben & Jerrys integrates social responsibility and a community orientation with profit-making, including the Partnershop program that enables nonprofit social service organizations to own a Ben & Jerrys franchise, and the companys policy of exclusively using milk from Vermont family farms.

Turning his discussion to ethics, Mr. Cohen described his participation in the founding of Business Leaders for SensiblePriorities, which seeks to eliminate unnecessary spending from the Pentagon budget, freeing up funds for use for other pressing needs, and True Majority, which monitors what's going on in Washington based on the principles of peace, justice, and sustainability and engages people by helping them generate messages to their political representatives.

Using stacks of giant plastic Oreo cookies, he demonstrated how federal spending on defense far outweighs spending on education, world hunger, childrens healthcare, energy independence and reducing the national debt, and how re-allocating just a small portion of the Pentagon budget (6 oreos out of 42) could make a significant impact on these other problems.

As conference participants dug into Ben & Jerrys ice cream pops, Mr. Cohen ended his talk with his personal thoughts about the power of the federal budget to really solve social problems, and the need for the last remaining superpower on earth to measure its strength not in terms of military might but in terms of how many people it can feed, clothe, house and care for.

IV. Open Forum: Diversity and Ethics

For the afternoon session, the conference participants broke into small groups to discuss the impact of diversity (broadly defined), or the lack thereof, on board leadership and decision making. The groups then shared their findings, with the consensus being that genuine integration of diverse individuals and viewpoints was crucial in making decisions that were thoughtful, ethical and sound.

Governance Matters again thanks the panelist and speakers, and the sponsors, supporters, benefactors and partners who helped make its 2005 Biennial Conference a success.

Presenting Sponsor

Citigroup

Supporting Sponsor

Altria

Supporters

Kuhn Associates, LLC

Carolyn L. Patterson

Benefactors

Anne E. Green

UBS Financial Services Inc.

Exhibitors

BoardSource

Concrete Stories

Council of Community Services of New York State/Council Services Plus

First Nonprofit Companies

Fiscal Management Associates

Merrill Lynch Private Banking

Laurence A. Pagnoni Associates

United Way of New York City