The Governing Board Faces

Widmer, C.. (1995). Nonprofit boards and leadership: Cases on governance, change and board-staff dynamics. San
Francisco, CA: Jossey-Bass. (pp. 139-147).
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Chapter Seven
The Governing Board Faces
Rebellion in the Ranks
Candace Widmer
Jane Armstrong hung up her office phone and sighed. This was
just what she did not need: a m~or problem at Community Oppor-
… tunities Inc. (COl), an agency for the developmentally disabled
whose board of directors she chaired.
With a total of 108 full- and part-time employees and an
annual budget of $3.1 million, cor provided residential care, day
treatment, case management, and educational and advocacy services to the developmentally disabled from all parts of the county.
Mter two years on the board, Armstrong had been proud and
pleased to be asked to serve as chair, a position she had assumed
two mon~hs ago. She believed strongly in her responsibility to
serve the community and in the importance of services for the
developmentally disabled, in part because her youngest brother
had been born with Down’s syndrome. Her employer also encouraged its employees, particularly senior executives, to participate
in community affairs.
At this point, however, Armstrong felt stretched to the limit by
the competing demands on her time. As vice president for public
relations at a bank in the throes of a corporate merger she was
experiencing unusual pressure at the office; her family was moving into a new house; and her father had recently suffered
a minor stroke. Now there appeared to be a full-blown crisis
at COl.
The Crisis
This morning’s phone call had been from Thomas Walker, a longtime member of the board whose disabled son lived in a COl
group home. Yesterday, when Walker had been at the agency to
talk with his son’s caseworker, the director of residential services
had complained to him that COl’s executive director was not managing the agency properly and threatened that “either he leaves or
I do.” Walker had also learned that five of the ten senior staff had
-recently resigned and that three others were reportedly threatening to resign or at least circulating their resumes (Figure 7.1).
Not all of this information was a surprise to Armstrong. Eric
Meyer, COl’s executive director, had telephoned late last week to
discuss two of the resignations, which he described as good opportunities to replace old-time staff members with.younger professionals with better credentials. He had not mentioned dissatisfaction among other staff, but then Meyer usually painted a rosy
picture for board members.
member whose son-in-law had been director of advocacy services
for the past three years. The board member reported ti~at her SOllin-law would undoubtedly be departing soon. He had told her that
the executive director was often unavailable due to speaking
engagements out of town, that he was unreceptive to suggestions
from senior staff members and unwilling to meet with them on a
regular basis, and that he seemed to be ignoring potentially serious budgetary shortfalls and numerous staff resignations. These
views, when they were made known to the board, would carry special weight. Quite apart from the authenticity of an intrafamily
communication, the advocacy director’s impeccable credentials
and engaging personal style had been identified by the board as
setting the standard for upgrading the staff.
But the “old guard” among the staffwas apparently equally up
in arms. Armstrong had been contacted directly by Brian Pai, a staff
member she had known for years. Pai was worried that the board
“seemed oblivious to the seriousness of the agency’s financial and
personnel problems.” He felt it was his duty to warn her so that she
and the board could act and avoid the embarrassment that would
undoubtedly result if the agency’s situation were to become public and tl1e board, and she as chair, were caught unawares.
Nonetheless, Armstrong had not been prepared to find in yesterday’s mail a petition signed by almost 90 percent of the agency’s
professional employees (program directors, residence directors,
education and counseling staff) stating that they lacked confidence
in the executive director and demanding that the board “take
action immediately to address the crisis in leadership.” Before she
was able to reach the vice chair of the board, a fax had come in
from him referring her to the morning paper.
At first glance, the news story seemed positive-a human interest piece describing COl’s plans to develop additional housing for
moderately disabled clients. But she was taken aback by the concluding paragraphs which, citing unidentified sources, questioned
the agency’s ability to follow through on new initiatives when serious budgetary and staffing problems existed. Armstrong did not
know for sure who the unidentified source was, but she thought it
might have been a board member, Marc]acobson, who had repeatedly questioned the vvisdom of the agency’s continuing expansion
and the financial status ofthe agency as a whole. If]acobson had
gone to the newspaper as she suspected, he must have serious
reservations about the agency’s financial stability, despite the executive director’s reassurances at the last board meeting that COl
had no major financial problems.
The Executive Director
Eric Meyer had been executive director of COl for almost six
years. From the beginning, Meyer had been a visionary who
believed the agency could and should grow, and he had worked
with the board and staff to bring this vision to reality. During his
tenure, COl had expanded from four group homes to a complex
agency with eleven homes and many integrated programs. A suc- .
cessful capital campaign had recently been completed and, until
the development director had resigned five months ago, the
annual campaign had been doing well also. The director of day
treatment services had also resigned recently, and day treatment
programs had not proven as financially stable as Meyer had led
the board to expect.
Virtually every member of the board considered Meyer masterful at winding his way through the state bureaucratic maze to
gain approval and licensing for new programs. He also worked
extremely well with local officials and community leaders. He had
been able to persuade local banks, including Armstrong’s, to make
loans, the zoning board to grant variances, and the county commissioners to allocate additional funds-all in record time. He was
unquestionably an invaluable asset to an agency such as COL Also,
there was no doubt about Meyer’S dedication. He was widely
known for his commitment to the rights of the developmentally
disabled and his advocacy on their behalf. He was invited by agencies throughout the state to speak at their annual meetings and by
national associations to serve on task forces and committees.
Occasionally Armstrong worried that Meyer worked too hard.
He often seemed tired, even a bit frantic, and he sometimes took
I=riticism and suggestions very personally, becoming defensive when
a board member asked a question or voiced a concern, implying
by his response that the board member did not trust him. Armstrong could imagine that his defensiveness might get in his way in
dealing with senior staff. Meyer also performed many tasks that
might have been delegated. His management style included always
meeting personally with representatives of the bank or the state,
frequently dropping in at the cor group residences, and often
checking or even correcting the work of subordinates. He also did
much of the fundraising himself.
Despite having a hand in everything that went on in the
agency, Meyer was not a detail man when it came to financial matters. He seemed neither to enjoy that aspect of his job nor to spend
much time on it. Although Meyer held the primary responsibility
for organizational finances-COr had a bookkeeper but no senior
staff member with this responsibility-his financial reports to the
board were cursory as well as optimistic. His underlying message
seemed to be, this is neither very interesting nor very important .
and we won’t spend much time on it. His passion was advocacy, not
budgets (Table 7.1).
With Armstrong’s encouragement, the board had finally gotten around to a formal review of Meyer’s performance as executive director three months ago. He had not been reviewed for a
couple of years, at least not since Armstrong had joined the board.
During a brief executive session, most of the concerns expressed
had been vague, and there had been many positive comments, particularly regarding his growing national reputation as an advocate.
As part of the performance review, the executive committee had
set performance goals, including a balanced budget in 1996. His
annual contract had been renewedjust a month ago, and he had
been granted a sizable bonus at that time.
The Chair’s Dilemma
What worried Armstrong most were the staff departures and the
calls she had received from board members reporting on conversations with the advocacy director and other well-qualified staff
who were threatening to leave if action was not taken. COl had
been able to attract such outstanding professionals in spite of a
modest salary scale, and the board was particularly proud of this
fact. In addition, Armstrong worried that the resignations might
spread to the residence staff, without whom the agency simply
could not operate. Plus, the petition, signed byso many of the
professional staff, could not be ignored.
These issues might prove too complicated to handle in the
time Armstrong had available over the next several weeks. Maybe
she should resign. Perhaps if she argued that the bank’s merger
and her father’s illness required all of her attention for the immediate future, she could leave without looking blatantly irresponsible. Already she had hinted to the board’s vice chair how pressured
she was for time, and he seemed prepared to take on as much of
a leadership role as she would like. He was the executive director
of a small youth agency and, she guessed, would probably welcome
the experience of being a key player in a complicated governance
problem at a larger agency.
Maybe, though, she should go down to COl and speak informally ,’\lith some of the staff. She had not been to the administrative offices or any of the residences for awhile, and she might be
able to get a better feel for the underlying problems. Alternatively,
maybe the staff should be invited to address the board, as several
senior staff had apparently suggested to board members. On the
other hand, maybe the board should simply let Meyer go about the
process of filling staff vacancies. Certainly his past performance
suggested that he could rebuild the management team.
In fact, perhaps this crisis could best be handled by Meyer. Mter
all, financial and personnel problems were the executive director’s
responsibility. The executive committee could express its concern
and ask Meyer to report back to the board at appropriate intervals.
The personnel committee could also be asked to assume a larger
role during this crisis (Exhibit 7.1). On the other hand, it might be
best to suggest to Meyer that he resign. The board should not fire
him, of course, but they could give him the opportunity to leave
gracefully. It was hard to imagine that the staffs confidence in him
could be rebuilt when it had deteriorated so dramatically. However,
community support for Meyer and COl were closely linked, and losing staff members might be less damaging to the agency than losing
Meyer. Furthermore, as a practical matter, for the board to replace
Meyer would be a time-consuming task with an uncertain outcome.
Realistically, the board was likely to be criticized no matter what
it did. Some staff were already blaming the board for the agency’s
problems. If COl’s conflicts became widely known, as now seemed
likely, private gifts and perhaps county funding for the agency
might be adversely affected. Then too, Armstrong reflected, her
bank would hardly be pleased to have its senior public relations
executive associated ,’\lith a civic controversy.
She picked up her telephone. A reporter from the newspaper
had left a message on her voice mail. She must also return the calls
of two board members as well as the assistant director of day treatment services, who was apparently particularly upset and the kind
of person likely to spread rumors throughout the community if she
was not calmed down. COl’s next regularly scheduled executive
committee meeting was to occur in three days, and the full board
was scheduled to meet the following week. What should she do,
Armstrong wondered, and what was a board supposed to do in a
situation like this?
Questions for Discussion

  1. What are the strengths and weaknesses of this agency? What
    are the primary problems facingCOI at this time?
  2. What are the choices for board action? Discuss the possible
    consequences for each. Are ethical issues involved? If so, what
    are they?
  3. What are the best and the worst outcomes that might reasonably be anticipated?
  4. What is the appropriate role of the board? How should board
    members react to staffwho behind the back” of the executive director to complain to board? ‘AThat steps should the
    board take to address the crisis? What actions should be avoided?
  5. Evaluate the behavior of the board and board chair so far. Has
    it been exemplary, acceptable, inadequate? What criteria
    should be used to judge their performance? What should Jane
    Armstrong do now as chair of the board of COl?
    Exhibit 7.1. Excerpts from Bylaws.
    From Article III:
    Section 12: Duties of Directors
    A director shall discharge his or her duties as director, including his
    or her duties as a member of a committee (1) in good faith; (2) with
    the care an ordinarily prudent person in a like position would exercise under similar circumstances; and (3) in a manner the director
    reasonably believes to be in the best interests of the corporation.
    In discharging his or her duties, a director is entitled to rely on
    information, opinions, reports, and statements, including financial
    statements and other financial data, if prepared or presented by
    (1) One or more officers or employees of the corporation whom
    the director reasonably believes to be reliable and competent
    in the matters presented;
    (2) Legal counsel, public accountants, or other persons as to matters the director reasonably believes are within the person’s
    professional or expert competence; or
    (3) A committee of the board of which the director is not a member, as to matters within its jurisdiction, if the director reasonably believes the committee merits confidence.
    A director is not acting in good faith if the director has knowledge concerning the matter in question that makes reliance as
    described in the foregoing unwarranted.
    Section 13: Committees
    The board of directors, by resolution adopted by a majority of tl1e
    entire board, may from time to time designate from among its
    ; i
    . .)
    , i
    ~-~ :J
    Advocacy Services
    Peter Chen
    r A~:~!\:;dO<
    Associate DirectOl·a
    Marcus Williams
    a Acting Director of Develpment
    Figure 7.1. Organization Chart.
    Board of Directors J
    Executive Director
    Eric Meyer
    Administrati ve
    :~~~ Director
    u_uA~igail ~arc~s
    Associate Director
    VACANT ,. “‘=iru, Di”””,
    Treatment Services
    Associate Director
    Linda Tschop
    members an Executive Committee and other committees, and alternate members thereof, as may be deemed desirable, from time
    to time, each consisting of three or more directors, with such pO’wers and authority (to the extent permitted by law) as may be provided in such resolution. Each such committee shall serve at the
    pleasure of the board.
    From Article IV
    Section J: Number, Qualifications, Election, and Term of Office
    (1) The officers of the corporation shall consist of a president, a
    secretary, a treasurer, and such other officers, including one or
    more vice presidents, as the board of directors may from time to
    time deem advisable. Any officer may be, but is not required to be,
    a director of the corporation. Any two or more offices may be held
    by the same person.
    Officers of the corporation shall, unless otherwise provided by
    the board of directors, each have such powers and duties as generally pertain to their respective offices as well as such powers and
    duties as may be set forth in these bylaws, or may from time to time
    be specifically conferred or imposed by the board of directors. The
    president shall act as chair of the board.
    Section 7: Executive Director
    (2) The executive director shall be responsible for hiring,discharging, directing, and supervising all employees, subject to
    approval by the board of directors or its designated committee.
    Table 7.1. Revenues/Expenditures.
    1990 1991 1992 1993 1994
    Revenues 1,200,000 1,800,000 2,500,000 2,950,000 3,000,000
    Expenditures 1,181,750 1,810,900 2,450,380 3,025,000 3,069,000
    Excess (Deficit) 18,250 (10,900) 49,620 (75,000) (69,000)

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