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July 26, 2007 Subj: Review of Newsletter 05-07-Part 2 Refer to: Central Region Letter 07-07 ********* Dear Central Region Alumni:
As I pointed out in my other Newsletters, my duty to communicate with you is made clear by the Alumni Association Bylaws/Operating Manual: “…being a Trustee of the Association involves serious responsibility...Of utmost importance is the responsibility to communicate effectively in explaining to our individual constituencies about issues, initiatives and activities of the Association.”
This is a continuation of Central Region Newsletter 06-07. This Newsletter contains my May 14, 2007 letter that was referred to several times in my response to ADM Carlisle Trost’s July 3, 2007 email to me, and was attached thereto electronically in the original transmission—something my mass email server won’t let me do with my Newsletters. As pointed out in Newsletter 06-07, the record can only be complete and transparent by including this letter. My May 14, 2007 letter, sent to all Board members, is presented verbatim below (except that ADM Trost’s street address is omitted): **** May 14, 2007
ADM Carlisle A.H.Trost, USN (Ret.) Street Address Annapolis, MD 21401
Dear Carl:
I’m writing this letter to give you my views on Trustee communications for which I’ve been “admonished”, and also my views on governance and some of the issues we face as a Board. Silence on my part has not been successful in quelling accusations and admonitions against me, and might even be misconstrued as an admission of wrongdoing. I firmly believe that I’ve done nothing wrong, and in fact, have conscientiously carried out my legal and fiduciary responsibilities as an Association Trustee, and have acted within the framework of the Bylaws and Operating Manual. I hope that this letter will give you more insights into my disbeliefs, beliefs, and issues that I think important to all of us.
Permit me to deal with my Newsletter communications to Association members first. For five years, I have regularly been sending Central Region Newsletters at my expense to keep alumni in the Central Region informed of “issues, initiatives and activities of the Association” as we all are directed to do by the Op Manual. Several current Trustees have received all of these Newsletters over this time and I’ve never received other than compliments for my communications. All my Newsletters are archived on the web, and I invite you to peruse them so that you might see first hand what they say, and how they say it. I believe you will find all communications to be measured, factual, and professional. Look particularly at the Newsletter that I was recently “admonished” for writing—it is serial 02-07 and entitled “Late Additions to BOT Meeting Agenda” dated April 24, 2007—and then make up your own mind. Click on links on the web site to see other Newsletters in the archives: www.wcginc.com/usnaaa
THINGS I DO NOT BELIEVE IN
Items that I do not believe in, nor espouse, with regard to our activities as Association Trustees are important to better understand my value system and my actions. I also believe that they are important to sound governance by the Trustees. For example:
· I do NOT believe that ad hominem attacks are of any value, nor are they productive. Personal attacks, instead of discussing the issues, are an implicit admission that one cannot win the debate on the merits of those issues. When one cannot refute what is said, he/she just attacks the person for saying it. It accomplishes nothing, and merely attempts to intimidate the person being attacked, as well as those witnessing/reading the attack.. · I do NOT believe that libeling, impugning one’s character, or threatening a Trustee with physical harm should be allowed on our Board. It is certainly illegal, and I believe immoral. I have an opinion, from one of the more prestigious law firms in Chicago, based on many documents which I provided to them, that it is legally clear that certain officers and Trustees of the Alumni Association have defamed me. Adding insult to abuse, I was even threatened with physical harm by a fellow Trustee in Alumni Hall after a lengthy “admonishment” session—very sad.
· I do NOT believe that any single Trustee, or small group of Trustees, has the authority to admonish me or any other Trustee who is faithfully trying to discharge his or her responsibilities. We don’t work for these Trustees, and we are not answerable to them. Only a ¾ majority of all of the members of the Board, acting as a whole in a properly convened meeting, with a proper agenda, properly disseminated, has that authority, and even then only "for cause" as defined by Maryland law. On matters of opinion, no Trustee is superior to any other Trustee, and each has an individual duty to exercise his or her own independent judgment on matters affecting the corporation. I do not believe that disagreement is disrespect.
THINGS I DO BELIEVE IN
Others have made much of their past experience with Boards and governance. I too have had relevant experience. For many years I was a senior partner with one of the world’s largest general management consulting firms. For almost 35 years, I have made my daily living by consulting to a large number of Fortune 500 Boards of Directors and CEOs in the areas of governance, strategy, and organization. This has included experience in not-for-profit organizations, having established such organizations from a clean sheet of paper to full implementation. You might be familiar with some of these organizations. Below are summaries of three of the principles I have distilled from my experience. In the attachment to this letter, I have included some relevant, and possibly useful, quotations from a nationally known authority on nonprofit corporate governance for your review and consideration.
§ I believe the primary duty of a Trustee is a duty of loyalty to the organization, its stated missions and goals, and its members. Trustees owe no loyalty to the management of the corporation because it is the duty of all Trustees, acting as a Board, to select, supervise, manage, and if necessary fire the management of the corporation. Harmony and civility and good working relationships are always desirable, but there can be no doubt as to who is ultimately responsible, ultimately liable, and therefore ultimately in charge, and that is the Board of Trustees.
§ I believe each Trustee has a duty to exercise due care in preparing to consider all issues brought before the Board for discussion or vote. Due care requires each Trustee to take whatever steps are necessary to make sure that he or she is fully informed on those issues. The task of exercising “due care” cannot be delegated to management, or to other Trustees, or to committees of Trustees, and requires asking questions, demanding additional information, consulting with others, considering alternative courses of action, or considering doing nothing rather than the proposed course of action, whenever any of that seems appropriate to make a fully informed decision. That cannot be done in a brief Board meeting, or in a few moments just prior to a Board meeting.
§ I believe the responsibilities of a Trustee cannot be discharged by “going along to get along,” “doing what you are told,” “deferring to management,” deferring to other Trustees who seem to be closer to the issues, or deferring to another Trustee with a seemingly higher title or former rank than yours. The responsibilities and liabilities of a Trustee are individual, not collective. In this case, there really is neither safety nor salvation in numbers.
ISSUES THAT I BELIEVE WE NEED TO ADDRESS
The issues we all need to discuss involve our responsibilities and liabilities as Trustees of the Alumni Association, and the need for greater individual attention to the details of proper nonprofit corporate governance, especially in light of the large sums of money which flow through and around the Alumni Association/Foundation. The issues we need to confront are numerous, but let me cite a few that I believe rank as high priority. Stating these issues as questions is useful for clarity.
§ Why did the alumni members from classes ranging from 1935 to 1969 rate our Board very low in “representing their interests” as uncovered by the Plan 2010 Review Committee? § How extensive is this dissatisfaction given that over 2000 alumni voted for a write-in candidate who had little publicity and virtually no campaign, a number of votes exceeding the total election count in some prior elections? § How could a proposed Bylaw change, in final form, be tabled for a vote on the BOT meeting agenda only three days before the meeting, and why had the proposal not been seen by the Governance Committee until the day before the BOT meeting? The undeniable fact is that the Trustees were going to be asked to vote on proposals they had never been given a chance to investigate, question, or discuss, in violation of both the Bylaws of the Association, the Operating Manual, and all principles of corporate governance. Only the day before the BOT meeting, the Chair and President/CEO made a presentation supporting passage of this proposal to about 85 Chapter Presidents. I invite your attention to the following:
Operating Manual, Article V. Section C:
“The President/CEO will prepare an agenda for each meeting and will distribute it with appropriate documentation to all officers, trustees, committee members, and other board meeting attendees sufficiently in advance of each semi-annual or special meeting to allow time for full study and preparation of required reports and actions.”
Operating Manual, Article VIII. Section A:
“It is the mission of the Governance Committee to consider all issues relating to governance of the Association and to make recommendations to the board of Trustees regarding such issues, including proposed amendments to the bylaws. Issues that would require changes to the Association governing documents may be submitted by motion at a semiannual meeting of the Board or at any time to the Chair of the Board. After careful review of issues submitted to it by the Chair of the Board and issues brought up within the committee, the committee will present to the Board proposed bylaw amendments that it, the Committee, recommends. Generally, such proposed bylaw amendments will be presented in concept form. If approved by the Board of Trustees, the issues will be drafted in bylaw language by the bylaws subcommittee of the Governance Committee, and submitted to the Board for final approval and incorporation into the bylaws.”
§ How are we going to exercise due care in considering the important proposals that were placed before us for vote on April 27, then tabled until the next BOT meeting, and do so with adequate time and input from the membership to exercise such due care?
One such issue is on Trustee communications with alumni members, and the proposal to establish a mechanism for censorship of that communication process by officers or employees of the Association. A second issue is of the election of the Chairman of the Board and Vice Chairman of the Board, and the proposal to eliminate the right of the members to vote in such elections, which would be replaced with a selection process run by a few appointed persons. I believe, sincerely and with good justification, that if a member of the Association cares at all about what the Association does, it is certain that the member will have strong and deep opinions on those two issues currently before us. Controversial is barely adequate to describe the feelings surrounding those proposals. One would hope and expect the Association Board to be encouraging discussion of such important proposals with Association members prior to any attempt to force a Board vote on the issues.
§ How did changes occur to the Operating Manual without knowledge or approval of the Board, or at least a thorough review by the Governance Committee?
As recently as February 2006, the Operating Manual Article 1 Section F, entitled “Trustee Expectations”, contained numerous mandates to Trustees including one on communications that said:
“ …being a Trustee of the Association involves serious responsibility. This quality consists of the simple duty of attending Board meetings and contributing one’s best judgment on problems facing the Association to a variety of directly supportive activities. Of utmost importance is the responsibility to communicate effectively in explaining to our individual constituencies about issues, initiatives and activities of the Association.”
Since that time, this entire section has disappeared without discussion or explanation, and “Trustee Expectations” are now completely different and under Article 1 Section G. Our governing documents are important legal documents for all to adhere to and live by, and this disappearance of important Trustee mandates requires an answer as to how this change was authorized and made.
I do not claim to know how any other Trustees on the Board feel about these issues of corporate governance. The opinions I have expressed here will give you some information on my positions on the issues, and on what I consider appropriate processes. Further I believe a communication like this letter between Trustees is not “public”, but rather a responsibility we all share for professional communications of issues affecting our Association. I welcome a call from each of you if that is what you want to discuss.
Most sincerely,
Leonard R. Wass
Attachment: Governance Quotations from a Non-Profit Expert
SOME QUOTATIONS ON THE DUTIES OF NONPROFIT TRUSTEES
“Emphasize respect for opposing views. Don't personalize the debate. Establish a culture of open discussion, and free exchange of information.”
“A common feature of the spectacular business failures of recent years in that the boards of those organizations approved just about everything their leaders proposed.”
“Many nonprofit boards consist of Trustees who serve without pay and often believe they serve in an honorary and passive capacity. They believe they lack authority to do anything but advise, counsel and approve. Rarely do they question, challenge, or oppose management.”
“Many Trustees think they serve the CEO or the Chairman of the Board rather than the organization itself. They do not seem to realize they have legal responsibilities defined by state law.”
“Although Trustees are legally responsible for making policy decisions, the practice in some nonprofit organizations is quite different. The Trustees in those organizations are uninvolved and uninformed. The CEO or Chairman of the Board makes all decisions, period. This is not the way to make decisions. The board level is where policy decisions should be made.”
“A board of Trustees needs to take eight steps to make effective decisions: (1) ask relevant questions, (2) evaluate information but do not assume all necessary information has been provided, (3) examine the known alternatives, (4) weigh risks and rewards, (5) seek the opinion of experts, (6) consider everything in the light of the organization's core values, (7) fulfill the organization's purposes, and (8) decide.”
“Trustees must get and understand all the necessary information before deciding. Trustee should not assume management is trying to hide something, but neither should they assume they have all the information they need. Sometimes, management's failure to provide needed information merely means it does not realize the board needs it. Yet, just to be sure, Trustees should ask.”
“To fulfill their duties Trustees must ask questions. Trustees must ask questions even if the environment is positive and they have a complete trust in management. If management discourages the asking of questions, or characterizes reasonable inquiry as negative, or refuses to provide answers to reasonable questions, Trustees cannot fulfill their duties and should consider resigning.”
“When Trustees actively discuss issues they may disagree. There is nothing wrong with that. Trustees must have the liberty to debate issues, exchange ideas, gather information and become informed before they decide. An expression of disagreement is a healthy sign in the boardroom. It shows that the board is concerned about its duties and cares about the impact of its decisions. A routinely unanimous board may mean that Trustees are not taking their roles seriously, not that they are of one mind.”
“In some organizations a dissenting Trustee is threatening to fragile egos and is characterized as a negative thinker. The rule in these organizations is that policy can only be made when there is a unanimous decision. The result of such a rule is that healthy, probing questions never get asked.”
“The suppression of different views is wrong and opposes setting a high standard of organizational accountability. Where only views supporting or approving management are permitted, truth and reality are suppressed. Where differing views are discouraged or characterized as negative thinking, accountability is also suppressed. The result of such suppression is poor, ineffective and unaccountable board decision making.”
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