A Person on Two Missions? Funders as Board Members of Grantee Organizations
By Alicia S. Oberman and Andrés Spokoiny
Many people in the Jewish community play two roles at once for the same organization: funder and board member.
What could possibly be problematic, or even noteworthy, about that? The funder and the organization both ostensibly share the desire to do the same kind of good in the world, and they’re joining forces. The dual role allows the funder to provide the organization not only money but also skills, time, effort, and wisdom, helping the organization to do the work.
But what happens when the funder’s interests and the organization’s interests don’t completely align?
It’s way too easy to underestimate the potential issues – ethical, legal, and practical – that can arise from this common dual role of the funder/board member.
In truth, all board members are generally funders in some capacity. But there’s a difference between a funder who contributes the board minimum and a “major” funder – one whose withdrawal would have a profound impact on the organization’s operations. In this article, we’re talking about “major” funders.
Here are some issues (out of many) to consider when one asks funders to join a grantee board.
Individual funders and foundation principals seek to serve their philanthropic missions precisely as they have formulated them. Foundation trustees and staff, likewise, are obligated to protect the intent of the original donors. When sitting on a grantee’s board, however, the same people have a sacred responsibility to serve the organization’s mission and interests. Hopefully, and obviously, the funder supports the nonprofit because their missions and interests are well aligned, but that alignment may sometimes be 95% rather than 100%. What will funders/board members do if and when these interests conflict?
If a situation arises in which they cannot strike this balance with integrity toward both roles – not just being outvoted on a decision, but an essential conflict – they should resign from the grantee board.
Fear of Transparency
Can an organization be truly transparent about its challenges and concerns in front of a major funder? The answer should be yes, but fear of jeopardizing a major gift can have a powerful chilling effect for organizational leaders and staff.
All voices on a board should have equal weight, despite the level of anyone’s contributions. This is a best practice, though it’s too often disregarded in the field. But even in the best circumstances, there is an unavoidable inequality of power that can only be addressed by very self-aware funders.
Board seats are often offered to major funders as recognition, or an attempt to keep the funder engaged (i.e., donating). Yet if the board seat exists to keep the gift in play, how do you ever off-board the funder? If the organization has term limits for its board, has it just “bought” a gift with a lifespan of that term?
Foundation staff as board members
Not uncommonly, senior foundation professionals serve on grantees’ boards. In these cases, however, they – the individual professionals, and not the foundations that employ them – are board members of the organization, with all of the responsibilities that such fiduciary service entails. This is true even when they sit on the board only because of their employer’s monetary commitment, while they themselves do not make personal contributions. Even though this is not often enough explicitly stated, a board member’s duties include confidentiality. A staff member who is elected to a board (at least in theory and, again, not often in practice) cannot and should not discuss what happens in a board meeting with anyone who is not on the board. Does that include their employer – the foundation and its trustees and principals, without whom the staffer would not be on the board at all? Technically yes, to the extent that the information is not public in nature.
Funders are not fond of surprises. So how can we really ask a staff member, whose livelihood is dependent on a funder, not to share information with foundation colleagues, trustees, and principals? How can this fundamental duty and real life be reconciled?
Double fiduciary duties
The most complicated scenario may be the one in which the funder is both a board member of the foundation and a board member of the grantee organization. In this case the person has not only ethical but also fiduciary duties to both the foundation and the grantee. This double board member situation is commonplace, but many foundations have policies disallowing their board members to sit on the boards of grantees, and this is precisely why.
State laws differ on whether and what types of conflicts may exist and how to deal with them in these circumstances. Without being able to generalize, it is critical to understand how the relevant laws and regulations play out in your specific case. While the spirit of much of the discussion above still applies, in this particular situation there may actually be more substantial legal considerations, and competent legal counsel is critical.
Using board seats wisely
Board seats should be considered a precious commodity. They should be filled with people who will contribute both financially and an organization’s needed human capital. But too often organizations allocate board seats to funders with no clear sense of what the funder actually brings to the table in the form of governance expertise, experience, skills, or personal qualities.
Given all these complications and possible conflicts of the funder/board member dynamic, should we abandon the model all together?
What we should do is name and understand the potential problems, dilemmas, and opportunities the funder/board member role creates.
And these issues do, in fact, bring opportunities. Recognizing that funders/board members need to understand what is working well, and more importantly what is not working well with a grantee, may lead organizations to greater transparency overall. Recognizing potential conflicts between these roles may lead funders and nonprofits toward more dialogue about the power dynamics that too often go unexamined in philanthropy – especially in the Jewish community, where the sense of heimish togetherness can sometimes lead Jewish communal leaders to avoid potential questions of ethics and professionalism. Asking pointed questions about what human capital a funder might bring to the board may prompt much-needed reappraisals of board roles and practices overall.
These questions and challenges prompted us to partner in creating a new and unique opportunity to dive deeply into many of these issues and more. The 2019-2020 Hybrid Cohort of the Board Member Institute for Jewish Nonprofits will include a foundations track, tailored for current and future foundation board members. The Institute is a hands-on comprehensive board development initiative, taught and administered by Northwestern University’s Kellogg School faculty and practitioners from the Jewish sector, intended for active and incoming board members of Jewish nonprofit organizations. In addition to the collective learning of the entire cohort, the foundations track will include materials and experiences crafted and facilitated by Jewish Funders Network experts to help foundation board members navigate these complicated and nuanced situations. Learn more here.
The more we neglect these issues, the more we underutilize the resources and potential already present in our community. The better we understand and address them, the more our philanthropic, organizational, and communal missions will be advanced.
Wearing two hats is perfectly possible, and even desirable – as long as our heads are on straight.
Alicia S. Oberman is Executive Director of the Jack Miller Family Foundation and the Jack and Goldie Wolfe Miller Fund. Andrés Spokoiny is President & CEO of Jewish Funders Network.