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QUESTION 14: How Prepared Are We to Work With Activists?

By John Pearson

The $500,000 Restricted Gift, the Hospital, and the Jury

Ram Charan’s final chapter in Owning Up addresses the challenging issues faced by for-profit public companies. You’ll be tempted to skip this chapter (since nonprofit ministries do not have shareholders).

But—your ministry does have stakeholders—so don’t miss the wisdom on how to communicate with any “activist” or social media eruption.

Charan writes, “Bloggers search through the footnotes of SEC filings. Seventy-eight-year-old women with no corporate leadership experience file shareholder proxies and end up interviewed on business channels.”

Warning, he says: “Your performance as a board will increasingly be scrutinized, as much as the [organization’s] performance.”

QUESTION 14 of 14: How Prepared Are We to Work With Activist Shareholders and Their Proxies? Owning Up: The 14 Questions Every Board Member Needs to Ask, by Ram Charan (Order from Amazon)

Finally! We’re in the last chapter of this important book. (Watch for the index and summary in my next blog.) In this blog, I’m taking liberties with the for-profit topic—to address just one of many related topics for nonprofits. Let’s call them activist or dissatisfied donors.

In his powerful book, Trust: The Firm Foundation for Kingdom Fruitfulness, Dan Busby says that “We ignore perceptions at our peril.” His short chapter on “Perceptions” includes “Ten Major Issues Can Lead to Misperceptions.” (The list: compensation, fringe benefits, intellectual properties, family members paid by the ministry, related-party transactions, and five more.)

Is your board proactively discussing these 10 major issues—or will you be unprepared when a ministry issue (fake news or not) hits the fan and/or the internet?

Busby quotes Harvey McKinnon:

“Donor loyalty is not about the donor being loyal to you;

it is you being loyal to the donor.”


Being proactive means your board will have policies and practices that will give confidence to givers that restricted gifts will, in fact, be restricted for the specified use. In the absence of trust, “activist” stakeholders and donors can and will sound the alarm—often inappropriately.

Ram Charan’s chapter includes several examples of activists and he lists the affected companies, by name. Some handled the issues with wisdom—and a few didn’t. He gives “four pieces of advice” for boards when “activist investors come calling.” While no Scripture is cited, you’ll find Jesus’ principles in his recommendations.

Likewise, Busby includes an “activist” true story in Trust—and he adds the Scripture (2 Cor. 8:14-25) in the chapter, “Honoring Giver Intent.” He also shares the true story of a hospital in Oklahoma that received a $500,000 gift from Troyal G. Brooks in 2005. The giver’s intent was to honor his mother by naming a new facility after her. In 2008, the hospital reneged on the agreement and planned to use the funds for another project—so Brooks sued the hospital.

Busby writes, “…the agreement with the hospital was oral; therefore, the jury had to determine who was telling the truth. In 2012, a jury awarded Troyal the $500,000 gift back plus the maximum in punitive damages—$500,000.” He adds, “Troyal is better known as Troyal G. (Garth) Brooks. Ironically, the hospital is located on Garth Brooks Way.” Yikes!

Ram Charan writes, “Every shareholder matters.” Dan Busby would add, “Every giver matters—and trust is the firm foundation for Kingdom fruitfulness.”

BOARDROOM DISCUSSION: Dan Busby quotes Max De Pree: “When things go awry, trust powers the generators until the problem is fixed.” Here’s an agenda item for your next meeting: “How Prepared Are We to Work With Activist or Dissatisfied Donors?”

CHECK OUT THESE HELPFUL ECFA RESOURCES

• READ: Lesson 22, “Whopper Mistakes Can Unravel Your Ministry,” in More Lessons From the Nonprofit Boardroom. (Click here to read the four-page chapter.) See especially “Whopper Mistake #3: Failure to provide accountability for restricted gifts.” Click here to read Kecia Klob’s color commentary, including this from Max De Pree: “The first responsibility of a leader is to define reality.”

• READ: Lesson 31, “Where Two or Three Are Gathered on Social Media…” in More Lessons From the Nonprofit Boardroom. While this lesson is focused on conflicts of interest, it’s a timely reminder that you’re just one click away from a social media firestorm. (Click here to read the four-page chapter.)

 

 

This article was originally posted on the “Governance of Christ-Centered Organizations” blog, hosted by ECFA.
John Pearson, a board governance consultant and author, was ECFA’s governance blogger from 2011 to 2020.
© 2021, ECFA and John Pearson. All rights reserved.


This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.

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