NONPROFIT MANAGEMENT & LEADERSHIP, vol. 15, no. 4, Summer 2005 © Wiley Periodicals, Inc. 469

CASE STUDIES

Called to OrderA Board President in Trouble

Stefan ToeplerThis is a fictionalized case based on real events. It is intendedas a teaching tool to stimulate discussion about proceduralissues in nonprofit governance; board roles and responsibilities;communications; and relationships between boards, chairs, andexecutives, particularly in the context of smaller organiza-tions. It is meant to support sessions on nonprofit boards andgovernance in introductory courses on nonprofit managementor for use in workshops with new or less experienced executivesand board members. Set in an organization engaged in culturalexchange, the case can be used in introductions to nonprofitmanagement, arts administration, or international nongovern-mental management.

MECHTHILD “Hildi” Müller stared out of her office windowoverlooking Lafayette Park and the White House on a grayand rainy Monday morning in June. Although she was

already past deadline in drafting several public relations commu-niqués relating to her employer Maschinenbau AG’s planned invest-ment in a new manufacturing plant in Mexico, her thoughts keptreturning to the e-mail that Brian Smith had sent to the full board ofdirectors of Latin Adventures, a 501(c)(3) nonprofit organizationengaged in cultural and educational exchange with Latin America,whose presidency Hildi had assumed six months ago. Without callingHildi first, Brian, Latin Adventures’ immediate past president, raisedsignificant charges of improper board procedures and violation offiduciary responsibilities in the e-mail and in a subsequent phoneconversation had threatened to go public if the board would notdiscuss the issue at its next meeting.

Note: I am indebted for many good comments on an earlier draft by RobertGoler, Jane Kornblut, Patricia Lewis, and the four anonymous reviewers.

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Call to ServiceHildi came to Washington, D.C., five years ago on a researchfellowship after finishing her graduate degree in communica-tions and Latin American studies at the University of Bremen inGermany. While in graduate school, she was active in variousgroups advocating political change and economic development inLatin America. Toward the end of her fellowship in Washington,she received an offer to work for the North American representa-tion of Maschinenbau, a German industrial conglomerate, andbegan to settle into a corporate career path. Nevertheless, shemaintained a strong interest in Latin American affairs and wasdelighted to receive a nomination to serve on the board of LatinAdventures two and a half years ago.

When she joined the Latin Adventures board, the organizationwas going through a difficult phase: funding was threatened, thefounding executive director had just left, and the relatively unin-volved board was in the process of changing. Brian Smith, then serv-ing in his sixth year as board president, managed these challengeswith a strong hand and a relatively closely knit executive commit-tee. For example, Marita, the founding director, had been well likedby many board members, but she had had significant differences ofopinion with Brian about the strategic direction of the organization.Only the executive committee knew the exact reasons for her depar-ture, and Brian informed the board at large about her leaving onlyafter the fact.

During Hildi’s second year on the board, things had calmeddown, and the organization and its board began to settle into a newroutine, enjoying the calm after the storm. It was in the fall of thisyear that Hildi received a call from Brian asking her to become pres-ident of the board starting with the beginning of the new calendaryear. Although feeling honored by the request, Hildi was concernedabout taking on the responsibility, since she was anticipating a heavyworkload in the coming year due to Maschinenbau’s expansionplans. Nevertheless, Brian assured her that the job was not too time-consuming and that he was willing to help out whenever needed.Hildi agreed to assume the board leadership of Latin Adventures.

Latin AdventuresLatin Adventures was founded in the late 1980s to help facilitate cul-tural exchange between the United States and Latin America. Its mis-sion was to foster relationships between artists and arts institutions inthe Americas by sponsoring artist fellowships and residencies and sup-porting the development of traveling exhibitions. With an influentialformer ambassador among its founding members, the new organiza-tion quickly gained credentials and was able to secure a federal con-tract in the early 1990s. The contract, periodically renewed, continued

to be the financial basis of the organization, accounting for close to90 percent of the organization’s annual revenues of $1.1 million. Theremainder of the funding came in the form of small grants from vari-ous Latin American embassies, some corporate donations, a not veryprofessionally organized membership program, and occasionalfundraising events. Heavily reliant on the contract, Latin Adventureswas essentially in the business of regranting federal monies to eligibleU.S. institutions proposing exchange projects with artists or culturalorganizations from Central and South America. By the time Hildijoined the board, the organization had two full-time and two part-timestaff members in addition to the executive director.

Financial Troubles and a New ProgramWhen Hildi joined the board, Latin Adventures was encountering itsfirst financial problems. With the federal government’s policy prior-ities changing away from Latin America, the organization was expe-riencing slow reductions of its revenues, and this creeping downwardtrend was likely to continue in the foreseeable future. The main con-tract had just been renewed in the year prior to Hildi’s presidency,but funding levels were cut by almost 10 percent (or roughly$90,000), and further reductions were likely. At the same time, JuliaVelasquez, the new executive director hired after the departure ofthe founding director two years ago, brought new perspectives to theorganization. Having been a project manager at a large internationalrelief and development nongovernmental organization, she success-fully persuaded the board to stake out a broader vision for the orga-nization. With Julia pushing the issue, Latin Adventures wasbeginning to make forays into larger development education issues.More specifically, Julia believed that Latin Adventures should developits own programs and activities to help educate the American publicabout the need to increase government funding for cultural devel-opment abroad. As the most concrete manifestation of the newvision, Latin Adventures organized an annual street festival in down-town Washington, D.C. called “Latin Fair.” The festival featured exhi-bition stalls of local artists and artisans of Latin American descent,information booths of cultural institutions, as well as food standssupported by various Tex-Mex, Mexican, Salvadoran, and Brazilianrestaurants. Although not a moneymaker for Latin Adventures, theevent was generally considered a success by exhibitors and mostboard members alike, drawing a crowd of six thousand in the firstyear and eight thousand in the second.

Although the board at large had been very receptive to Julia’sarguments, Brian—and most of the executive committee membersloyal to him—continued to be less than enthused. More closelyattuned to the organization’s financial situation and operating detailsthan the rest of the board, the executive committee remained skep-tical about the need to invest resources into new programmatic

CA L L E D T O OR D E R 471

The contract,periodically

renewed,continued to be

the financialbasis of the

organization,accountingfor close to

90 percent of theorganization’s

annual revenuesof $1.1 million.

initiatives, particularly since there were no obvious stable fundingsources that Julia could point to. Accordingly, Brian had shot downnearly every idea that Julia had brought to the executive committeeover the past two years. Without the initial backing of the commit-tee, Julia had felt constrained in her ability to explore potential fund-ing sources seriously. As a result, Julia was deeply frustrated, andtensions between her and Brian increased over time, a fact that therest of the board was largely unaware of. Latin Fair was Julia’s firstnew programmatic idea after signing on as executive director. Itremained essentially the only one that survived the executive com-mittee and was brought up for discussion and approval at a meetingof the full board.

Despite its apparent success, Brian and the executive committeecontinued to have misgivings, largely on financial grounds. Shortlyafter calling Hildi about serving as president, Brian convenedan emergency meeting of the board to deal with funding shortfalls.The contract renewal had resulted in a $90,000 reduction of the$1.1 million budget that needed to be addressed. During the meet-ing, the board made several budget adjustments. Among otherthings, it resolved without formal motion not to mount Latin Fairin the coming year with the understanding that the issue could bereconsidered if additional funding could be secured. Hildi, who hadgreatly enjoyed the past two festivals, had been unable to attend themeeting.

The President in TroubleThe first three months of Hildi’s presidency went smoothly. The lastgrant cycle ended in December, and the deadline for new proposalsfor Latin Adventures’ grants programs was not until late May. Latewinter and early spring were usually relatively quiet at Latin Adven-tures, with few pressing issues and little demanding business beforethe board. This suited Hildi just fine, since the work schedule at herjob was beginning to heat up as she had anticipated. In preparationfor Maschinenbau’s finalizing its expansion plans, her office hadalready started working overtime, and a vacation freeze was in effectfrom April through August. Still, Hildi occasionally found time tochat with Julia about developments on the administrative side. Inearly April, Julia told her that one of the Latin American embassieshad indicated an interest in funding half of the Latin Fair’s $30,000budget if Latin Adventures would agree to organize the event againthis year. With this in mind, Julia had already started to discusspotential sponsorships with several businesses and was optimisticthat she could put together the funding for the other half of the bud-get. To Hildi, this sounded good. Two weeks later, Julia called her ather office to let her know that she thought she had the fundingtogether and was beginning to set festival preparations in motion.

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[The board]resolved withoutformal motionnot to mount

Latin Fair in thecoming year

with theunderstandingthat the issue

could bereconsidered if

additionalfunding couldbe secured.

Hildi briefly inquired about the nature of the promised sponsorshipsand congratulated Julia on successfully pursuing this. Realizing thatsome board members were not too happy with Latin Fair, Juliarequested that Hildi inform the board that the festival would be heldthis year after all. Hildi agreed to get a note out.

Hildi realized that the board politics would require her to com-pose the message very carefully and with some reflection, particu-larly since Brian, accustomed to pushing his views after six years ofserving as president, was likely to raise objections. Unfortunately,Hildi was too overwhelmed by her work schedule to attend to itimmediately and kept pushing it back, although Julia e-mailed sev-eral reminders before leaving for a two-week vacation in the first halfof May. When she returned, Julia inquired again, and Hildi resolvedto write the note that same week. Two days later, though, Hildiopened the weekly public announcement and events e-mail thatLatin Adventures distributed and was mortified to see an announce-ment concerning booth rentals for the upcoming Latin Fair toppingthe list. She sat down immediately and sent the following e-mail tothe board:

Subject: Latin Fair

Dear All:I hope everyone is having a lovely spring. I also hope thatnobody is as behind on things as I am. Among these is aquick update on Latin Fair developments. As you willremember, we iced the event in our budget deliberations forthis year, because of lack of funds. However, one of theembassies was intent on having the event again this year andwas willing to back up their commitment. In fact, theycommitted over $15,000 to this, and the remainder of theneeded funds came in through sponsorships. Latin Adven-tures’ direct contribution will therefore be largely in-kind inthe form of time and commitment of our outstanding staff.

Given the overwhelming sentiment that public outreachshould be one of our priorities in the near future, this is aterrific development. The event is scheduled for August 1and I look forward to seeing you and your friends and familythere.

Hope this finds you well!

All best,Hildi

With some trepidation, she saw a reply to her e-mail by Brian thefollowing evening. With copies to the whole board and Julia, Brianwrote:

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Subject: RE: Latin Fair

Mechthild,I was quite a bit surprised to learn about the Latin Fair plansfrom the public announcement as well as your e-mail. Itseems to me that the appearance of new funding and thesubsequent budget reconsideration is something on whichat least the Executive Committee should have been con-sulted. If I am not mistaken, I still serve on the committee,and I cannot at all recall having any information, muchless discussion, of this until this announcement. Quitefrankly, proper procedures for involving the board haveapparently been fully ignored here and I, for one, am veryseriously concerned about this.

Brian

Hildi knew that her procrastination had caused a problem. Shehad anticipated some response, but was still taken aback by the brash-ness of Brian’s note and the severity of the charge. At the same time,she was beginning to wonder whether, despite her enthusiasm forthe mission and her best intentions, she had seriously failed theboard and the organization. Given the current demands of her job,had she been negligent in properly discharging her duties and oblig-ations as director and president? Had her lack of attention plungedthe organization into—what seemed to her at the moment—a majoruproar? While she was still sitting in front of her computer ponder-ing these issues, Julia called, asking whether she should offer her res-ignation. She had very much looked forward to a fresh start with thechange in board leadership, but now it seemed as if nothing wouldever change. Obviously, she said, the board does not have much con-fidence in her. Perhaps Latin Adventures would be better off with anew director—someone happy to administer the current programsrather than pushing in new directions. Hildi did her best to reassureher, promising to call Brian the following day, owning up to themishap, and keeping the battle at the board level. The prospect oflosing the executive was the last thing she needed right now.

When Hildi reached him the next morning, Brian sounded bothagitated and slightly defensive. He discarded her apology for notinforming the board in a more timely fashion, declared changingboard policies and budgets single-handedly to be a violation of fidu-ciary duty, and he threatened to go public with this issue if the mat-ter would not be discussed in detail at the upcoming board meeting.Hildi agreed to put the issue on the agenda, and Brian noted that hemight send a memo to the board if he were unable to attend themeeting. The phone call left Hildi both intimidated and infuriated.Unable to concentrate on her work, she started drafting her ownmemo to the board, offering to resign as president and from the board

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She wasbeginning to

wonder whether,despite her

enthusiasm forthe mission and

her bestintentions, shehad seriously

failed the boardand the

organization.

if needed. She attacked Brian and the way he had run the orga-nization out of the executive committee, occasionally not informingthe board about the full background to decisions the board was askedto ratify. However, in the end, she decided to discard her memo draftand leave the discussion to the board meeting next Tuesday.

On the rainy Monday morning before the meeting, Hildi contin-ued to ponder the problem, feeling not at all sure of herself and theappropriateness of her conduct as president. The quiet of her officewas interrupted by a new e-mail notification. It was Brian’s memo tothe board:

To: The Board of Directors of Latin AdventuresFrom: Brian B. Smith, Immediate Past President

Dear Colleagues,A business trip to Costa Rica prevents my attendance whenyou will discuss an important matter at Tuesday’s boardmeeting, so I take the liberty of writing to you in advance.We have recently spent a good deal of effort in building astrong and involved board for Latin Adventures. One of ourmost important roles is to oversee the financial viability ofthe organization through setting policies, which is theboard’s prerogative, even its obligation. In this context,the board has given thoughtful attention to numerous issuesincluding policy regarding the management of the annualbudget.

Faced with financial constraints and reduced funding forcore programs, we decided last year, as a policy, not to spon-sor Latin Fair. I know it was not an easy choice. We did itbecause, in the prior year, promised support to underwritethe event’s costs did not materialize. We were left with a sig-nificant shortfall that we were able to close only because ofthe fortuitous resignation of a staff member and a delay inrehiring. Because this year was also tight, we prioritized ourbudget policy to maintain core programs.

Frankly, I was very surprised to get an announcement tothe general public about Latin Fair, followed by a letter fromHildi explaining that the event would go on and that fundingwas available, an assurance that has not been demonstrated tothe board. To the best of my knowledge, neither the board northe executive committee was consulted about this change.This is a violation of both the budget policy set by the boardlast year and the obligations of a responsible board.

To be clear, this is not about Latin Fair itself; it is aboutproper and responsible board procedures. I wish I could bethere with you to discuss this significant procedural lapse. Ithink it is that important, and I trust you will give the issuedue consideration.

CA L L E D T O OR D E R 475

The memo weighed Hildi down further. Brian had now clearlylaid out the charges against her. None of the other board membershad reacted to Brian’s initial e-mail one way or the other. Did thesilence mean that the board as a whole agreed with Brian, who had,after all, successfully led it for six years? Perhaps she should just takethe consequences of her (in)actions and resign.

Discussion Questions1. What would you do in Hildi’s situation: resign or not resign?2. Do you agree with Brian’s point of view?3. Did Hildi breach any fiduciary responsibilities as Brian suggests?

If so, which ones?4. Would it have been necessary for Hildi to take the issue to the

executive committee earlier? What are the proper roles andfunctions of this committee?

5. According to Brian, the Latin Fair affair violated board budgetarypolicies among other things. How can we define policy? Wheredoes policy end and management begin?

6. Was Hildi too eager to take full responsibility? Did Julia get off thehook too easily? What does the case say about board-executiverelationships?

7. In terms of proper board procedures and conduct, do you thinkthat Brian acted appropriately?

STEFAN TOEPLER is director of the Center for Arts and Culture and assis-tant professor of nonprofit studies in the Department of Public and Inter-national Affairs at George Mason University in Arlington, Virginia.

Suggested Readings

Axelrod, N. “Board Leadership and Development.” In R. Herman andAssociates (eds.), The Jossey-Bass Handbook of Nonprofit Leadershipand Management. (2nd ed.) San Francisco: Jossey-Bass, 2005.

Hopkins, B. Legal Responsibilities of Nonprofit Boards. Washington,D.C.: BoardSource, 2003.

Light, M. Executive Committee. Washington, D.C.: BoardSource, 2003.Zimmerman, D. Robert’s Rules in Plain English. New York: Harper-

Collins, 1997.

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