Executive Misdeeds Can Happen on the Non-Profit Level, Too

ANN ARBOR, Mich. – “Destructive behavior by an executive that harms an organization, possibly destroying it.” That’s how John Tropman, professor at the University of Michigan School of Social Work and adjunct professor in the U of M Business School, defines flameout. He warns boards of nonprofits, including credit unions, they aren’t immune from the threat posed by executive misconduct such as inappropriate use of agency resources, embezzlement or sexual misbehavior. People immediately recall Enron, Tyco and other businesses when they think of such shenanigans. But Tropman cites examples from the non-profit sector such as Frank Hudson, CEO of Catholic Charities in San Francisco. Hudson was forced to resign when it was discovered he spent almost $73,000 of the charity’s money on personal expenses such as cosmetic surgery. Tropman believes the issue is serious enough among nonprofits that he has written a paper, “Flameout/Calamity in the Nonprofit Sector,” scheduled for a special issue of the journal Administration in Social Work this summer. “You can’t change human nature,” Tropman declares. “The fact people are in the nonprofit business, the helping business or the religious business is not any kind of protection. It’s sad that it may lead boards to be less vigilant. “I think the kinds of things we’re talking about – stealing, various kinds of acting out, substance abuse, abuse of power – are all things any of us might be guilty of. Every time I mention this, the people I’m talking with know of an instance or two, whether it’s a minister in a local church, the head of a United Way, or a cocaine addict running a children’s facility.” Tropman, who teaches nonprofit management in the School of Social Work and for-profit management and executive leadership in the Business School, has been interested in the issues of who gets into executive positions, who leaves and under what conditions. “There were people who lost their jobs in ways that harmed the organization,” Tropman says. “That became very costly. I’ve worked with some of those organizations and the damage is hard to repair. Even worse, some not only took down their organizations and their families but even the entire sector.” Before this happens, he notes, there are usually warning signs that are overlooked. These may include sexual liaisons, substance abuse problems, or the Missing in Action executive who is always traveling. Then somebody gets sued, perhaps for sexual harassment, and it turns out that wasn’t the only case. “A lot of the focus is on the CEO himself or herself,” Tropman points out. “But one does have to ask the question, what are the boards doing during all of this? The people this (flameout) happens to are frequently very talented. They’re not bozos, but they have a big blind spot. They’re actually doing a lot right. Therefore boards hesitate to say, `Yea, the guy’s fantastic, but he drinks too much.’” The board’s attitude is the executive is doing so much for the agency, they need to cut him or her a little slack. Yes, people have seen the male CEO constantly hugging the female vice president, but he’s just the kind of guy who touches and hugs people. Even when concerns arise, “Do you really want to talk to me about what I’m doing in a limited way?,” Tropman asks. “A problem is not all bad behaviors lead to really destructive results. There are probably a lot of people who drink too much. It’s a problem but it’s not causing the organization to collapse. “However, executive behavior is part of the total executive package. What I do as dean, if I were dean of the school, affects the organization with which I work. Therefore added diligence is required.” Unfortunately, he continues, as people move up in their careers and acquire more power, subordinates and many others are less willing to be honest with them. The information top executives get is increasingly skewed. Sometimes what Tropman calls “the sidekick hypothesis” comes into play. A trusted associate, perhaps a partner or spouse, declares, “John, you’re being a total jerk. Knock it off.” Can the board serve as the sidekick? “Not really,” Tropman answers. “There has to be a close personal relationship, like Robert Kennedy and John Kennedy. There could be a member of the board who could do that, but that creates its own problems, because that person has a noticeably closer relationship to the executive than anyone else.” Tropman suggests one answer is a coaching system, similar to the approach psychologists use. Therapists have a lot of opportunity to act out as they deal with vulnerable people sharing intimate details. Professional therapists have someone to whom they go to examine their cases and conduct. Tropman urges boards to think very carefully about how they review the CEO’s behavior, and consider whether they need some outside help. He notes there’s a whole industry of executive coaches. A website for the Coaches Training Institute, www.thecoaches.com, offers information about executive coaching. [email protected]