Ouch! Non-Profit Board Structure Being Used As An Example Of What Not To Do

by:

Joe Patti

Tyler Cowen, the economist who write the Marginal Revolution blog linked to an interesting paper from 2014, Corporate Governance Without Shareholders: A Cautionary Lesson from Non-Profit Organizations Lesson from Non-Profit Organizations . The article basically says, as bad as some corporate board are, non-profit boards are worse.

The author, George W. Dent uses the example of non-profit boards to argue against corporate board governance models in which the board of directors is strong and the shareholder power is weak. As much as corporate boards of directors may prefer it if they weren’t beholden to shareholders, it is actually the shareholders holding the board accountable which ensures better governance.

But let me tell you, even though everything Dent says about the problems with non-profit boards has long been acknowledged, it is tough reading.

Under the theory of director primacy that pressure from short-termist shareholders wreaks havoc with long-term corporate planning, NPO boards (which are free of that pressure) should be models of prudent, far-sighted leadership. However, according to a virtually unanimous consensus of experts, this is not the case at all. NPO directors are generally uninformed and disengaged. “[B]oard members . . . are faulted for not knowing what is going on in their organizations and for not demonstrating much desire to find out.

Attendance at board meetings is often spotty and participation perfunctory.” The insignificance of the directors is even touted as a benefit of the job. “[S]ome boards actually encourage the disengagement they later lament: They promise prospective board members that there will be little work to do, in the hope that low expectations will attract more prospective board members.”

In analyzing why corporate board structure is better, Dent analyzes and discards corporate board members being paid and holding stock in the company as reasons why they perform better. He also notes that while non-profit boards fiduciary responsibility is only accountable to secretaries of state, corporate board members are very infrequently sued for improperly exercising their fiduciary responsibilities.

Ultimately, Dent settles on the fact that despite the hurdles they may face in doing so, corporate shareholders are able to exert influence over boards of directors to change policy. With non-profit organizations, the absence of shareholders means there is no possibility of doing so. He admits there are a lot of flaws with corporate forms of governance, but that the non-profit model “It does show, however, that freeing directors from shareholder control leads not to optimal governance, but to dysfunction.”

Now all this being said, I have seen bylaws for non-profits which have memberships where the members elect people to the board so there are some non-profit board structures which do have boards accountable to a larger group comparable to shareholders. I would be interested to know if anyone analyzed the effectiveness of non-profit boards elected by members vs. boards which are entirely self-perpetuating.

News Of Their Retirement Has Been Greatly Exaggerated. AARP Doesn’t Care

by:

Joe Patti

I had to cackle when I saw this post by jazz critic and music historian, Ted Gioia:

For those for whom the image isn’t populating, he writes”

I’m not sure whether I’m depressed by the AARP sponsoring the Stones, or applaud it as the obvious move.

But whether you love it or hate it, this is one more sign of the music culture’s obsession with what’s old and aging.

I am mostly submitting this for everyone’s general entertainment rather than to make an attempt at any sort of meaningful statement. I don’t have any strong thoughts on music culture’s obsession with what’s old and aging. I do think there is a degree of irony in the fact the the Rolling Stones clearly haven’t retired in the spirit of Mark Twain’s statement that reports of his death was greatly exaggerated.

Since Twain arranged his estate so that his autobiography wouldn’t be released until 100 years after his death and other papers until 400 years after his death, I wouldn’t have put it past him to disseminate news of his death as a publicity stunt similar to how the Rolling Stones have announced their retirement from touring at least a couple times now. It turns out though that Twain had a cousin in London who was seriously ill with whom the author had been confused.

Competition Among Donor Advised Funds Is Constricting Charitable Giving

by:

Joe Patti

I am always interested in news about how donor advised funds (DAF) are operating. On the whole, their use hasn’t gone as intended and they have reduced, rather than increased or incentivized charitable giving.   A few weeks ago Vu Le linked to an article that examined how the differences in the way DAFs are promoted is an indicator of whether they are distributing or sequestering funds. (emphasis original)

National sponsors that spend more time talking about donor benefits on their websites have more assets, take in a much higher proportion of noncash contributions, and pay out grants at much lower rates than sponsors that spend more time talking about charitable giving.

[…]

But our analysis predicts that a hypothetical national sponsor with a strong emphasis on charitable grantmaking on their website would pay out at 53 percent, while a hypothetical national sponsor with a strong emphasis on donor benefits would pay out at just 2 percent. And those lower payout rates have ripple effects when it comes to the buildup of assets: Our model predicts that the highly charity-focused sponsor would have assets of just $34 million, whereas the highly donor-focused sponsor would have assets of $2.7 billion.

Something to note is that the analysis focuses on national sponsors of DAFs rather than regional and local sponsors. The author of the piece, Helen Flannery, notes that since national sponsors tend not to have the specific focus, whether it be geographic region or cause, they often need to work harder to make a case for people to arrange their giving through them. Flannery seems to suggest that the those that tout financial benefits to the donor are able to make a more compelling case than a more charitably focused sponsor without a specific focus.

Flannery calls for a more specific evaluation and regulation of DAFs on an individual basis rather than looking at the aggregate giving of sponsors since the really generous ones tend to make the parsimonious ones look better due to averaging.

The analysis we present in our paper quantifies this phenomenon. It measures the degree to which sponsors have financialized what was originally intended to be a nonprofit instrument, and it measures just how intense the competition has become among the very largest DAF sponsors in this country.

Music Preference And Morals – Do Evil Geniuses Really Love Classical Music?

by:

Joe Patti

When I saw a link on Artsjournal.com to a research study on PLOS One exploring the link between music and morality, I was half expecting to discover that evil people do prefer classical music, bolstering the stereotype of movie villains who apparently love playing that music to accompany their nefarious scheming.

Alas, the researchers didn’t specifically address that highly relevant question. I did learn that there has been a lot more research into the connections between music preference and personality types than I imagined. The literature/previous research review at the start of the research findings discuss those findings if that sounds interesting.

Rather than plotting on a good/evil axis which would require judgment calls, the researchers categorized different ends of the moral spectrum as:

Individualising (Care and Fairness), indicative of a more liberal perspective, and Binding (Purity, Authority and Loyalty), indicative of a more conservative outlook.”

Looking at everything from lyrics, timbre, and audio elements. In the results section of the study they note the following correlations:

From the perspective of the lyrics’ linguistic cues, we saw that people who value more foundations related to Care and Fairness (Individualising values) prefer artists whose songs’ textual content is about care and joy. Those concerned more about Loyalty, Authority and Purity (Binding or ingroup) foundations tend to choose artists whose songs’ lyrics talk about fairness, sanctity, and love.

Also, individuals with strong ingroup values tend to prefer artists whose lyrics have positive sentiments and talk about dominance. This is intelligible as individuals who value Binding and their social groups tend to engage in group activities such as sports, religious events, and political gatherings, which often make use of music to promote messages of power, unity, and victory (e.g. sports chants, church choirs, etc.). On the other hand, participants with high Binding scores tend to dislike songs with negative valence, violent narratives and songs that resonate with sadness, fear, and disgust.

From an audio perspective, we saw that participants with Binding values preferred more artists whose songs are danceable, loud and with more positive sounds. In contrast, participants with Individualising values chose more artists whose songs are smooth, acoustic and have less dynamic sounds

In terms of timbre, people oriented to Care and Fairness preferred smoother to louder. Binding oriented people preferred the loud, but only conventional rhythmic songs. Binding oriented individuals disliked loud, distorted, rebellious songs that aligned with timbres common in “hard rock, metal indie, pop, and electronic music.”

Like me, you may be wondering where people who enjoy loud, hard music with lyrics about struggle or darker themes. Reading through the study, it wasn’t really clear to me what sort of moral alignment those folks might have. I will confess that I didn’t quite understand some of the technical references to to things like BERT (Bidirectional Encoder Representations from Transformers) and what fell into those classifications.

One thing that amused me was the lengthy discussion of how preferred lyrics reflected moral value. As we all know, a lot of times people aren’t paying close attention to the lyrics and if they are, they may be getting some of them hilariously wrong. It may be that on the whole, lyrics and morals do track closely, but there have been a number of instances in the last few years where people loudly proclaim that an artist has betrayed the moral values they when they were popular 10-20 years ago and the general public cackles, “Were you paying attention to the lyrics?”

There is specific mention in the article about the choice of music at political rallies in the U.S. and how that often aligns with the general moral outlook of each group.