The Second Mile – Lessons in Nonprofit Governance
“Wyland’s analysis uses Second Mile as a fascinating tutorial on problems in nonprofit structure and governance.”
Rick Cohen, The Nonprofit Quarterly
Tragedy – A drama or literary work in which the main character is brought to ruin or suffers extreme sorrow, especially as a consequence of a tragic flaw, moral weakness, or inability to cope with unfavorable circumstances.
– American Heritage Dictionary, 2000 edition
The incidents and allegations surrounding Jerry Sandusky, the charity he founded, and the university with which he has been affiliated for decades invite scrutiny and comment. There are many lenses through which to view the situations and stories.
We have chosen to limit ourselves to a consideration of The Second Mile, a nonprofit founded by Jerry Sandusky in the 1970s. We do not attempt to say that this is the only story to be told, or the only set of facts to be considered. Rather, it is our attempt to limit the scope of inquiry to our field of expertise. We do this to draw lessons from The Second Mile that other nonprofit organizations can learn from.
From a review of publicly available documents, we have identified several areas of The Second Mile’s governance and management that are worthy of consideration. None of these issues is, of itself, necessarily major, disqualifying, or otherwise suspect; however, they are departures from what is generally considered “best practice” in nonprofit governance and management.
The following areas related to the governance and management of The Second Mile are described below:
- Founder’s Syndrome
- Founder as Titled Corporate Officer
- Board Conflicts of Interest – General
- Conflict of Interest – CEO and Spouse Both Employed by Nonprofit
- CEO with Multiple Professional Relationships
- Board Members Sharing Employment Relationship
- Lack of Board Term Limits
- Complex Governance Structure
- Board(s) Too Large
- Donors and Celebrities as “Leaders”
- Access to Legal Counsel
Founder’s Syndrome
Jerry Sandusky founded The Second Mile in the mid-1970s and acted as a corporate officer, key fundraiser, and the “face” of the organization for over thirty years. His presence and contacts were a part of The Second Mile even after he left the board in 2010.
Many nonprofit organizations are started by an individual who is strongly motivated to help people in need. The successful founder of a nonprofit gathers people and resources to support their efforts, often due in large part to their personal strength, charisma, and ability to inspire others to share a passion for their cause.
The downside of a founder starting a successful nonprofit organization is that nonprofits are, by law and practice, collaborative, rather than individual, enterprises. Nonprofits are designed to serve a “public benefit purpose” and hold their assets in trust for the community at large. The community’s representatives serve as board members (trustees) to serve the nonprofit’s mission as well as to act as the community’s guarantors of the organization’s proper operation.
A founder often attracts “fans” whose loyalty to the founder as individual is indistinguishable from their loyalty to the nonprofit. These board members assume that the founder is acting in the best interest of the nonprofit because s/he is so passionate about the mission. The board members often develop a blind spot to the governance issues in their care, instead focusing on the founder as embodiment of the mission.
Founders have to be careful to recruit board members who are faithful to the nonprofit organization’s mission and who will serve the community as well as the organization. Potential board members need to understand that, by accepting nonprofit board service, they are accepting legal duties to a corporation and to the community which are independent of the founder and his or her wishes or interests.
Founder as Titled Corporate Officer
The Second Mile’s by-laws, amended in 2009, identified “the Founder” as a corporate officer and a member of the board’s executive committee. The Founder chaired the strategic planning committee, had ex-officio membership on all committees and was empowered to act as the board chair when the board chair was absent, unable or refused to act.
Two points: 1) we have never before seen by-laws which identify a nonprofit corporations’s founder, by title, as a corporate officer; and 2) the duties of the Founder explicitly conflict with those of The Second Mile’s Vice Chairperson, who is also empowered to act as the board chair when the board chair is absent, unable or refuses to act. The by-laws do not resolve the issue of whether the Founder or the Vice Chairperson takes precedence in such situations.
Board Conflicts of Interest – General
Ongoing investigations will likely document the relationships between board members of The Second Mile and Penn State. Many of these conflicts are not improper, and can be effectively and ethically addressed by policy development, including full disclosure by board members.
It should be especially noted that potential conflicts are almost unavoidable in smaller communities where community leaders (and their families) often occupy several leadership roles simultaneously. This is particularly true in smaller communities with a single large employer; e.g., State College/ Centre County and Penn State University.
Unfortunately, the very likelihood and recurrence of coincidental and necessary conflicting relationships can cause directors and managers to lose sight of the importance of documenting and monitoring relationships which are both well-known and ongoing within the community.
Conflict of Interest – CEO and Spouse Both Employed by Nonprofit
Dr. Jack Raykovitz was CEO of The Second Mile until November, 2011. His wife, Katherine Genovese, is a long-time Second Mile employee whose compensation was second only to her husband’s.
This represents both a management and a board-level conflict of interest, as Dr. Raykovitz would normally be expected to review Ms. Genovese’s job performance, set her compensation, and otherwise act as her supervisor at The Second Mile.
Ms. Genovese, by virtue of being married to the CEO of The Second Mile, is by IRS definition a “disqualified person” under IRC Section 4958. The board has a legal responsibility to monitor the transactions involving disqualified persons. The board must insist that documented procedures are followed to assure that the marriage relationship does not adversely affect The Second Mile and its interests as it enters into agreements (such as employment) with Ms. Genovese.
Another concern is raised by The Second Mile’s 2009 annual filing (Charitable Organization Registration Statement) with the Commonwealth of Pennsylvania.
Question 22 asks for the names and addresses of the individuals responsible for: 1) custody and/or distribution of contributions; 2) solicitation activities; and 3) financial records. Dr. Raykovitz, as CEO, is responsible for 1) and 3). Ms. Genovese is responsible for 2), according to the statement.
Husbands and wives should avoid sharing responsibility for both the income and expenses associated with a nonprofit corporation, especially one with a multimillion dollar budget and significant assets. It is notable that Ms. Genovese’s title, VP of Programs, does not imply any fund development responsibilities.
CEO with Multiple Professional Relationships
Dr. Jack Raykovitz, CEO of The Second Mile, is listed on the 2009 Form 990 as a full-time employee (40 hours a week) with compensation totalling $132,923. His LinkedIn profile also lists him as a psychologist with both the Midstep Centers for Child Development and Scenery Park Psychology Group. Scenery Park apparently does not have a web site. The web site for Midstep Centers currently lists Dr. Raykovitz as a former staff member, now inactive. Until recently, however, he was listed on the web site as a current staff member. His staff web page at Midstep also said: “In addition, Dr. Raykovitz provides consulting services to area schools, businesses, and non-profit organizations.”
We don’t know whether Dr. Raykovitz had an agreement with The Second Mile to work as a licensed psychologist, school psychologist, and/or consultant while also serving as CEO of The Second Mile. The employment policies for The Second Mile, as well as any employment agreements entered into between The Second Mile and senior managers, should address whether such employment is exclusive, to what extent “moonlighting” is permitted, and procedures for assuring that “moonlighting” does not adversely affect The Second Mile. In addition, the determination of Dr. Raykovitz’s compensation as CEO of The Second Mile should take into account whether the employment relationship is exclusive.
Board Members Sharing Employment Relationship
The Second Mile’s Forms 990 disclose two sets of two board members who share the same employer. In both cases, it appears that one of the two board members reports to the other at their place of employment.
These relationships raise the possibility that one board member’s vote may be influenced by their junior employment status to another board member. A nonprofit organization must take care to assure that each board member’s ability to act in the best interest of the nonprofit is not conpromised by other relationships.
Lack of Board Term Limits
The Second Mile’s board members serve three-year terms, with one-third of board members’ terms expiring each year. However, there are no limits on the number of terms a board member may serve. It should also be noted that the by-laws assume that the Founder’s status is ongoing.
It is considered best practice that nonprofit corporate boards have term limits for board members, for a number of reasons. For more on this topic, see our essay “Term Limits: Only ‘Perfect’ Boards Can Do Without Them”
Complex Governance Structure
The Second Mile’s 2009 by-laws actually enumerate the structure and duties of “five classes of board membership”: 1) state board of directors (the governing board); 2) regional boards of directors; 3) chapter boards of directors; 4) the Honorary Board; and 5) Founder’s Council. These classes of board membership are distinct from the state board’s committee structure, which includes seven named committees.
The governing board is a requirement. Whether the four other boards are necessary or advisable to further The Second Mile’s mission, they should not be included in the by-laws. Additionally, nonprofit best practice is to limit the number of standing committees and allow the board flexibility in creating and ending ad hoc committees as needed.
Board(s) Too Large
The Second Mile’s governing board (state board) has 36 members, according to its 2009 Form 990 filing. Best practice is to reduce governing board membership to a number which will allow manageable meetings and dialogue while also providing essential governance support for essential functions. This number varies, but numbers between nine and fifteen are common. A board with 36 members is probably unwieldy enough that many board functions are handled by the board’s executive committee.
Donors and Celebrities as “Leaders”
Celebrities including Lou Holtz and Arnold Palmer were identified as members of The Second Mile’s “honorary board”. Several of these celebrities have stated that they were unaware of their names being used in this way. They had attended an event as a speaker or fundraiser, but had not consented to an ongoing relationship of any kind.
Matt Millen was identified by ESPN’s web site as a member of the honorary board with Mr. Holtz when, in fact, Mr. Millen is a member of The Second Mile’s governing board. Mr. Millen, employed by ESPN, was interviewed more than once on ESPN without being identified on-camera as a board member of The Second Mile with governance responsibility and liability.
Access to Legal Counsel
Page nine of the grand jury report (presentment) states that Wendell Courtney, Penn State’s legal counsel for many years, was made aware of allegations involving Jerry Sandusky in 1998. The grand jury found that Mr. Courtney was also counsel for The Second Mile at that time.
Mr. Courtney disputes that he was legal counsel for The Second Mile in 1998, but the district attorney asserts that he was providing legal advice, regardless of whether he had a formal counsel relationship with The Second Mile at that time.
It should also be noted that Mr. Courtney’s wife is a past board member at The Second Mile. We have not yet determined her exact years of service to see whether they included 1998, which was the concern of the grand jury report.
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This article has attracted a lot of notice, due to an Associated Press (AP) reporter seeing The Nonprofit Quarterly piece and doing a December 9, 2011 story that was ultimately featured on/in 125 media websites and publications. It was also quoted in a USA Today column on January 2, 2012.
Here are some links:
The Nonprofit Quarterly:
Lessons to be Learned from Sandusky’s Second Mile Charity: Issues in Nonprofit Governance
http://www.nonprofitquarterly.org/index.php?option=com_content&view=article&id=17881:lessons-to-be-learned-from-sanduskys-second-mile-charity-issues-in-nonprofit-governance&catid=155:nonprofit-newswire&Itemid=986
AP Story:
Expert questions makeup of Penn St. case charity
http://www.foxnews.com/us/2011/12/09/expert-questions-makeup-penn-st-case-charity/
Follow-up column 1/2/2012 in USA Today:
Don’t let scandals stop charitable giving
http://www.usatoday.com/money/perfi/columnist/block/story/2012-01-02/researching-charity-donations/52340776/1