#72 Musings Beyond the Bunker (Monday June 28)
Friends,
Many of you know Andrea’s and my deep commitment to the nonprofit institutions in our midst that provide the cultural, spiritual, educational, and empathetic glue that holds our society together. They often succeed but they sometimes fall short. This is the first of several observations about the nonprofit world… It’s about my alma mater, its failings, its challenges, and lessons learned—about which I haven’t previously commented publicly.
The story passed almost as an afterthought, a tiny postscript to an otherwise unimportant reporting of a list of credit rating changes. But there it was, clear as day. USC’s bond rating has been reported as subject to a likely downgrade. The enviable AA rating once enjoyed by the university is going down and, when it does, the cost of debt originated by the university will go up. One additional price to pay for a proud institution digging its way out of serial missteps.
After a decade or more of more or less positive reporting on the university (well, other than some notable miscues in the athletic arena), USC has been plagued over the past five years by what in sports parlance is referred to as “unforced errors.” These unforced errors occur in sports when a team is ahead and squanders its lead through inattention, over-confidence and/or mixed signals. In USC’s case, there are too many to count. But these include two real headline grabbers. The first, a spate of abusive behaviors at the Keck School of Medicine and the Student Health Center (actually a series of events). The second is, of course, the outsized participation of the university in the “varsity blues” admissions scandal, which exposed not just the misdeeds of those affiliated with Rick Singer, but a culture of complicity. Both are indicative of an institution that lacked the necessary controls but, as important, the humility to accept that bad things can happen and that, rather than covering them up, they must be dealt with. Until recently, the university’s public relations juggernaut turned out good news upon good news, eschewing a more measured, accurate analysis of what was happening. Indeed, within the university, a number of people have reported that bad news was shunted off and contrary views and reporting of problems were acts of disloyalty.
As one reflects upon the over $1.2B that the University of Southern California will be paying out to victims of the abuses committed by one of its physicians in the Student Health Center—abuses that occurred over a series of years, if not decades, one must keep coming back to the questions, “How could this have occurred?” and its rejoinder, “How could have been allowed to continue?” Let’s face it. Women were sexually assaulted over a very long time in the Student Health Center. Some people knew and more should have known. Indeed, one friend recounts his daughter being told at a dorm meeting to stay away from one Dr. Tyndall—“he’s a creep.”
The answers to these questions go beyond the criminal behaviors of a single individual. And they go beyond one or two supervisors who knew or should have known of these horrific activities occurred under their watch at this institution that purports to be a place of safety and learning. It goes beyond the inadequacy of controls and accountability. It extends to a culture that has permeated an institution running in hyper-drive, rushing its way to the rarefied air of “elite institutions” without acknowledging the existence of guard rails—either those imposed from the outside or, as responsible organizations do, imposed upon itself. This lack of guard rails resulted in a medical school dean carousing in hotel rooms, being replaced by a fellow reprimanded for unwholesome activities while employed at USC. Culpability goes well beyond the administration. It extends into the way in which USC approached nearly any challenge—aggressively, unapologetically, and with a lack of self-awareness or acknowledgement of responsibility.
In the best case, those entrusted with the institution’s responsibilities simply were asleep at the wheel; in the worst case, there were people actually engaged in cover-ups in these and other scandals that plagued the university. These problems are not just those of some junior administrators. They extend through the General Counsel’s office, the President, Provost and their staffs, and the Board of Trustees—the ultimate “keepers of the flame” for any nonprofit.
I often say that people on non-profit boards will act in ways they never would act in their own business. I have a friend, a scholar in this area and former CEO of a prominent nonprofit, who says that many (if not most) non-profit board members “leave their briefcase at the door.” But to be on a Board is to accept responsibility to do hard work, ask tough questions, and demand answers.
One conversation is illustrative of the problem with a board more concerned with controlling the narrative, rather than addressing the problem. When I confronted a board member about the Student Health Center issues, he tried explaining to me that digital examinations of gynecology patients were not outside the norm, nor was photographing gynecological patients for medical recordkeeping (I don’t think he came up with this narrative all by himself). Besides being astounded to have this conversation with a person who has no medical training, I decided to consult with a friend who is a gynecologist. He assured me that these are not normal behaviors. He was as surprised as I to learn that persons in authority at USC were perpetrating such a canard in defense of such unprofessional (and criminal) behavior. But this is illustrative of many institutions’ response to crises—explain it away or deny it.
Thankfully, the Board Chair, Rick Caruso, orchestrated the removal of the President on whose watch these events occurred. Some will say that it wasn’t the president’s fault—but that’s a cop-out. So much happened on his watch. In any corporation, allowing multiple cultural/ethical lapses would have resulted in termination. Yet even with his removal, this past president continues to sit on the Board, albeit in a non-voting capacity, and continues to enjoy his plush offices on campus, outfitted at great expense.
People in nonprofit boards are responsible for the continued vitality of the organization in pursuing its mission, maintaining solid finances, assisting in fund raising, and choosing and reviewing a CEO. They set the agenda. In a sense they are no less to blame than the many administrators who, through these scandals, either resigned or were asked to leave. In the nonprofit world, the active engagement of the Board is required. As opposed to for-profit institutions, there are no shareholders and no Wall Street analysts demanding performance. Best practices require board member engagement—not in running the institution but in setting the standards and monitoring their enforcement. Best practices suggests that merely the donation of funds—or the promise of donations—is not the primary qualification for Board membership. Best practices suggest rigorous annual evaluations of board members. Best practices suggest a limit to board terms (some have been on the board for decades).
As to the second of the twin catastrophes, the Varsity Blues scandal, it should be noted that USC’s involvement is not the same as others. It is the central institution to this scandal. Sure, one can point out that institutions like Yale, Stanford, and UCLA were implicated. But none shares with USC the distinction of being involved in nearly 50% of the cases. And is it surprising at all that there were administrators at USC involved and on the take? Chairman Caruso says that the “institution failed us.” And he’s right, to a point. But institutions are not people. Institutions do not make decisions. Institutions are the product of the direction set out by people. The institution is embodied in the administration and the Board. Both failed us.
There is reason for optimism. The board has moved beyond the failures of the past administration. They have hired a woman of principle and integrity as President. The university seems committed to a culture of cooperation and controls. And the Board has made moves toward a governance system that has term limits and other systems that are common in the non-profit world (although their details have not been widely shared). Meaningful strides have been made but there remains work to be done.
That said, the university will only be out of the woods when demonstrable change is apparent and practiced for a period of years. The culture needs to embrace questioning. Loyal criticism should be encouraged and valued. People addressing tough issues should not be shunted aside. Whistleblowers should be listened to. And the administration must be open, patient, and humble. This is not a question of just a few bad apples. These maladies are the result of institutional failure and cultural malaise. But in the end, they are the failures of individuals. And that failure extends to the people entrusted by the State of California to manage such things—the Board of Trustees.
Transparency will be critical to the restoration of trust. We have been told that the university’s investigations into past wrongdoing and administrative failings—undertaken by distinguished law firms like O’Melveny & Myers and Gibson Dunn & Crutcher, among others—would be thorough and would be shared. We are still waiting for that sharing. As they say, before one can solve a problem, one must acknowledge it exists. And if we are to be called upon to provide financial support to the university and send our children there, ought we not know the facts and that change is, indeed, coming?
More on nonprofits in a later Musing.
Best, Glenn
FROM THE ARCHIVES