Do you remember Jean-Marie Messier? A little over a decade ago, in New York City’s philanthropic circles, the then chief executive of the Franco-American company Universal-Vivendi was the toast of the town. Literally (in that fund-raising season Messier was toasted at benefits for the New York Public Library, the Appeal of Conscience Foundation, and the Robin Hood Foundation) and figuratively speaking, too. At the time the Whitney Museum and the Museum of Radio and Television had made him a trustee; he was being considered for the board of the Metropolitan Opera; and his wife, Antoinette, was on the board of the New York Philharmonic. Less than a year later, with Universal-Vivendi’s stock in free fall and his own corporate vainglory under harsh scrutiny in Paris and New York, Jean-Marie Messier was toast. The moral of the Messier story was summed up by the woman who had wooed him for the board of the New York Public Library, Elizabeth Rohatyn, wife of the investment banker and former ambassador to France, Felix Rohatyn, and herself a notably public-spirited figure in the city. “When new top people come to New York, everybody wants them,” she said.
Let’s unpack that. “Top people” is an obviously enviable social niche. We all want to be ‘at the top’ in some category or other—a top dermatologist, say, or a top golfer at the club, or a top government official, or a top stamp collector. But to be among the top people is a different kind of wonder.
And to discover who belongs in it and how they got there, you need only look at the second clause of Elizabeth Rohatyn’s sentence. Who is “everybody” and for what, exactly, are the top people wanted? Jean-Marie Messier’s story holds the answer. “Everybody” refers to the guardians of a city’s nonprofit, nongovernmental institutions— principally other top people—and what they want from new top people is money, and as much as possible. In the course of Messier’s brief sojourn among the top people of New York, for example, he committed himself and his corporation to giving many hundreds of thousands of dollars to the civic institutions that had honored him with their toasts and, much more importantly, with a seat on their board of trustees. For all intents and purposes, in American society today “top people” and “trustees” are hyphenated terms, and the hyphen is a placeholder for money.
This arrangement, in reality as on paper, is unique in the modern world, and a bit breathtaking on the rare occasion someone takes a closer look. Trustees, as a group of people, often have in their charge an astonishing portion of the entire high-culture heritage of the nation, a very large part of its educational, scientific and medical institutions, ideological seedbeds of social and foreign policy called think tanks, agencies of social service and economic betterment, and vast and growing chunks of the country’s land itself.
For well over 200 years the system has straddled the encroachments of government bureaucracy and politics on one side and the clutch of private enterprise on the other. Protecting the tradition was precisely the intent of the Supreme Court in the famed Dartmouth case of 1819 that decided to create and protect a civic space where private money could accomplish public purposes in the unending struggle against misery, ignorance, and ugliness. The system is also the envy of some European politicians who want “voluntary taxation” to relieve them of the onus of having to support their nation’s cultural heritage with direct taxation. Italy’s Silvio Berlusconi, for example, before his more recent controversy, wanted to take the alarming step—alarming to some lovers of art, anyway—of “privatizing” the glorious museums and churches of Italy.
Everywhere these days one hears loud cries for more “transparency” and “accountability” in corporate governance. But when it comes to the governance of nonprofits, there is only silence. A case in point: Business Week once ran an excited story about the bold drive of Harvard’s then president, Lawrence Summers, to reform just about everything in the university, and the grim opposition he was running up against from just about everyone. Everyone, that is, but the trustees (called The Corporation). This handful of men had chosen Summers as president, presumably after listening to what he wanted to do in that office, and after giving him firm assurances of their support. But Business Week did not so much as mention Harvard’s trustees.
This may be changing, however. Scandal has a way of attracting inquiry and inquiry can reveal structures that underlie the story of who did what to whom. The fact is that opportunities for abuse of trust by trustees are abundant in nonprofits, and some abuses are getting front-page coverage these days. The board of Boy Scouts of America is under surveillance by the media for its struggle with gay rights. Susan G. Komen, the cancer charity, recently underwent a leadership change in the wake of a scandal involving a board decision to deny funding to Planned Parenthood and continues to draw ire for its CEO’s grandiose salary. The Hershey School in Pennsylvania, with its $12 billion endowment, has been under siege by some of its most loyal alumni because of perceived conflicts of interest on the part of board members.
A few voices murmur of crisis in American trusteeship. There are too many nonprofits and too few available trustees. For one thing, a position that once brought little but honor now holds the possibility of dishonor as well, through liability to prosecution. For another and more important thing, trusteeship is at risk of becoming an onerous task and of going the way of other forms of civic participation. The problem seems to be one of time. Fifty years ago, most trustees were recruited from the ranks of the more or less leisured class, so-called old money.
But old money being almost by definition these days no money, its representatives have been replaced by new money (“new top people,” as Ms. Rohatyn put it)—that is, by folks who, again almost by definition, are extremely busy making money. And though this talent makes them attractive as donors, it might make them less so as competent, attentive trustees.
A talent for money-making is often paired with a penchant for ‘free market’ solutions to nonprofit problems. There was a time, for example, when the galleries of the new museum of German and Austrian art on New York’s museum mile were open three days a week, while the museum shop and the restaurant were open four. Or, to take a more poignant example, consider the case of the passionate and sole supporter of a modern dance group who asked one of his businessmen trustees to help him decide whether to carry on in the face of modest ticket sales. The businessman quite properly replied that very few, if any, dance groups made money but that he hadn’t supposed his friend had gone into it to get rich. The man was so dismayed at this verdict of the marketplace that he abandoned his passion forthwith.
But the principal infection that new-money trustees carry with them onto a board is called “corporatization.” The infection comes in many forms. One is commercialization, whether it’s the ascendancy of shops and restaurants in the calculus of institutional performance, or a university’s determination to flog its science faculty’s research products, or the near universal “branding” of great and proud institutions. Centralization is another guise, as essentially feudal structures are replaced by command structures with swim-or-sink performance guidelines. Still another is “consumer sovereignty,” as proudly traditional private schools, for example, are obliged to bend and break every ancient custom to suit student and parent demand. Another is a penchant for bold financial practices, such as the hedge-fund and other alternative investments that in the recent recession financially imperiled not a few well-endowed American universities, several in the Ivy League.
Critics of the corporatization infection seldom have any idea of what should be done about it. One can hardly blame them. It’s embedded in the culture and an assumed moral imperative of growth and competition. Yet every one of the problems (never mind the cultural issues) raised by corporatization demands unusual judgment from the people who hold the institution in trust for the public, and their employees. One sign of the strain in the system is the proliferation—in business schools, law schools, public-policy schools, and divinity schools—of courses in philanthropy and nonprofit management. The Third Sector is rallying to protect its turf, or maybe to negotiate its surrender. In either case, they have no one to do it with but the trustees—a.k.a. the top people.