Nonprofit Quarterly 2017 Summer Issue

21. Approve changes in the organiza- of the following conditions must be met: 2. The voting member is a donor of any NONPROFIT BOARDS tion’s name and address. 1. The member may not be a compen- amount to the organization. sated officer or employee of the orga-22. Approve changes in the number, nization, its affiliate, or other related Obviously, these concepts of con- composition, qualifications, author- organization, or any other with which flict of interest, nonindependence, and ity, or duties of the governing body’s the filing one does business. self-dealing need to be given further and voting members; and in the number, 2. The member may not have received keener attention, depending on one’s composition, qualifications, author- compensation exceeding $10,000 own organizational design and relation- ity, or duties of the organization’s from any of the above during the ships (see Table 1). officers or key employees. reporting year. 3. Neither the member nor a member Dealing with Possible23. State the requirements for a quorum of his or her family may have had an Conflicts of Interest or for any class of issue. economic transaction with the organi- zation or its affiliated or related orga- A conflict of interest occurs when a24. State the conditions and procedures nizations during the year. person stands to gain from decisions he for calling emergency meetings. 4. Neither the member nor a member or she makes that are likely to benefit of his or her family may have had him- or herself, family, or business asso-25. Keep records of its activities. an economic transaction during the ciates at the expense of benefit to the year with an organization doing busi- organization. A nonindependent boardBoard Members and Conflicts ness with the filing organization or member may not necessarily have aof Interest, Nonindependence, its affiliates. conflict of interest vis-à-vis a particularand Self-Dealing transaction. A conflict of interest vis-à-vis A member is not considered to be non- a transaction may just as easily occurThe relationship of the trustee to a family, independent just because: (if not more so) with an independentto a business, and to the organization member of the board. A conflict of inter-itself matters. Therefore, there should 1. The member receives compensation est implies that the person has subordi-be a concern for conflict of interest (a from the organization contingent nated or is at the risk of subordinating hisconcept that focuses on personal or upon his or her being a member of a or her duty (loyalty) to the organizationprivate gains from a specific transaction), recipient group of the organization. on an organizational matter to his or herand concern for the independence of aboard member (a concept that refers to Table 1. Conflicts of Interest, Nonindependence, and Self-Dealingthe relationship of the board member tothe organization: is he or she a part of the Conflicts of Interest: This concept relates to specific transactions. Who in a particular transaction may be exposed toorganization and therefore likely biased a conflict of interest (regardless of remuneration from any party) because of direct or indirect ties to parties standing toin favor of the organization rather than gain (and also lose) from the transaction directly or indirectly? If not the person, then relatives, associates, or businesses? Aobjective?). There should also be concern conflict of interest policy should apply to employees (especially those in senior management) as well as some independentfor self-dealing (a concept that describes contractors (especially those integral to the nonprofit operation; for example, doctors in a hospital).using an organization to advance per-sonal benefits when it is clear that the Nonindependence: This concept applies primarily to voting trustees—those who by their actions can influence thepersonal gains outweigh the gains to the decisions and direction of the organization. A person is not an independent trustee if he or she receives remuneration fromorganization). the organization (other than from being a trustee), or if his or her relatives, businesses, and associates do business with the organization and any of its affiliates. Being a donor of any amount does not make a trustee nonindependent. The fact that a member may be non-independent does not necessarily mean Self-Dealing: This concept applies to donors and other benefactors of the organization. It also applies to trustees and seniorthat the member has a conflict of interest. management when there are (a) excessive or prohibited transactions or (b) transactions from which a donor or memberBut it can raise the question: Is the per- of the management can benefit or from which their relatives, associates, or businesses can benefit. This type of violation,son’s view likely tainted or biased? When unlike the two above, comes with financial penalties to management.a board member is not independent,that has to be recorded, but it is not pro- Except for self-dealing, where penalties may apply, the reliance is on transparency and good judgment. A policy on any or all ofhibited. Interlocking directorates may, these should be part of the annual orientation of managers, and especially of trustees—principally because it is possible to betherefore, have several members who inadvertently trapped. Policy should be refreshed annually with a simple question: Have there been any changes in your conditionare nonindependent but not necessarily or the condition of your relatives, associates, and businesses that could expose you to being classified as a disqualified person (toself-dealing. For a member of the board whom the concepts of conflict of interest, nonindependence, and/or self-dealing apply)?to be considered independent, all fourS U M M E R 2 017 • W W W. N P Q M A G . O R G  T H E   N O N P R O F I T   Q U A R T E R LY  ​49

NONPROFIT BOARDS own gain or the gain of a family member of the amount by which the property of the trustees and the officers of a non- or business associate. appreciated, and a fee for the use of the profit, both of whom can be held per- property. It may also include a disciplin- sonally liable for monetary damages for Every nonprofit organization needs to ary penalty for the fraudulent use of the breaching these duties. A trustee who consider ways to avoid conflicts between assets of the organization.2 behaves in conformity with these stan- the interests of the organization and dards escapes personal liability for his or those individuals in management, gover- Again, self-dealing does not bar an her action on behalf of the organization, nance, and decision-making roles in the honest, arm’s-length transaction that ben- even if the result is an error so serious organization. The IRS has recommended efits the nonprofit and does not unduly as to cause the organization to lose its that organizations consider adopting a favor the trustee or officer over others. status. The standards guide actions; conflict of interest policy that includes These types of transactions should always they do not judge their brilliance or provisions to which these individu- be approached with very careful legal and consequences. als should conform when considering ethical scrutiny and within the scope of transactions in which they have a poten- a carefully crafted and existing policy. These standards recognize the pos- tial, actual, direct, or indirect financial Discussions involving the questioning sibility of error, so they judge only unin- interest. of the involved parties—as well as deci- tentional negligence—not whether the sions—and the supporting or exculpatory decision was fruitful or intelligent. The The Risk of Self-Dealing information should always be retained. application of these principles in a court of law prohibits second-guessing as long Self-dealing is invariably a consequence Dealing with Nonindependence as the trustees made their decisions in of a conflict of interest. If the latter were good faith. This is called the business the signal of a likely opportunity, the Each member of the board has to be judgment rule. What follows is an expla- former is the action that takes advantage classified as independent or not, and if nation of the three. of the opportunity for personal, family, not, why and how. Moreover, there is no or business-related gains or the gains of prejudgment that is correct about the Duty of Loyalty another manager or independent contrac- relevance of nonindependence. A key The duty of loyalty means that while tor (such as excessive compensation). employee who might also be a member acting in the capacity of a trustee or of the board is nonindependent by virtue manager of a nonprofit, a person ought to Section 5233 of the California Corpo- of his or her employment in the orga- be motivated not by personal, business, rations Code clearly defines self-dealing nization, and another member of the or private interest but by what is good for as any transaction involving the organi- board who is not an employee may be the organization. The use of the assets or zation and in which one or more trust- nonindependent because his or her firm goodwill of the organization to promote ees or officers have a material financial has a close relationship with the orga- a private interest at the expense of the benefit, unless: (1) the attorney general nization—such as sponsorship of its nonprofit is an example of disloyalty; in gave approval; (2) the organization operations or services to it, or being a such cases, an individual places the non- entered into the transaction for its own client of the organization (or vice versa). profit in a subordinate position relative benefit; (3) the transaction was fair and Knowing where board members may be to his or her own interest. The nonprofit reasonable for the organization; (4) it coming from is important in evaluating is being used. One purpose of the annual was favorably voted for by the majority the possible impact or perspective they reporting referred to above is to check of the board, not including the affected might bring to specific board decisions— on self-dealing. members; and (5) the board had infor- especially transactions with financial mation that more reasonable terms were implications. Self-dealing is a form of disloyalty. not available. In addition, the California As described earlier, self-dealing means law, as in most states, not only defines Standards at the Root of using the organization to advance per- self-dealing but also gives the time period All Trustee Actions sonal benefits when it is clear that the in which it must be reported or corrected personal gains outweigh the gains to the and the way liabilities are shared. A sixth At the root of conflicts of interest, non- organization. A trustee is not prohib- condition that is covered separately stip- independence, and self-dealing are three ited from engaging in an economic or ulates this. The penalty for the infraction simple standards: duty of loyalty, duty commercial activity with the organiza- of self-dealing may include the return of care, and duty of obedience. Together, tion. Such a transaction can, however, of the property with interest, payment they define the fiduciary responsibility 50 ​T H E   N O N P R O F I T   Q U A R T E R LY  WWW.NPQMAG.ORG • SUMMER 2017

be construed as self-dealing if it can be action when needed, and the decisions therefore, carry the possibilities of NONPROFIT BOARDSshown that: the trustee gained at the must be prudent. conflict of interest, self-dealing, cor-expense of the nonprofit; the trustee ruption, malfeasance, and personaloffered the nonprofit a deal inferior to The test of prudence depends on penalties on the trustees for failure towhat is offered to others or what the non- state law. In many states, the trustees of comply with the duties of loyalty, care,profit could acquire on the open market; nonprofits are held under the same rules and obedience. The member may notor, the nonprofit was put in a position of that govern trustees of for-profit corpo- be excluded from participation but mayassuming risks on behalf of the trustee. rations. In these states, prudence can be recuse him- or herself, or require a voteA numerical amount, $5,000 or more, construed to mean making decisions not or permission by the board for his ormakes the self-dealing an illegal—not unlike those expected of any other group her participation. Furthermore, thesejust an unethical—infraction. of trustees faced with relatively the same transactions come with the right of the “business” facts and circumstances. In trustees to be informed by the operating Another form of self-dealing can other states, nonprofit trustees are held managers of the organization—and mayoccur when two or more nonprofits to a higher standard, where prudence even require the approval of the trusteemerge assets or transfer assets from means using the same wisdom and judg- either by bylaws, state laws, or by theone to the other, and they have the same ment that one would if his or her own other parties to the transaction. They aretrustees. Here, the issue is whether a personal assets were at stake. The first inescapable in the role of being a trustee.good purpose is being served. Therefore, is called the corporate model and thebefore consummating a merger, or any second is called the trust model. Excessive Economic Transactionsother major transaction, it is wise to set and Due Diligencea barrier against self-dealing. The duty of care can deny using ignorance as a defense. Therefore, it is Every economic transaction has the One might assume that a common inconsistent with this duty to allege that potential for some form of compensa-way the board of trustees must defend a trustee or manager does not hold any tion where—by a lack of exercising theirthe nonprofit organization against responsibility merely because he or she duties of loyalty, care, obedience, andself-dealing is in cases of corporate offi- is unaware. To know is the duty. It is the additional duty of due diligence—cers abusing their trustee status for the this duty that makes many compassion- trustees agree to or put forward a com-benefit of their firms; however, this is not ate but busy people reluctant to serve on pensation that is offensively excessive.the case. A board will more likely need to nonprofit boards. In a real sense, they This occurs with compensation of keydefend its organization against the orga- can’t care enough—that is, not in the employees, the trustees themselves,nization’s founder(s). It is not unusual legal sense. and with independent contractors andto find that after years of personal sac- vendors.rifice in calling the public’s attention to Duty of Obediencea good cause, founders of organizations The duty of obedience holds the trustee Trustees are responsible for negotiat-confuse the assets of the nonprofit with responsible for keeping the organization ing and agreeing to executive compen-their own, confuse the interests of the on course. The organization must be sation and key employee contracts. Keyorganization with their own, and begin made to stick to its mission. The mission employees satisfy two criteria: (a) theirto take dominion over these assets or of a nonprofit is unlike the mission of a full aggregate compensation of all typesinstall themselves or relatives in highly firm. The mission is the basis upon which from the organization (its subsidiaries,favorable tenured positions. Operat- the nonprofit and tax-exempt status are its affiliates, and disregarded groups—ing under the burden of loyalty, boards conferred. Unlike a firm, a nonprofit joint ventures and corporations ofmust separate these persons from the cannot simply change its mission without which the nonprofit is sole member andorganization. the threat of losing either its nonprofit or must include in its 990 reports) exceeds tax-exempt status, or both. $150,000 annually, and (b) they hold aDuty of Care position of responsibility for makingThe duty of care requires trustees of Economic Transactions the decisions concerning any of the keynonprofits to act in a manner of someone and the Trustees employees. The federal law, “Taxpayerwho truly cares. This means that meet- Bill of Rights 2,” makes trustees disquali-ings must be attended, the trustees Table 2 (following page), enumerates fied persons. For purposes of compensa-should be informed and take appropriate certain economic transactions that tion, a disqualified person is any trustee, require decisions by the trustees—and,S U M M E R 2 017 • W W W. N P Q M A G . O R G  T H E   N O N P R O F I T   Q U A R T E R LY  ​51

NONPROFIT BOARDS manager, donor, or entity (and in the case an excess benefits transaction—unless was an act of self-dealing, where this of a hospital, any physician) who had sub- there is reasonable cause to believe that inquiry is clearly indicated, does con- stantial influence over the organization in the trustee or other disqualified persons stitute an act of negligence and could the five years preceding the date of the did not know of the transaction, and did likewise result in being penalized by the “excess transaction.” Any firm in which a not know that the transaction would imposition of the excise tax. member of the board directly or through be deemed self-dealing. Failure to have family relationship owns or controls inquired about whether the transaction But when is compensation excessive? 35 percent or more of the voting stock It is excessive when the compensation is itself a disqualified person. Therefore, the firm would also be limited in its eco- Table 2. Economic Transactions That Require Decisions by Trustees nomic relationship with a nonprofit orga- nization. This is to prevent a member of 1. Changes in financial advisors or institutions a nonprofit board who is also a business 2. Changes in the mission of the organization, whether by amendment, interpretation, or by emphasis owner—or who is related to one—from 3. The allocation of the annual budget, both costs and expenditures doing business with the organization and 4. The sale of the organization’s assets for excessive fees. 5. The acquisition of capital assets or initiation of programs 6. The annual performance of the organization—financially and in terms of its output Any such disqualified person (the 7. Hiring, departure, or transfers in the top tier of the organization trustee or the firm that he or she—or his 8. The signing of contracts by independent contractors as well as key employees or her relatives—controls) who obtains 9. Major collaborations or partnership arrangements involving the organization excess benefits (such as overcompensa- 10. The leasing of major assets by the organization, whether as lessor or lessee tion) can be subject to an excise tax of 11. Disputes in which the organization is likely to be involved, whether by clients, employees, or others 25 percent of such an excess; and any 12. Planned changes or agreement to any compensation schemes of employees, executives, and disqualified person who knowingly par- ticipated in this agreement would addi- independent contractors, or compensation that could be considered excessive tionally be subject to an excise tax of 13. Independent assessment of financial activities and performances of the organization 10 percent of the excess up to $10,000. 14. Specific performances of endowments and other funds subject to restrictions—dealing separately The focus of this law is on executive com- pensation, but it applies to all kinds of with restrictions imposed by donors from restrictions imposed by the trustees transactions—including the payment of 15. A projection of earnings and expenses by source with caveats of a projection, and the identification trustees or any other disqualified person as defined above, or the payment in a of any uncertainty, twists, turns, and plans for more than a year, if that is feasible and requested sale of a product or service rendered by 16. A discussion of diversion of funds and taking action them. The law considers excessive com- 17. The written authorization of debt and of any specific borrowing arrangement pensation to any disqualified person to be 18. The written authorization of fundraising campaigns and contracts and choice of firm self-dealing; for example, using the assets 19. The hiring of auditors, receiving of their reports, and requiring organizational response of the organization for personal benefit. 20. Discussion prior to acceptance of large gifts, whether outright or deferred, and their terms 21. Claims and potential settlements of corruption, discrimination, negligence, or harassment Participation in self-dealing is willful 22. Any legal action against the organization, including failure to file proper documents if the disqualified person engaged in the 23. Establishment and monitoring of internal controls act voluntarily, intentionally, and con- 24. Approval of major advertising or use of the organization’s logo or reputation sciously. Self-dealing refers to benefit- 25. Decisions on dissolution, major collaboration, mergers, and other reorganizations ing—or having some other related person 26. Setting investment policies for unnecessary risk exposure and investment protection benefit—excessively from a transaction. 27. The assessment of purchasing contracts It can occur from an act or the failure to 28. An assessment of the organization’s business-income stream and alliances act when one is required to express an 29. Any cross-subsidization or subsidization of one program by another or by the organization that opinion or decision about that transac- tion and fails to do so. Therefore, liability is tenuous also arises from silence and the lack of 30. Minimization of self-dealing, conflict of interest, personal inurement, and manipulation, fraud, action to stop or to record objection to and failure to comply 52 ​T H E   N O N P R O F I T   Q U A R T E R LY  WWW.NPQMAG.ORG • SUMMER 2017

exceeds the economic value of the their duty of care toward the organization 2. To inquire about an orientation NONPROFIT BOARDSbenefit the organization got in return or means that they need to be informed and session for board members andwhen the compensation is calibrated to to act prudently on behalf of the organi- about a board manual containingthe organization’s revenues or reflects zation, they should expect that they will the policies and procedures for thepersonal inurement. be kept informed about those things that organization. matter. These include being kept up to The law does provide for the orga- date on major changes in the organiza- 3. To have reasonable access to man-nization to indemnify or insure the dis- tion’s direction or assets, annual budgets agement and reasonable accessqualified person against the cost of any and financial statements, changes in key to internal information about thepenalty or taxes due to an “excess trans- employees, new risks to which the orga- organization.action.” It does, however, also require nization is exposed, employee compen-that this insurance or indemnification sation packages, and evaluations of the 4. To have reasonable access to thebe included in the compensation. Hence, organization’s performance. organization’s principal advisors,the more the organization covers for the including auditors and consultantsdisqualified person, the greater the tax The duty to the trustees also encom- on executive compensation.or penalty on all disqualified persons passes loyalty. This concept implies afound to have knowingly participated in protection of the trustees. Trustees have 5. To hire outside advisors at the orga-the transaction. a right to presume that the relationship nization’s expense.3 between them and the organization is The principal defense against exces- aboveboard (so to speak), at reasonable Observe that these rights are consis-sive economic transactions is compara- arm’s length, and that the organization tent with exercising the duty of care, andble compensation information—in other does not expose any trustee to personal with the law’s protection of trustees andwords, do comparable organizations or professional risks—even if it fore- officers if they rely on the expert judg-justify what is being accepted or offered? warned him or her that such risks might ment of persons such as auditors and be present. Put simply, they have a right accountants, lawyers, and investmentDuty of Organizations to to expect that they are not being used or advisors. They are also consistent withTrustees and Their Rights “set up,” that the information given them the organization’s duties to the trustees. to form the basis of their decisions is asTrustees have the right to expect that the clear, complete, correct, and relevant as These rights translate to the trustees’nonprofit organization has exactly the possible, and that the organization will right to know, be informed, and havesame duty to them as they have to the org­ not act imprudently. their actions followed. Some of these areanization. They should expect obedience required by law, such as trustee approvalto their policies that are consistent with Consistent with the exercise of pru- of amendments; some are required bythe mission of the organization. Trustees dence, trustees may rely on information practice, such as a bank’s stipulation thatshare liability for infractions; therefore, they obtain from appropriately assigned a trustee resolution be supplied before itthey should expect that their directions employees, accountants, lawyers, engi- extends a loan; some of these are subtle,will be obeyed. It is they, rather than the neers, and other experts. Relying on the such as informing trustees about majoremployees, who represent the public expertise of such persons is an act of transactions so that they can determineinterest. Timely and relevant informa- prudence and not necessarily a skirting if there is a potential conflict of interest;tion and interaction consultants (includ- or shifting of responsibility. and some of these are early warnings oring auditors, compensation experts, pleas for help, such as giving a projec-lawyers, and the chief executive of the In the Guidebook for New Hamp- tion not simply of the annual data but ofnonprofit) are first defenses against shire Charitable Organizations, New what they may look like under certainunwitting self-dealing, conflict of inter- Hampshire’s attorney general advises projections—such as if trustees continueest, and general failure to perform their that directors should have the following to operate as they have been.duties of loyalty, care, and obedience. specific rights (in addition to others):Trustees, therefore, have a right to know, Liability of Trusteesand the organization has a duty to keep 1. To have a copy of the articles of orga-them informed. nization (incorporation or deed), No matter how much protective action by-laws, and other documents that is taken, there is always the possibility Accordingly, trustees should expect are necessary to understand the of a trustee’s being sued or involved ina duty of care directed toward them. As operations of the organization. a lawsuit against the organization. How does the organization protect the trustee?S U M M E R 2 017 • W W W. N P Q M A G . O R G  T H E   N O N P R O F I T   Q U A R T E R LY  ​53

NONPROFIT BOARDS First, by timely information as discussed the affairs of a nonprofit unless the to be liable to the nonprofit or in any situ- above, so that the trustee can take ade- action taken is willful or wanton miscon- ation where he or she benefited improp- quate action; second, by covering the duct or fraud, or is gross negligence, or erly. Indemnification may be limited to trustee through insurance and indemni- if the person personally (or through a reasonable expenses incurred. Gener- fication; and third, by disclosures. relative or associate) benefited from the ally, reimbursement may occur only after action taken. the case is disposed, but Mississippi, as The board of trustees of a nonprofit an example, provides for payment in organization may be sued by (1) the A trustee is liable for unlawful dis- advance. However, the trustee must members in a so-called derivative suit, tributions of the assets of the organiza- provide a written statement attesting to whereby the members are suing the tion. An unlawful distribution can be one having undertaken the action in ques- trustee on behalf of the greater good that is inconsistent with the mission of tion in good faith, stating that the trustee of the organization; (2) a third private the organization, inconsistent with the promises to repay the sum if the judgment party; (3) a government; and (4) one of bylaws and tax-exempt laws, outside is against him or her, and declaring the act its own members or employees. Liability the powers of the organization, and for not one that would otherwise preclude may arise either for actions taken or for private gains of the trustee or associ- indemnification. A trustee that is entitled the failure to act. Furthermore, in some ates. A loan to a trustee is just one type to indemnification may turn to the court instances, liability may arise because of of unlawful distribution. Using the assets to have such indemnification paid by the the actions of other trustees or officers. for political purposes is another, and so is nonprofit. If the proceeding is against For example, a trustee can be held liable excessive executive compensation. the organization rather than against the for failing to block an inappropriate trustee, the trustee may be indemnified by action by other trustees or by manage- Not only are the trustees who voted in the organization for his or her expenses. ment. The duties of care and loyalty mean favor of the unlawful distribution liable, This is the case if the trustee acted in that a trustee cannot choose to look the but so are all other directors who failed good faith. other way when an officer or another to voice an objection. Arizona 10–3833 trustee may be involved in actions that requires that objections be noted in the • • • are wrong. minutes of the meeting when the act was taken or by 5:00 p.m. the next busi- A board of directors or trustees of a non- This liability threat would discourage ness day. It further states, “The right to profit organization is an essential part of many good people from serving nonprof- dissent does not apply to a director who the design of the organization and how its. If the trustee can be held personally voted in favor of the action.” Still further, well it abides by its mission, the expec- liable, then he or she faces the possibility any trustee found liable for the unlawful tations of its members, its clients, and of being sued and having to pay monetary distribution shares that culpability and state, local, and federal governments. damages out of personal resources. Even can be held equally liable with all trust- The way a board is constructed is impor- if monetary damages are not assessed, ees who voted affirmatively, all trustees tant because it affects the representation the trustee faces the unpleasant possibil- and members who shared in the distribu- of various interests and the efficacy of ity of having to spend time and resources tion, and all who failed to dissent in the the board. in a personal defense. In addition, there manner prescribed by law.4 are the emotional and social costs. The composition has to do with the Even though the nonprofit has the number and distribution of persons on Recognizing this deterrent, many power to indemnify a trustee or officer, the board and the way it is divided by states have taken actions to limit a trust- some states specify the conditions function. The functions are not perfunc- ee’s personal liability. For volunteers as under which such indemnification can tory; they facilitate the capacity of the well as trustees, states range from no be offered. In Mississippi 79–11–281, board to carry out its principal purpose protection to protection only if the act indemnification can be offered only if of being the voice of the organization was not intentional, was the result of neg- the trustee (1) conducted him- or herself and the various interests that the orga- ligence or breach of fiduciary responsi- in good faith and (2) believed that the nization serves. To do this competently bilities, was a knowing violation of the conduct was in the best interest of the involves carrying out a variety of specific law, or was a result of a reckless action organization—or at least not contrary to activities and first being true to the orga- or one done in bad faith. its best interest or those of its members.5 nization in doing so. This means putting the organization first (loyalty to it and the In general, an officer or trustee is The nonprofit may not indemnify the immune from civil suit for conducting trustee or officer when he or she is judged 54 ​T H E   N O N P R O F I T   Q U A R T E R LY  WWW.NPQMAG.ORG • SUMMER 2017

care it takes to do that well). Self-dealing DIVISION 2. NONPROFIT CORPORATION TWCPSA NONPROFIT BOARDSis to be avoided; conflicts of interests are LAW [5000 - 10841], PART 2. NONPROFITto be minimized. PUBLIC BENEFIT CORPORATIONS [5110 Public Service AdverPsing - 6910], CHAPTER 2. Directors and Manage- Use Your Budget Wisely The issues here are not just ethical; ment [5210 - 5260], ARTICLE 3. Standardsthey are also legal and therefore given of Conduct [5230 - 5239], § 5233,” California Be Smart attention as core duties of the board. The Legislative Information, leginfo.legislature Contact TWCPSA single best advice: board members must .ca.gov/faces/codes_displaySection.xhtmlcare sufficiently to be fully informed, ?sectionNum=5233.&lawCode=CORP. Find out how TWCPSA fully involved, and fully compliant. Short 3. Guidebook for New Hampshire Chari- can help opPmize all of this, there is personal risk of liability table Nonprofit Organizations, 1st ed. your fundraising efforts! and organizational risk of failure—to the (Concord, NH: Office of the NH Attor-detriment of those the organization was ney General Charitable Trust Unit, 2005), Average CPM* intended to serve. web.law.columbia.edu/sites/default/files /microsites/career-services/Guide%20for $33.00 $30.00 The success of the board depends %20New%20Hamphire%20Charitableupon all that has been outlined above, but %20Nonprofit%20Organizations.pdf. $14.00 $15.00 to carry out any of these best practices 4. “§ 10-3833. Liability for unlawful distribu- $10.00 requires that the organization—espe- tions,” Arizona State Legislature, www.azleg $5.00 $0.48 cially the chief executive—recognize the .gov/viewdocument/?docName=http://wwwimportance of providing the board with .azleg.gov/ars/10/03833.htm. *cost per thousand impressionstimely information. Society depends 5. “2013 Mississippi Code, Title 79 - COR-upon nonprofit organizations for a PORATIONS, ASSOCIATIONS, AND Contact: variety of essential functions—from edu- PARTNERSHIPS, Chapter 11 - NON- Wendy Wetherall, CFRE cation to health, art to social services, PROFIT, NONSHARE CORPORATIONS 516.449.5661 and housing to general welfare, to name AND RELIGIOUS SOCIETIES, MISSIS- [email protected] a few. The success of these organizations SIPPI NONPROFIT CORPORATION ACT,in serving the public depends not only § 79-11-281 - Indemnification of director, twcpsa.com upon monetary resources but also on the officer, employee, or agent,” law.justia.comability of these organizations to function /codes/mississippi/2013/title-79/chapter-11in an orderly and efficient manner. When /mississippi-nonprofit-corporation-acta nonprofit organization fails, promises /section-79-11-281/.fail—and so do the expectations of thepublic and the direct clients and donors. Herrington J. Bryce is the Life of Vir-And society has one organization less ginia Professor (corporate finance) at thethat it can call upon to provide needed Raymond A. Mason School of Business,services. The key to avoiding failure is College of William and Mary, an affiliate of itsthe way the organization is managed— Thomas Jefferson Program in Public Policy,and at the very top of the management and the author of several books on nonprof-pyramid is the board of directors. its, including Financial and Strategic Man- agement for Nonprofit Organizations (De|GNotes Press, 2017), a comprehensive guide to all1. Herrington J. Bryce, “Decision-Making phases of nonprofit management.and Governance Structure in Lessening theBurden of Government,” in Nonprofits as To comment on this article, write to us atPolicy Solutions to the Burden of Govern- [email protected]. Order reprints fromment (Berlin, Germany: De|G Press, 2017): http://store.nonprofitquarterly.org, using125–43. code 240208.2. “CORPORATIONS CODE – CORP,TITLE 1. CORPORATIONS [100 - 14631],S U M M E R 2 017 • W W W. N P Q M A G . O R G  T H E   N O N P R O F I T   Q U A R T E R LY  ​55

ACTIVISM IN THE DIGITAL AGE A Media Theory of Movement Power by David Karpf When we talk about “the media,” we tend to envision the old media institutions that are giving way to new journalistic approaches and technologies. The same goes for activism: we look at today’s movements and find them lacking in comparison to the movements from the past, forgetting that movements evolve along with the media frameworks of their time. “When we lionize the tactics of social movements from a bygone era, we blind ourselves to the opportunities and potential presented by current media technologies,” writes Karpf. “Properly harnessed, these technologies allow large organizations to engage in analytic activism. Improperly harnessed, they can send civil society organizations down a crooked path that leads to prioritizing issues, campaigns, and tactics that are more clickable over those that are more important.” Editors’ note: Movement organizations are dealing with an increasingly varied media and technological landscape, and that requires our use of a different set of tools and strategies. This article, which is drawn (with some minor alterations) from David Karpf’s new book, Analytic Activism: Digital Listening and the New Political Strategy (Oxford University Press, 2016), provides a useful disruption of antiquated assumptions about the interfaces between movement and medium. We thank the author and WOxford University Press for their kind permission. media system has undergone a continu- new competitive pressures, adopting new e often make two mistakes ous series of upheavals. journalistic routines, and making use of new media technologies. As Andrew with regard to the interac- We can no longer simply state that Chadwick suggests, we have replaced tion of media institutions and political activism. some protest actions are inherently First, we still frequently treat “the media” more media-friendly or newsworthy than the old media cycle with a new “political as a unitary, stable, and undifferentiated others. We now have to specify which information cycle.”2 Stories unfold differ- system. This was a defensible assumption media and which news. Protest tactics ently in the political information cycle. in 1993, when William Gamson and Gadi are made media-friendly when they align Social media buzz helps to determine the Wolfsfeld wrote their authoritative treat- with dominant media technologies. They mainstream news agenda. Partisan news ment of the subject, “Movements and become newsworthy when they fit the sites highlight different stories to appeal Media as Interacting Systems.” Gamson norms, incentives, and routines of the to their niche audiences.3 If movements and Wolfsfeld demonstrated that “social major news organizations of the day. and media are interacting systems, then movements need the media far more than When we talk about the “media system,” the dramatic changes to the media system the media need them.”1 They did so by we still largely have in mind the broad- must produce ripple effects that change tracing the interests of social movements cast media institutions that dominated the opportunity structure for social and of industrial media organizations twentieth-century American politics—the movements. that typified the broadcast news era. But nightly news and the daily paper in partic- Second, we treat the media as though in the decades that have elapsed since ular. Today, those broadcast institutions it were a mirror, held up to society and that classic work was published, the remain relevant, but they are also facing reflecting back the most important 56 ​T H E   N O N P R O F I T   Q U A R T E R LY  WWW.NPQMAG.ORG • SUMMER 2017

or prominent issues of the day. The presents to activist organizations, we usually ignore how those earlier move- ACTIVISM IN THE DIGITAL AGEdominant theories of policy change must historically bracket successful ments were strategically tailored to thein political science, in fact, have long movement tactics. Different media, emerging broadcast media environmenttended to ignore the role and interests dominant at different points in history, of the day.of media institutions.4 These theories incentivize different forms of publicdraw empirical data from newspaper spectacle. The release of a new policy Let me animate this point with a cel-coverage, equating it with evidence of report will be much more appealing ebrated example: the Bloody Sundaypublic opinion and public events. Media to policy bloggers than to television march in Selma, Alabama. Taeku Leeattention serves as a stand-in for public journalists. Press conferences are an discusses the tremendous success ofopinion in this tradition: if a topic makes artifact of the broadcast era; bloggers this action in his 2002 book, Mobilizingthe front page of the local paper or see little value in a press release. The Public Opinion:receives four minutes of coverage on the broadcast television era imparted greatnightly news, we treat it as evidence of leverage to advocacy tactics that could The movement strategy of provok-public interest and public will. As Susan make the six o’clock news. The current ing police brutality with nonvio-Herbst demonstrates in Reading Public digital era, with its niche news program- lent direct action fit well in Selma.Opinion, both political activists and ming, twenty-four-hour cable stations, Sheriff Jim Clark’s bigotry andlegislators treat the daily news agenda hashtag publics, and social sharing, short temper were notorious. . . .as evidence of public opinion.5 creates leverage for a different set of The activists marched uneventfully tactics. The relative power of individual [on Bloody Sunday] through down- But a long research tradition main- protest tactics—petitions and sit-ins, town Selma but barely crossedtains that media has never been merely marches and boycotts—changes apace the murky Alabama River on thea reflective technology. Kurt and Gladys with the shifting media system. Whether Edmund Pettus Bridge beforeLang first offered this insight in their we label these changes to the media they were met by a detachment ofseminal 1953 study of the MacArthur system as indicative of changing “media law enforcement officers. AboutDay parades: media is a technology of regimes,”8 “information regimes,”9 fifty Alabama state troopers andrefraction, not reflection.6 Introduce “hybrid media systems,”10 or “civic infor- several dozen of Sheriff Clark’stelevision cameras into an event, and mation paradigms,”11 the central point is posse waited on horseback, fittedyou will manufacture a public spectacle. that media technologies and media insti- with gas masks, billy clubs, andPeople will behave differently, perform- tutions play a role in determining the blue hard hats. . . . Newsmen oning roles for the cameras. Place newspa- strategic value of various protest tactics. hand captured the surreal chainper reporters or bloggers at that event, All movement power is, in part, premised of events with film and camera.and you will reveal different elements on understanding and leveraging the By sundown, scenes from Selmaof the same spectacle. Media coverage interests of these changing media enti- were broadcast in living roomsis not a neutral arbiter or reflection of ties. Movement power is, in this sense, throughout the nation. One tele-objective reality. It documents a perfor- also media power. vision station, ABC, interruptedmance that it is helping to cocreate. As their evening movie, JudgmentGamson and Wolfsfeld put it, “A demon- Activism is adapting to the digital at Nuremberg, to air a film reportstration with no media coverage at all is age (as are we all). Our expectations on the assault. The raw footagea nonevent, unlikely to have any positive of activists, however, remain decidedly ignited a firestorm of publicinfluence either on mobilizing followers anchored in the preceding century. In outrage [emphasis added].12or influencing the target. No news is bad particular, the era of grand U.S. socialnews.”7 Successful protest events are movements (roughly the 1960s and early Lee is describing a key moment in onestrategically designed to attract cover- 1970s) often receives hagiographic treat- of the most celebrated, successful socialage from the dominant media of the day. ment from scholars and practitioners movements of the twentieth century. ItAnd as the media system changes, so too alike. Those movements were power- was not the sheer number of protest-must our understanding of successful ful, their tactics successful. Present-day ers (approximately six hundred) thatprotest events. movements are frequently compared made this action so powerful. Nor was it with movements of this era and found the poetry or the righteousness of their To think clearly about the oppor­ wanting. In making this comparison, we cause. Central to the protesters’ strategytunities that the changing media system was a clear reading of the affordancesS U M M E R 2 017 • W W W. N P Q M A G . O R G  T H E   N O N P R O F I T   Q U A R T E R LY  ​57

ACTIVISM IN THE DIGITAL AGE provided by the broadcast-era media coverage. This was not the first time Now, in the simplest sense, Lemann is environment. If Sheriff Jim Clark had left that a major oil spill had happened, and factually incorrect: Beginning in October those protesters alone, the march would it was the twelfth time the Cuyahoga had 2006, seven students from Middlebury have ended uneventfully. The protest- caught fire. But because of the limited College worked with their professor, Bill ers would have had tired limbs and not viewing options of the broadcast media McKibben, to launch the Step It Up day much else to show for it. If the cameras environment, these images were seen of action on climate. After six months of had not been present, Clark’s brutality in living rooms throughout the nation. organizing, facilitated mostly through would have gone unheralded, another Rivers catching fire make for great tele- the Internet, the Step It Up day of action chapter in the long history of violence vision footage. The early leaders of the occurred on April 15, 2007. It included against African Americans in the Ameri- environmental movement seized upon 1,410 events across the country.16 Step can South. But raw footage of police the public attention generated by these It Up later changed its name to 350.org, brutality was piped into living rooms broadcast tragedies and used it to galva- a leading climate advocacy organization across the nation. To borrow a phrase nize media-friendly actions like the first that regularly plans massive global days from Todd Gitlin, “The whole world was Earth Day. As Ronald Shaiko put it, “One of action that feature four thousand to watching.”13 And since this was 1965, a might ask, philosophically, If Greenpeace five thousand simultaneous events. The time when we had only three stations, activists hold a protest rally in the woods youth-led Energy Action Coalition has there was nothing else on television. and the media are not there to cover it, also repeatedly planned a series of citizen do they really make a sound?”14 The lobby days that have broken records as Against tremendous odds, civil rights birth of the environmental movement the largest in U.S. history, bringing fifteen movement activists proudly and stri- and its most iconic tactical successes thousand young people into face-to-face dently forged a better society. Their were rooted in the affordances of the contact with their congressional repre- personal courage was coupled with media system of that time. The problem, sentatives. Present-day movements still great strategic acumen. There are good however, is that this glamorized remem- plan plenty of “events that people actu- reasons why present-day activists and brance of past social movements inap- ally attend.” But that attendance is no scholars seek insight from the social propriately shades our perceptions of longer picked up and refracted through movements of that era. But in the search modern-day social movements. Consider, a broadcast-dominant media system. for insight, scholars, public intellectu- for instance, Nicholas Lemann’s indict- Without the amplifying power of the als, and practitioners alike tend to over- ment of 2010 environmentalists’ failure broadcast-era industrial media, the same look how the tactics of that era were to pass climate legislation through the tactics no longer produce the pressure crafted to match the media system. If U.S. Congress: that they once did.17 the Bloody Sunday march had occurred in 2015, it would have included hashtags Today’s big environmental groups The difference between Step It Up and retweets, mash-ups and Vine clips. recruit through direct mail and the and the original Earth Day was not in But it also would have reached a smaller, media, filling their rosters with mil- the quantity of simultaneous teach-ins. niche audience through the nightly news, lions of people who are happy to It was not in the power of their rhetoric and it would have been immediately rein- click “Like” on clean air. What the or the resonance of their media frames. terpreted, reframed, and denounced by groups lack, however, is the [1970] The difference was in how those mass partisan elites. The whole world would Earth Day organizers’ ability to protest events were refracted and ampli- not have been subjected to the same generate thousands of events that fied through the larger media apparatus images, and the resulting public mobili- people actually attend—the kind (and, one might add, in the sclerotic state zation would have unfolded along a dif- of activity that creates pressure on of U.S. congressional politics). ferent path. legislators.15 The original Earth Day, like the Bloody Another example: In 1969, during By Lemann’s reckoning, the environ- Sunday march in Selma, was strategically the early years of the environmental mental movement of 2010 was a failure tailored to take advantage of a media movement, two galvanizing moments because it did not generate the same regime that no longer exists. The mere came when Time magazine ran a story “thousands of events that people actu- existence of the teach-ins was news. The about the Cuyahoga River catching fire ally attend” that the environmental move- Earth Day teach-ins attracted broadcast and when an oil spill off the coast of ment of the broadcast era had generated. media attention. And the public politi- Santa Barbara received national news cal agenda was defined through that 58 ​T H E   N O N P R O F I T   Q U A R T E R LY  WWW.NPQMAG.ORG • SUMMER 2017

media attention. New media refracts at the dots between a series of individual objects that are discussed at weekly staff ACTIVISM IN THE DIGITAL AGEdifferent angles. Recruitment for Step It tragedies and place-based protests, meetings.Up/350.org actions occurs through e-mail which themselves became the topic oflists, Facebook shares, and blog posts. media coverage.20 These activists are not Properly harnessed, these tech-The fact of the 2010 day of action was choosing between broadcast media and nologies allow large organizations tohashtagged and retweeted. These digital social media. They are using the tools at engage in analytic activism. Improperlyactions defined a political agenda for a their disposal—including social media harnessed, they can send civil societypublic. But they did not leave the same accounts—to create leverage over their organizations down a crooked path thatimprint on the broader public conscious- direct targets (public officials) and sec- leads to prioritizing issues, campaigns,ness. The lesson gleaned from success- ondary targets (including mainstream and tactics that are more clickable overful social movements’ past cannot be to media organizations). Broadcast media those that are more important. Analyticmimic exactly what they did. The leaders outlets sent reporters to Ferguson, Mis- activism supports new innovations inof the present must strategically adapt to souri, to cover protests surrounding tactical optimization, computationalthis digital refraction, just as social move- the death of teenager Michael Brown management, and passive democraticment leaders of the past adapted to the because Twitter conversation signaled feedback. It enables organizations tobroadcast refraction. its newsworthiness.21 The presence of learn and listen in different ways and to those same reporters then helped to capture the energy refracted through the The current hybrid media environ- cocreate the unfolding political specta- hybrid media system.ment provides opportunities for activ- cle.22 Both broadcast television camerasist movements and activist moments and cell phone cameras are technolo- Notesthat would have gone missing in the gies of refraction. Social movements 1. William A. Gamson and Gadi Wolfsfeld,older industrial broadcast media envi- of the 1960s developed their tactics for “Movements and Media as Interactingronment. As James Rucker, founder an industrial broadcast media environ- Systems,” Annals of the American Academyof ColorOfChange.org and cofounder ment. Social movements of the 2010s are of Political and Social Science 528, no. 1of Citizen Engagement Lab, argues: modifying their tactics for a hybrid media (July 1993): 114–25.“The media landscape twenty years environment. 2. Andrew Chadwick, The Hybrid Mediaago would have prevented the stories System: Politics and Power (New York:driving the Movement for Black Lives There is no single “correct” strategy Oxford University Press, 2013).today from breaking through. The for leveraging digital media into move- 3. Kathleen Hall Jamieson and Joseph N.voices we’re now hearing, reading, and ment power. There is, however, a set Capella, Echo Chamber: Rush Limbaughseeing are all enabled by an open Inter- of practices that, when properly insti- and the Conservative Media Establish-net that has largely avoided corporate tuted, helps activist organizations adapt ment (New York: Oxford University Press,or government filter. And they are shift- to the rhythms of the digital age. I have 2010); and Kevin Arceneaux and Martining public dialogue, impacting culture, only just touched here on the strengths, Johnson, Changing Minds or Changingand building momentum to change weaknesses, possibilities, and limitations Channels? Partisan News in an Age ofpolicy.”18 When we lionize the tactics of of those new practices. In particular, Choice (Chicago: University of Chicagosocial movements from a bygone era, we we need to focus on the role that new Press, 2013).blind ourselves to the opportunities and digital listening tools have begun to play 4. Arceneaux and Johnson, Changingpotential presented by current media in fashioning new tactics and strategies Minds or Changing Channels?; and Franktechnologies.19 that help large-scale political organiza- R. Baumgartner and Bryan D. Jones, tions create leverage in the hybrid media Agendas and Instability in American Indeed, this appears to be a key system. Analytics encompass a cluster Politics (Chicago: University of Chicagoingredient in the success of present-day of technologies that allow organiza- Press, 1993).political movements. The Movement for tions to monitor online sentiment, test 5. Susan Herbst, Reading Public Opinion:Black Lives (a.k.a. #BlackLivesMatter) and refine communications, and quan- How Political Actors View the Democratichas directed national attention to the tify opinion and engagement. These are Process (Chicago: University of Chicagocrisis of police violence against African back-end technologies, viewed by pro- Press, 1998). Indeed, as Susan Herbst hasAmericans. It has done so by adopting a fessional campaigners through internal repeatedly demonstrated, media cover-distinctly hybrid media strategy, includ- dashboards and fashioned into strategic age often serves this role for researchersing the use of hashtags that connectedS U M M E R 2 017 • W W W. N P Q M A G . O R G  T H E   N O N P R O F I T   Q U A R T E R LY  ​59

ACTIVISM IN THE DIGITAL AGE precisely because “public opinion” is so hard Engagement in a Networked Age (New York: Computer-Mediated Communication 21, to define. Oxford University Press, 2015). no. 2 (March 2016): 140–55; and Hadas Eyal, 6. Kurt Lang and Gladys Engel Lang, “The 12. Taeku Lee, Mobilizing Public Opinion: “Digital Fit as a Leg-Up for Nongovernmental Unique Perspective of Television and Its Black Insurgency and Racial Attitudes in Organizations’ Media and Political Success,” Effect: A Pilot Study,” American Sociologi- the Civil Rights Era (Chicago: University of Political Communication 33, no. 1 (2015): cal Review 18, no. 1 (February 1953): 3–12. Chicago Press, 2002). 118–35. Dan Mercea and Marco Bastos have 7. Gamson and Wolfsfeld, “Movements and 13. Todd Gitlin, The Whole World Is Watch- likewise traced the role of “serial activists” Media as Interacting Systems.” ing: Mass Media in the Making and Unmak- in transnational social movements—people 8. Bruce A. Williams and Michael X. Delli ing of the New Left (Berkeley: University of who repeatedly use social media to help Carpini, After Broadcast News: Media California Press, 1980). publicize, support, and orchestrate protest Regimes, Democracy, and the New Infor- 14. Ronald G. Shaiko, “Greenpeace U.S.A.: events. And Hadas Eyal has demonstrated mation Environment (New York: Cam- Something Old, New, Borrowed,” Annals that, among Israeli NGOs, “digital fit” is a key bridge University Press, 2011). of the American Academy of Political and determinant of traditional media coverage. 9. Bruce Bimber, Information and Ameri- Social Science 528, no. 1 (July 1993): 88–100. Though I focus mostly on American case can Democracy: Technology in the Evolu- 15. Nicholas Lemann, “When the Earth examples here, there is strong evidence for tion of Political Power, Communication, Moved,” New Yorker, April 15, 2013, similar changes on the global scale. Society and Politics series (New York: Cam- www.newyorker.com/magazine/2013/04/15​ 20. Deen Freelon, Charlton D. McIlwain, and bridge University Press, 2003). /when-the-earth-moved. Meredith D. Clark, “Beyond the Hashtags: 10. Andrew Chadwick, The Hybrid Media 16. Dana R. Fisher and Marije Boekkooi, #Ferguson, #Blacklivesmatter, and the System. “Mobilizing Friends and Strangers: Under- online struggle for offline justice,” (Washing- 11. Chris Wells, The Civic Organization standing the role of the Internet in the Step ton, DC: Center for Media & Social Impact, and the Digital Citizen: Communicating It Up day of action,” Information, Commu- American University School of Communica- nication & Society 13, no. 2 (March 2010): tion, February 2016). EDUCATION 193–208. 21. Zeynep Tufekci, “What Happens to 17. Incidentally, I was in Washington, DC, for #Ferguson Affects Ferguson: Net Neutral- LifeBUILT FOR the initial Step It Up day of action. Having ity, Algorithmic Filtering and Ferguson,” heard a constant drumbeat about the event Medium, August 14, 2014, medium.com​ MASTER IN PUBLIC through listservs, discussion boards, blogs, /message/ferguson-is-also-a-net-neutrality​ ADMINISTRATION and other niche media, I arrived at my -issue-6d2f3db51eb0. parents’ home that weekend and told them 22. Byron Tau, “How the media discov- - Nonprofit Organizational why I was in town. My mother was a welfare ered Ferguson,” Politico, August 17, 2014, Management rights organizer in the 1970s, and my father www.politico.com/story/2014/08/how-the​ voted for Nader. Neither of them had heard -media-discovered-ferguson-110072. - Government Administration about the event. In the post-broadcast media - Health and Human Services environment, you can efficiently target your David Karpf is associate professor of - Emergency Management and message to the niche audience you seek to media and public affairs at George Wash- mobilize. But lost in the process is the ben- ington University. He teaches on the Homeland Security eficial inefficiency of spillover information, Internet and American politics, and is the - And more! wherein untargeted individuals become award-winning author of The MoveOn generically aware that a social movement Effect: The Unexpected Transformation of CLASSROOM ONLINE SELF-PACED is under way. American Political Advocacy and Analytic 18. James Rucker, “Preface: Black Lives Do Activism: Digital Listening and the New 800.553.4150 – [email protected] Matter, and Black Voices Do, Too,” in The Political Strategy. Digital Culture Shift: From Scale to Power” UIU.EDU/NONPROFIT (Center for Media Justice, ColorofChange​ To comment on this article, write to us at .org, and Data & Society, 2015), 7. [email protected]. Order reprints from 19. Dan Mercea and Marco T. Bastos, “Being http://store.nonprofitquarterly.org, using a Serial Transnational Activist,” Journal of code 240209.NonProfit Qtrly - 2.22 x 4.687 - Summer 2017 Issue.ind5d/261/2017 11:13:46 AM WWW.NPQMAG.ORG • SUMMER 2017 60 ​T H E   N O N P R O F I T   Q U A R T E R LY

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NONPROFIT POLICY & ADVOCACY Investing in Policy and Advocacy: A Foundation Shares Lessons Learned by M. Gabriela Alcalde and Maggie Jones The challenging policy and advocacy work taken on by the Foundation for a Healthy Kentucky was further complicated by dramatic changes in the political climate. But by drafting out key strategies and challenges, the foundation was able to identify five fundamental recommendations for how best to pursue policy change and how funders can make policy more responsive to the communities they serve. Editors’ note: This article was first published by Health Affairs as a blog, on June 6, 2017. It is reprinted with permission from Wthe authors and Health Affairs, with minor alterations.1was selected to serve as the externalpolicy change, the foundation approached orking on advocacy and evaluation partner because of its expe- PRHP using four key strategies: rience evaluating policy work and its 1. Requiring use of the following policy is challenging. Not only is it complex, fluid, characteristics of effective, high- and increasingly politi- developmental approach to evaluation.3 cized, it is also challenging to measure Halfway through PRHP, a change in quality grantmaking. Trust: The progress and communicate success. state leadership prompted dramatic foundation’s partnership approach Some Background changes in the political climate and in to grantmaking enabled it to provide policy positions coming from the gover- the needed flexibility for grantees to Understanding this, in 2012, the Foun- nor. These changes meant that PRHP’s be responsive to political changes. dation for a Healthy Kentucky, a state- policy goals, especially around the This approach depended on trust wide foundation located in Louisville, Affordable Care Act (ACA) and efforts and long-term relationships with and launched Promoting Responsive Health toward passing a comprehensive state- among grantees. Policy (PRHP), a six-year, multifaceted wide smoke-free law, were at odds with Flexibility: An adaptive and initiative to address four broad health the new governor’s goals.4 These changes multipronged approach allowed the policy areas: increasing access to inte- had profound impact on the foundation foundation and its grantees to be grated healthcare; increasing the propor- and its grantees, requiring all players to agile in a rapidly changing policy tion of Kentuckians living in smoke-free reassess their strategies and make sub- environment. jurisdictions; improving children’s health; stantive adjustments. Diverse strategies: Having a and strengthening local public health.2 The foundation’s approach, combined diverse cadre of partners made a Building on past investments, with the dynamic policy environment, variety of tools available to the foun- the foundation engaged a variety of provides a unique opportunity to examine dation, and that was particularly grantees and contractors as partners: and share lessons learned (addressed useful when tactics had to be adapted legal, youth, and consumer advocates; more fully in the final report on the PRHP to the changing political landscape. researchers; and communications and evaluation).5 Collaboration: As a result of the media organizations. The Center for foundation’s efforts to promote col- laboration among partners, grantees Community Health and Evaluation Strategies Used (CCHE), located in Seattle, Washington, Recognizing the complexity of the policy reported increased connections with and affiliated with Kaiser Permanente, issues and taking a broad approach to other partners. 62 ​T H E   N O N P R O F I T   Q U A R T E R LY  WWW.NPQMAG.ORG • SUMMER 2017

Capacity building: Investing in policy issues, and its communication exchange, and the tobacco-free policy NONPROFIT POLICY & ADVOCACY organizations through multiyear grantees translated policy issues for on state government property). grants, trainings, and technical assis- the mainstream media and diverse • Breadth versus depth. ACA imple- tance (in addition to sharing findings stakeholders without health policy mentation created unique policy from foundation-funded research expertise. opportunities for PRHP to contribute projects) deepened and strength- to Kentucky’s success in outreach and ened the advocacy infrastructure in Challenges enrollment. This focus, however, tilted Kentucky. foundation resources and staff capa­2. Acting as a convener, which was While the foundation was, in fact, able city to one of its four policy priorities, consistently identified as one of to apply what it had learned from prior thereby limiting the investments made the most effective ways the foun- advocacy initiatives, working in a time in the other priorities. If the founda- dation informed policy. Evaluators of a rapidly changing policy landscape tion had had a narrower policy focus, found that “stakeholders described the presented some challenges, including it might have had an even greater valuable and unique role the Founda- the following: impact on state health policy. tion plays in informing health policy in • Lack of clarity on policy positions • Differing definitions of success for Kentucky as a non-partisan, indepen- the initiative. PRHP used a “policy dent organization.”6 The foundation and the foundation role. Changes spectrum” framework, which allowed brought local and national speakers to in state government leadership placed for a broad understanding of policy inform local health policy discussions the foundation at odds with prevail- and incorporated a wide array of and facilitate difficult conversations, ing state policy directions, which strategies and tactics.9 While this was guided by research and best practices, uncovered a lack of clarity on specific embraced by grantees and foundation in a safe, neutral space. policy positions among members of staff, there was a “strong focus from3. Investing in data and research, the foundation’s staff and governance the Foundation’s board on judging which was the foundation’s key committees. This was compounded impact primarily through policy contribution to health policy. by an ongoing deliberation regarding enactment,” the final PRHP evalua- Grantees and key stakeholders iden- the foundation’s advocacy role. While tion report said.10 This divergence in tified the annual Kentucky Health the foundation made a decision to be how policy (and policy success) was Issues Poll and the multiyear study an operating foundation as well as a defined became more pronounced as on the impact of the ACA, which was grantmaking foundation, it was less the initiative progressed. conducted by the State Health Access clear how public the foundation would Data Assistance Center (SHADAC), be on increasingly politicized policy Lessons Learned as integral and valuable in ground- issues. ing advocacy efforts in facts.7 As • Maintaining alignment with grant- The successes and challenges experi- noted by evaluators, “investments in ees. Organizations took different enced throughout PRHP provided the convenings and data were identified positions as to how oppositional they foundation with lessons on how best as examples of how the Foundation would be to the new state administra- to pursue policy change through invest- could leverage its resources to be tion. This divergence created tensions ments by philanthropy and how funders responsive to emerging policy issues between and among the foundation can make policy more responsive to the and to bolster the capacity of advo- and its grantees, and in response, the needs of the communities they serve. cates, particularly grantees.”8 foundation developed mechanisms to Recommendations from the evaluation4. Using communication and messag- maintain connections and alignment included the following: ing for effective policy and advo- with key partners. As an example, the 1. Clearly identify policy priorities cacy work. The foundation increased foundation created and led a working its own communications capacity to group of grantees and other partners and understand potential trade- support grantees and highlight grant- to identify opportunities and strate- offs between a broad set of policy ees’ work. The foundation also offered gies for coordinating and collabo- priorities and more focused media training and assistance with rating efforts to sustain the health policy goals. messaging around complex health policy wins from the past few years 2. Articulate the funder’s role in the (such as Kentucky’s Medicaid expan- initiative, including the level of sion, the state-based health insurance engagement in direct policy workS U M M E R 2 017 • W W W. N P Q M A G . O R G  T H E   N O N P R O F I T   Q U A R T E R LY  ​63

NONPROFIT POLICY & ADVOCACY “NPQ is a and how policy positions will be Worksites, Restaurants, and Bars—United developed. Depending on the legal States, 2015,” Morbidity and Mortality courageous journal structure of the foundation, funders Weekly Report (MMWR) 65, no. 24 (June in a field will need to be clear on their ability 24, 2016): 623–26, Centers for Disease to lobby and the extent to which they Control and Prevention, www.cdc.gov that will need can engage in lobbying. /mmwr/volumes/65/wr/mm6524a4.htm; 3. Align the focus and structure of and Morgan Watkins and Tom Loftus, ”courage. grants with the necessary exper- “Bevin’s first year: Policies and contro- tise and strategies [such as flex- versies,” Courier-Journal, December 10, — Jack Shakely, NPQ reader ibility] needed to respond to the 2016, www.courier-journal.com/story/news dynamic policy environment. For /politics/ky-governor/2016/12/10/bevins Thank you for subscribing example, for a health policy initiative -first-year-policies-and-controversies to NPQ! such as PRHP, both the foundation /95102532/. staff and the grantees should have 5. Toward a Healthier Kentucky: Using We see ourselves as being in deep expertise in health policy. And it is Research and Relationships to Promote partnership with you, our readers. also important to contract with expe- Responsive Health Policy: Lessons for the rienced researchers who can provide Field (Louisville, KY: Center for Community We rely on your feedback, your data and research findings to the Health and Evaluation, March 2017). survey responses, your stories for our foundation, grantees, and interested 6. Ibid. editorial content. Subscribers are the members of the general public. 7. “Kentucky Health Issues Polls,” lifeblood of our organization but we 4. Build awareness of the broad Foundation for a Healthy Ken- also rely on your donations for our spectrum of strategies needed to tucky, www.healthy-ky.org/research financial health. We keep the cost of develop, enact, and implement /category/4/kentucky-health-issues-polls; and policy. “First Year Report Tracks Affordable Care Act our subscriptions low— 5. Consider long-term investments Impact in Kentucky,” Foundation for a Healthy we don’t want cost to be a barrier to build infrastructure in key Kentucky, March 7, 2016, www.healthy-ky.org partner organizations.11 /newsroom/news-releases/article/8/first for anyone! But if you can give -year-report-tracks-affordable-care-act more—and if you value what NPQ Notes -impact-in-kentucky?. has provided for more than fifteen 1. M. Gabriela Alcalde and Maggie Jones, 8. Toward a Healthier Kentucky, 6. years—consider joining a growing “Investing In Policy And Advocacy: A Foun- 9. Ibid., 7–8. group of your fellow readers, and go dation Shares Lessons Learned,” Health 10. Ibid., 8. Affairs Blog, June 6, 2017, healthaffairs​ 11. Ibid., 10. to www.nonprofitquarterly.org . o r g / b l o g / 2 0 1 7 / 0 6 / 0 6 / i n v e s t i n g - i n​ to make a donation today. -policy-and-advocacy-a-foundation-shares M. Gabriela Alcalde is the newly appointed -lessons-learned/. managing director for equity and health at — Ruth McCambridge, 2. “Promoting Responsive Health Policy Richmond Memorial Health Foundation. Editor in Chief (PRHP),” Foundation for a Healthy Ken- Previously, she was vice president of policy tucky, www.healthy-ky.org/about-us and program at the Foundation for a Healthy /current-initiatives/promoting-responsive Kentucky. Maggie Jones is associate direc- -health-policy. tor of the Center for Community Health and 3. Jamie A. A. Gamble, A Developmental Evaluation. Evaluation Primer (Montreal, Quebec: J.W. McConnell Family To comment on this article, write to us at Foundation, 2008). [email protected]. Order reprints from 4. Michael A. Tynan et al., “State and Local http://store.nonprofitquarterly.org, using Comprehensive Smoke-Free Laws for code 240210. 64 ​T H E   N O N P R O F I T   Q U A R T E R LY  WWW.NPQMAG.ORG • SUMMER 2017

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