When Your Board Walks Out En Masse…

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Wanted: 20 new board members. Now.
Wanted: 20 new board members. Now.
Wanted: 20 new board members. Now.

Were you to visit the ‘About’ page of the website of Minnesota Dance Theatre (MDT) this week, you might notice something curious: the board of directors is “To Be Announced.” Recently, the entire board, some 20 individuals, resigned en masse. They sent a note to the press, stating they “are no longer able to serve the needs of the organization going forward,” and have since been unreachable for comment. MDT’s press release response is upbeat but ambiguous, merely acknowledging “the commitment of the recent board to the mission and vision” before switching to happy talk about the company’s future.

Individuals join boards for many reasons, most of which are good intentioned: an altruistic sense of giving back, to positively influence their local community, or to join in the excitement of friends, colleagues and family members for a cause. Board service is a serious (and legally binding) personal, professional and fiduciary responsibility. When 20 professionals walk out on an organization they are required by law to govern, one can safely suspect something had to have gone very, very wrong.

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A unanimous board walkout is about as big a statement of no-confidence as a group can make, outside of hurling flaming bags of excrement, which I’m sure they also considered. The move is extreme to the point of questionable legality, as Minnesota state law requires that a not for profit organization have no fewer than three trustees. In their release, the board said nothing specific about their motivation to leave, but make no mistake: this was a concerted, choreographed, carefully considered move. In governance terms, this is the nuclear option, executable only when all other avenues of negotiation have been exhausted. It likely means that the board felt unable to do the work of governing the entity, meaning that something (or someone) had prevented them from doing that work.

It is the architecture of the not-for-profit corporation that juxtaposes individual interests with those of the collective. When money is coming in, and the interests of the individual founder and collective board are aligned, you have an apparently “successful” (or even apparently “sustainable”) company. However, when the individual and collective interests are mutually exclusive, or in the case of MDT, ostensibly intractable, there are only two real options: the problematic founder is amputated by the group, or the group cleaves itself from the founder. For MDT, one extreme was closely followed by the other.

MDT was founded in 1962 by Loyce Houlton, who received her Masters in Education at NYU and settled in Minneapolis with her family. In 1982, Houlton resigned as the artistic director of the company (likely due to mounting financial pressure), but was hired back by the board as the “Associate Director for Choreography” simultaneous to putting out a notice to hire an artistic leader whose “exact position, title and description [are] being developed.” In 1986, riddled with debt, the board of directors fired Houlton and attempted an ill-fated merger with the Pacific Northwest Ballet to create the “The Northwest Ballet,” which was to be based both in Seattle and Minneapolis. That company disbanded. Houlton reincorporated MDT in 1991, keeping control until she passed away in 1995. Houlton’s daughter, Lise Houlton Gilliland, then assumed control and has remained its artistic director ever since. Gilliland’s daughter, Raina, dances with the company; according to Guidestar.org, her brother, Andrew, served on the board in 2009, 2010 and 2011. No matter the board’s intentions, MDT is, and effectively has always been, a family business.

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When a not-for-profit company is constituted (or, in this case, reconstituted), a foundational set of documents called “bylaws” are ratified by the board and filed with their articles of incorporation. These bylaws dictate, often with dizzying levels of detail, the operational rules and regulations of the corporation: who reports to whom; what committees consist of what trustees; how much money staff can spend on what per year; and, most germane, what it takes to remove staff or artistic personnel from their jobs. Bylaws further contain strict provisions for the amendment of their own language; in extreme cases, they require unanimous board votes to make even the smallest of grammatical changes. As a result, arcane, unintelligible or disadvantageous clauses can be nearly impossible to remove, and, indeed, some bylaws provisions can be composed such that they cannot, under any circumstances, be altered.

Hypothetically, if a founding artistic director is also a founding board member, he or she can craft a clause in the bylaws giving them the power to singularly veto any action or board motion, to terminate any board or staff member, and generally to operate as a board of one no matter how many trustees are technically in place. An artistic director with absolute fiduciary power over a company they themselves founded is not rare. In the 1980s, such provisions were considered a vital means to prevent board encroachment and institutionalization, to the point where Anna Kisselgoff, writing for The New York Times in 1982, complained, “Clearly, we are heading for the era of the board-run company.” Strict bylaws are a legal means for artists to insulate themselves from an institutional structure — that is, the 501(c)3 not-for-profit corporation — that otherwise empowers a board to make all organizational decisions, including whether to fire their founder. One imagines that between the elder Houlton’s first go at creating MDT, getting fired by her board and then reconstituting the company, the younger Houlton learned a thing or two about institutional governance. Presumably she knew quite well how to keep herself (and her successors) in control.

Bylaws are one example of the many administrative means by which a founder or artistic director can make a board lose their minds — and vice versa. By law, the board is financially responsible for the management of the company, meaning that should it go into debt, it’s their legal responsibility to cough up the dough. No one reads bylaws when things are going well; should a board discover they lack the agency to prevent their company from going into debt while at the same time being on hook for the liability, one would expect the flaming excrement to hit the fan. In MDT’s case, their stated revenue between 2011 and 2012 contracted by nearly $350,000, roughly a third of its annual operating budget. This isn’t a sign of a healthy organization, and you can imagine board members fleeing the room only to discover the doors quite locked.

It’s not pleasant to be on the inside of this sort of culture war. There are tightly prescribed expectations, terms, statutes and limitations to board service, including procedures for exiting. (These expectations, I might add, are rarely clear to the naif who is excited to give back to their community through board service.) It’s possible to want to leave a board and simply be unable, administratively or ethically, to do so. Add in the financial risk in the form of liabilities of various sizes and natures, little or no agency by which to address those risks, all compounded by 20 people in a high-stress situation, and enemies and alliances inevitably form: the corporate framework ostensibly designed to promulgate social good soon devolves into Robert’s Rules of Order meets Game of Thrones. I have personally seen such board infighting destroy marriages, ruin careers and evaporate bank accounts. Given such stakes, MDT’s board, deciding to opt out of a broken system, is an understandable action, if not necessarily a commendable one.

In light of a recent interview with a former MDT board member, the case presents itself as a hyperbolically advanced form of what is called “Founders Syndrome,” whereby a founder fosters an environment in which it is impossible to get anything done without their approval. This is not necessary malicious, although it absolutely can be, but it has the effect of warping the already baroque rules of not-for-profit governance to a point of contusion and inoperability. In such cases, board members’ legal and ethical responsibility to the organization collides with their instinct for self-preservation.

Such collisions are not the exception, but the rule. It is how the system is designed; so long as performing arts organizations are expected to operate as not-for-profit entities (a framework that, at no historical point, was designed or intended for such a use), there will inevitably be seismic clashes between artists and the institutions that house them. While we will probably never know everything that happened at MDT, we can be assured that the problems they face are being silently encountered by innumerable other groups and individuals around the country, and that blame for a broken system rests not just on the problematic one, but on the failures of imagination that implicate us all.

  • Juan R. Ramírez, Founder and Artistic Director
    The Atlanta Virtuosi Foundation, Inc.
    The Buckhead Youth Orchestra
    The Atlanta Community Symphony Orchestra, Artistic Director & Conductor
    Casa de la Cultura-Atlanta, Founder and Artistic Director.
    World Chamber of Commerce, Music Committee Chair
    Advocacy Committee, Atlanta Symphony Musicians, Chair

    http://www.atlantavirtuosi.org
    http://www.buckheadyouthorchestra.com
    http://www.worldchamber.org
    http://www.acsorch.org

  • As a Minnesotan, I completely agree that when I (or anyone) think of MDT, we think of Loyce and Lise – they are indeed a critical component to the company’s brand, if you will. But, as a dancer who’s sat through my fair share of various company board meetings, I would also say that to be fair, it can be so frustrating to hear your board crush your artistic dreams. Even though there may have been a rift between management and board, I sincerely hope this gives MDT a chance to revamp not just their board but also their image. Although MDT is really recognized now through Lise, perhaps this is their chance to shift some of that recognition to the whole company, so each dancer could be a sort of brand ambassador (similar in many ways to how I see NYCB).

  • Great piece – required reading.

  • Matthew Brockmeier

    This is an interesting story highlighting what sounds like an extreme example of the things that can go wrong with nonprofit governance, but I should note that the story itself suffers from some level of hyperventilation.

    It is not true, for instance, that all governing documents for nonprofits are impenetrable jungles of words. Well-crafted bylaws can be clear (though almost certainly boring to most people). If someone is considering board service, reviewing the bylaws, and being sure they are understood, is basic due-diligence. If you can’t do that for yourself, you shouldn’t be imposing yourself on the governing board of an organization.

    It is also not true that bylaws “dictate . . . how much money staff can spend on what per year.” That, friends, is called a budget. Bylaws provide a framework, not the planning or oversight for which a board exists. The details are an ongoing issue of concern, ideally invented or re-invented in some appropriate cycle.

    Next up? The idea that “a founding board member . . . can craft a clause in the bylaws giving them the power to singularly veto any action or board motion,” etc. Not so much. While this may happen from time to time there are two important things to keep in mind. The first is that, should you see this as you conduct due-diligence about board service, you should firmly slam the door on your way out of the room. The second is that nonprofit regulations generally forbid any structure effectively controlled by an individual or a family, or which appears to exist primarily for their benefit.

    This is not as easy to catch in all cases, as board dynamics are simply another manifestation of often dysfunctional dynamics between people where power or money are in play, but it is not a given that a founder can run roughshod over a properly constituted board of directors.

    Finally, one more big error in the essay, regarding a company going into debt. “By law, the board is financially responsible for the management of the company, meaning that should it go into debt, it’s their legal responsibility to cough up the dough.” Again, not really. It is true that if you stiff Uncle Sam for payroll withholding the IRS will show up at the door of each director to recoup what was not paid, but beyond that there is generally no individual liability for a nonprofit’s debts, assuming that board members were not guilty of misdeeds or gross negligence. The creditors will simply be out the money in most cases.

    I appreciate the fact that Sydney Skybetter created this small window into the issue of civil war in nonprofits and Founder’s Syndrome, but would have appreciated it all the more had it not had so many inaccurate statements and assumptions.

  • While the IRS may not coming a knocking, the courts might. The board members of a non-profit in financial straits does have a responsibility to wind down the organization according to an article by a Tennessee assistant attorney general on the Chronicle of Philanthropy – http://philanthropy.com/blogs/watchdog/boards-cant-just-abandon-an-insolvent-nonprofit/24376

    “Legally the board is required to dissolve the nonprofit, but when it fails to do so, that responsibility falls to the regulators and the courts.

    This process will probably involve subpoenas to members of the former board, which may require board members to retain personal legal counsel at their own expense. What’s more, by resigning, board members may no longer have the benefit of directors’ and officer’ liability insurance. Former board members may even be personally liable for actions done in the name of the nonprofit while it is unmanaged.”

    While she doesn’t say they may be held personally financially accountable, they may still personally incur costs related to issues that face the non-profit. (And, of course, the laws in your state may vary)

    Now granted in the instance of this dance company, it sounds more like the result of internal strife rather than imminent insolvency is the root cause of the departure.

    The scope of a non-profit board’s responsibility in governance is pretty poorly understood because the focus is so often on fundraising. There have been an increase in articles on the topic in the last few years, but it is still a good topic to tackle.