Price of Board Inaction: $5.5-Million for One CharityPosted on February 5th, 2013.
Nonprofit board members who think they don’t face any risks if they provide lax oversight should pay close heed to the $5.5-million price tag the New York attorney general just put on inattentiveness. Every board member should understand the strong message government officials were sending about the level of diligence expected from them, especially when it comes to conflicts of interest involving top executives.
The case at issue involved Educational Housing Services, its founder and CEO George Scott, and its board of directors. Regulators have drawn such conclusions about lack of due diligence at other nonprofits, but the severity of the penalties levied in this case is what should receive broader attention from all boards. Mr. Scott, his controlled subsidiary company, and the charity’s five board members were required to pay an aggregate of $5.5-million to settle the matter.