Personal Fine for a Nonprofit Executive
In the nonprofit world, we hear of being “written-up,” suspended, and even fired. But what about a court imposing a multi-million dollar fine on an individual because of his malfeasance…that one is new to even me.
Recently, a New York state court fined Wilson “Woody” Phillips $2 million dollars (personally) due to mismanagement issues within his organization, the National Rifle Association. Allegations included financial irregularities, conflicts of interest, and failure to maintain adequate governance practices. These issues not only tarnished the organization's reputation but also raised questions about Phillips' stewardship and accountability. He also agreed to not accept any nonprofit job for a decade…and thereafter, if he should choose to re-enter the nonprofit workforce, he would have to take “classes” on ethics in nonprofits.
The idea of finding a leader individually is interesting. New to me. And with potentially great long-term effect on nonprofits. And to be honest, with arguments on the appropriateness on both sides…
For
1. Accountability and Deterrence: Holding individuals personally accountable for mismanagement reinforces accountability within nonprofit leadership. It serves as a deterrent against negligence, malpractice, and unethical conduct, thereby protecting the organization's integrity and public trust.
2. Restitution: Personal fines can be seen as a means to recover financial losses incurred by the organization due to mismanagement. This ensures that the burden of financial irresponsibility does not fall solely on donors, beneficiaries, or the broader community served by the nonprofit.
3. Legal and Ethical Compliance: Nonprofit leaders must adhere to legal and ethical standards. Personal fines underscore the seriousness of these obligations, promoting compliance and ethical behavior among executives and board members.
Against
1. Impact on Nonprofit Sector: Personal fines could deter qualified individuals from assuming leadership roles within nonprofits, fearing personal liability even when acting in good faith. This may limit the talent pool willing to take on crucial leadership positions.
2. Effectiveness of Enforcement: While fines address accountability, their effectiveness in rectifying organizational mismanagement or preventing future incidents is debatable. Additional measures such as training, robust governance structures, and transparency initiatives may be more proactive in promoting responsible stewardship.
I am not quite sure where I fall on this. There is no question that what Mr. Phillips did (or did not) do was unethical to an extreme level. Maybe even immoral. But it wasn’t illegal because he was not in a criminal proceeding. This was a civil matter with the NY State Attorney General and the NRA, and its leaders. Phillips and NRA (plus others) were found LIABLE, not GUILTY.
Is this a precedent of things to come? If so, is it a negative? Or a positive? And how much “leeway” will a state office/department have in determining whether a nonprofit is doing something “wrong?” What are the formal, written rules?
I am all for accountability. But part of culpability is knowing where the boundaries are before you start to play. While there is NO doubt about Mr. Phillp’s behavior being way outside any borders, the unintended consequences are unknown, and that always makes me just a little bit nervous without true legal/written definitions.
