Where’s The Goodwill at Goodwill Omaha Nonprofit Ethical Case: Where’s The Goodwill at Goodwill Omaha Brandon Jones and Robert Williams NPA 601: NONPROFIT ETHICAL LEADERSHIP Fall/ 2017 Prof. Marco Tavanti. Ph.D

Summary The CEO of Goodwill Omaha, Frank McGree, resigned in fall of 2016 after the World-Herald Investigation found that top executive pay consumed much on the charity’s profit and left little for its programs that were to help the needy and disabled. The investigation also uncovered the mission drift of the organization with movement towards a profit-first mentality to the detriment of their constituents. As a result of the scandal many major donors of the organization pulled their support. The organization has undergone changes in the wake of the scandal, with the exit of more executives and the board bringing in a third-party to assess its organization and governance. https://www.youtube.com/watch?v=s7lhGn17sqg

Facts The World-Herald contacted Goodwill Omaha in mid-August 2016 for an interview with its CEO, Frank McGree, and a board representative regarding high executive compensation and the appearance that the thrift store revenue was not going to the charitable mission of the organization Goodwill Omaha declined any interviews and only provided a written statement The first article of the three part expose was published on Sunday, October 23, 2016 On Friday, October 28, 2016, Frank McGree announced his resignation and early retirement

The Failure of the Organization The total executive compensation of Frank McGree in 2014 was close to $1 Million, which included a one-time retention bonus of $519K In 2015 over 15 executives at Goodwill Omaha were making $100K or more, which differed sharply from other Goodwill organizations of comparable size Out of 4 million in revenue that Goodwill Omaha thrift stores generated, approximately $557K was spent on job related programs. Former employees detail a profit-first mentality at the organization Those that completed the jobs program (at-risk youth or those with disabilities) were considered “too much work” to hire at the retail stores, as they would hurt the store’s efficiency and profitability

What About The Board The board of trustees defended the executive pay for Frank McGree, stating it was reasonable and justifiable The board blamed McGree for the outsized salaries for the other executives, as they only set the pay for the CEO The board was “unaware” of the mission drift of the organization The board plans to get a third-party assessment of its organization and governance

Compliance The property tax exemption for Goodwill Omaha thrift stores was called into question by the Douglas County Board Paying workers with disabilities below minimum wage, while the practice was legal how did it speak to the mission of the organization

Individual Responsibility Be informed about the organization's mission, services, policies, and programs. Review agenda and supporting materials prior to board and committee meetings. Serve on committees or task forces and offer to take on special assignments. Make a personal financial contribution to the organization. Inform others about the organization. Suggest possible nominees to the board who can make significant contributions to the work of the board and the organization. Keep up-to-date on developments in the organization's field. Follow conflict-of-interest and confidentiality policies. Refrain from making special requests of the staff. Assist the board in carrying out its fiduciary responsibilities, such as reviewing the organization's annual financial statements. Source: Board Source

Organizational Responsibility Duty of Care — Each board member has a legal responsibility to participate actively in making decisions on behalf of the organization and to exercise his or her best judgment while doing so. Duty of Loyalty — Each board member must put the interests of the organization before their personal and professional interests when acting on behalf of the organization in a decision-making capacity. The organization’s needs come first. Duty of Obedience — Board members bear the legal responsibility of ensuring that the organization complies with the applicable federal, state, and local laws and adheres to its mission.

Systemic Responsibility

Stakeholders Analysis

Alternative Solutions

Questions Do you think McGree should get his severance package as promised (allegedly) under the terms of his employment contract? Why or why not? Do you agree with the board’s decision to fire all executive staff and rehire? What kind of accountability measures should be in place at the board level, beyond what may or may not already be in place at nonprofit organizations?

References Cordes, Henry. “CEO of Nonprofits Council: Goodwill Scandal ‘Not the Norm.’” Omaha.com, 4 Nov. 2016, www.omaha.com/news/metro/ceo-of-nonprofits-council-goodwill-scandal- not-the-norm/article_56215dac-94f6-52c3-bcda-eecda46cff29.html. Cordes, Henry, and Matthew Hansen. “Goodwill Omaha: An Investigative Series - Omaha World-Herald.” Goodwill Omaha: An Investigative Series - Omaha World-Herald - Omaha.com, The World Herald, dataomaha.com/media/news/2016/goodwill/. Henry J. Cordes and Mara Klecker / World-Herald staff writers. “Goodwill Omaha's Ousted CEO Says Charity Owes Him $550,000 in Severance Pay.” Omaha.com, 27 Sept. 2017, www.omaha.com/news/metro/goodwill-omaha-s-ousted-ceo-says-charity-owes-him-in/article_fc9370b2-a310-11e7-b0e9-fb65927298b3.html. Klecker, Mara. “Goodwill Omaha Takes Steps to Restore Trust It Lost.” Omaha.com, 2 May 2017, www.omaha.com/news/metro/goodwill-omaha-takes-steps-to-restore-trust-it- lost/article_b628e574-e990-5b01-b1a1-39ab415b97aa.html. Board Source