Penn State/Second Mile Scandal 4.0: The Failings of Good People

In my office I have a Penn State hat signed by the school’s famed late coach, Joe Paterno. My parents gave it to me, having received it at a corporate leadership conference at which JoePa was a featured speaker. His topic was integrity, and for many he epitomized the concept. The Penn State football uniforms were decidedly old school – no player names on the back, no decals on the helmets signifying interceptions, hits, or other performance targets. The coach disdained post-play showboating by team members – why should a player celebrate something he was supposed to have been doing in the first place? Devout Catholics, Paterno and his wife lived simply and behaved humbly. They contributed to the well-being of the community and University, co-chairing the capital campaign for a new library and donating a million dollars for a new hospital wing. Graduation rates of football players under Paterno were above the national average and he was known as a mentor who emphasized citizenship and integrity among his players. His abrupt firing in the wake of the Sandusky sex abuse scandal led to student revolt and enduring efforts to clear his name.

How can someone so roundly recognized as a person of integrity fail so spectacularly? And, if it can happen to him, can it happen to any of us?

Although the answers are speculative, they are worth considering. Good people fail because they aren’t as good as their image suggests. They also fail because of ignorance, denial, misplaced loyalty, short-term thinking, and perceived helplessness. I’ll address these features in this and upcoming blogs. First, some caveats: 1) my closest connection to Joe Paterno is the hat in my office, so I rely on the reports of others for insight into the man and his actions. Those sources may or may not be honest and valid, though I do the best I can to weed out overly biased accounts in either direction. 2) In the big scheme of the Penn State/Second Mile scandal, Joe Paterno is a very minor character (albeit the best known). Jerry Sandusky has been convicted on 45 counts of crimes against children, two PSU officials are charged with perjury, civil suits are lining up on behalf of victims, and investigations are underway concerning the two organizations involved. There are plenty of failures worth examining, and I likely will do so as the cases unfold. For now, though, I will focus on Paterno, whose outcome was so greatly at odds with his image. Let’s start with a recap of the case.

Case Review

On February 9, 2001, assistant coach Mike McQueary went to Paterno’s home and revealed that he had observed sexual abuse of a youngster by Sandusky in Penn State facilities the evening before. (The exact language McQueary used is in contention, with some suggesting that he wasn’t explicit in his explanation to his elderly mentor, and others maintaining that the message was sufficiently clear). Paterno reported it to his supervisor, Athletic Director Tim Curley, and appeared to leave it in his hands. Ultimately, with the consent of the University President, the leaders merely forbade Sandusky future access to PSU facilities. In November, 2012, grand jury findings alleged years of sexual abuse by Sandusky, including at least four cases that occurred following the 2001 case. Joe Paterno told the PSU Board that he would resign at the end of the football season but was fired immediately, as was PSU President Graham Spanier.

At least part of the continuing outrage at Paterno’s termination is based on the belief that he was made the scapegoat for the failings of his superiors. Many contend that he did what was right in reporting it and had no legal or organizational responsibility to pursue it further. Others feel he had a moral responsibility to assure that proper steps were taken, in light of his power and position and the victimization of vulnerable youths. The Coach himself said in November, "This is a tragedy". "It is one of the great sorrows of my life. With the benefit of hindsight, I wish I had done more." Recent developments in the case suggest that Paterno did continue to be involved beyond his initial report to Curley, and that his actions contributed to the cover-up. Reports released yesterday reveal that administrators initially agreed upon a three-step remedy to the assault, including confronting Sandusky and banning him from campus, notifying The Second Mile charity, and reporting the case to child welfare authorities. Following a meeting with Paterno, the third step of the plan was dropped. The leaders suggested they would encourage Sandusky to get professional help and that this would constitute “a more humane and upfront way to handle” it.

Whether the errors were in what he did or what he failed to do, the roots of Paterno’s lapse of integrity are germane to all of us. For starters, perhaps he could have done better if he had known more.  

Failure of Knowledge

            Though school administrators and teachers are mandated reporters in Pennsylvania, college coaches are not. Nevertheless, anyone is entitled to report their suspicions of abuse or neglect to child protective services. Child abuse was probably not a common part of Joe Paterno’s lexicon or life experience. The coach admits as much in a January 2012 interview with The Washington Post. “I didn’t know exactly how to handle it and I was afraid to do something that might jeopardize what the university procedure was,” he said. “So I backed away and turned it over to some other people, people I thought would have a little more expertise than I did. It didn’t work out that way.”

Despite the widespread publicity about pedophilia in the Catholic Church, the notion of sodomy was even more difficult for the 85 year old to reckon with. In addressing the ambiguity over McQueary’s report to him, he told the Post, “You know, he didn’t want to get specific,” Paterno said. “And to be frank with you I don’t know that it would have done any good, because I never heard of, of, rape and a man. So I just did what I thought was best. I talked to people that I thought would be, if there was a problem, that would be following up on it.”

In addition to the lack of knowledge about procedures for addressing abuse and the harm such abuse causes victims, Coach Paterno and the PSU administrators also appear to have lacked knowledge of the characteristics of pedophilia. A stern talking to or a close call with reporting is insufficient to curb the assaults. Sandusky’s continued exploitation of youth following the 1998 investigation serves as evidence of that.

            There are many remedies for failures of knowledge: to be aware, to learn more, to avoid willful ignorance, and to seek out those who can educate us when we ourselves lack the knowledge to act.

Coming up in the next blog, the powerful combination of denial and loyalty.

When Civic Engagement Imperils the Bottom Line

Free speech and civic participation are cornerstones of democratic society. Individuals who take part in public debate, governance activities, or personal expression through blogs, letters to the news, or yard signs are not only enacting their rights, they are strengthening our social institutions. They bring the perspective of the citizenry (“the average American”) to inform policies and programs. Even when individuals have personal investment in a given cause (more dog parks for the pet lover, safer neighborhoods for the homeowner) their involvement enhances our communities. In doing so, these civic volunteers typically give more in time and effort than they reap in influence and change. Sometimes, they and their employers pay a price for their civic duties.   

A recent article in The New York Times outlined the repercussions experienced by Replacements Ltd, a Greensboro, NC based tableware distributor, when the company publicly and actively worked in opposition to a recent referendum to ban gay marriage in the state constitution. The article reports a deluge of letters and emails from customers terminating their relationships with Replacements. Bob Page, the company’s founder and chairman, didn’t intend to his actions to be “in your face”. They were simply an authentic reflection of his status as a gay man and his refusal to hide on such a significant matter. As Page says in the Times piece, “I am always concerned I will hurt our business. I know we have lost business. But I don’t have a board or shareholders I have to answer to. My life is not about money”.

But what about organizations that have boards and stakeholders? Another compelling example concerns John Tedesco, elected in 2009 to the Wake County (NC) school board while he also served as Chief Development Officer of Big Brothers Big Sisters of the Triangle (BBBST). In his role on the school board, Tedesco championed changes is the district’s diversity and school assignment policies that made him a highly visible target on volatile issues. News reports indicate that Tedesco’s employer was the target of criticism and donation boycotts as a result of the positions he took on the school board and the perception that those views were at odds with the mission of BBBST. While BBBST has not commented on the reports, Tedesco resigned from his job with them in 2010.

These cases present the classis ethical dilemma of “competing goods” – it is good to exercise one’s rights to civic engagement and it is good to hold one’s employer harmless for those activities. What can nonprofits feasible and legally do to balance these imperatives? I’m eager to hear from you about your thoughts and experiences.

Those Who Pay the Piper Call the Tune

Few nonprofits could survive without philanthropic gifts. Individual donations and bequests account for 16-29 percent of nonprofit income. Another 2-4 percent comes from foundations. These donations provide valuable support and serve as an affirmation of the organization’s good work and the cause it represents. Such gifts constitute “voluntary action for the common good” in the words of philanthropy scholar Bob Payton. A Google search reveals literally millions of sites dedicated to strategies for the cultivation of donations. Clearly donations are desirable. If that’s the case, big donations should be even better, right? What could possibly go wrong? 

As with other funding streams, excess reliance on a single source could create problems should crises, economic conditions, or a falling out with the nonprofit lead the funder to reduce or remove the support. Another consideration, less frequently examined, is the risk of the funding tail wagging the organizational dog.

In a recent Chronicle of Higher Education article, Stanley Katz warned of the influence big donors may have on education policy. Katz is particularly concerned about megafoundations – big new entities, such as the Gates Foundation, represented by the wealthiest Americans, making fewer, larger grants and expecting more in return. Some foundations have created their own 501(c)(3)s to more directly carry out their initiatives. Katz’s cautions can be generalized to nonprofits and scaled to organizations of all sized. In essence, he offers two concerns: the distortions created by strategic investments and the ways that funders influence process and policy. 

Strategic Philanthropy

            Perhaps due to the size of grants, donors’ business backgrounds, exasperation with inefficiency, or impatience with poor past return on investments, today’s philanthropists are more specifically targeting their gifts. Akin to venture capitalists, they precisely direct their investments and carefully track the results, often making future grants contingent on attainment. The up-side of this trend toward evidence-based gifts is accountability. The down side is that many of the problems targeted by nonprofits, at least in health, education, and social service domains, do not yield immediate and conclusive results. A further problem is the tension that results when a grant or gift is tied more closely to the donor’s business interests than the nonprofit’s mission or current strategy. Organizations may be hard pressed to decline financial support, even that which comes at the expense of growing in a direction they had not anticipated or divesting from other initiatives to pursue strategically fundable ones.  

Influencing Change Processes and Policies

            The increased specificity associated with gifts means that big funders are dictating not just the goal of the award (“help kids learn to solve disputes without violence”) but the process by which the goals should be met (“institute after-school and summer programs to help kids learn to solve disputes without violence”). If the prescribed approach is congruent with the evidence base and the interests and capacities of a particular nonprofit, the fit is good. If it is not, will organizations forgo the funding opportunity or change to fit the donor’s preferences? If this trend continues, what future will agency-level strategic planning have? Will the expertise of researchers and professionals in health care, education and social services still be relevant in conceptualizing how services should be delivered? Will an emphasis on proven or promising practices foreclose novel and untested approaches to change?

            Policies and government funding priorities will surely follow those areas of focus identified and tested by big donors. This may result in more efficient use of public resources and more effective service delivery, filling a needed void in governmental planning and performance. On the other hand these advances may come at a cost, to paraphrase Katz, in how we was a society, as a sector, make decisions about the goals to pursue and the ways to achieve them.

Edible Ethics

This is the time of year I plan our upcoming visit to Maine, primarily to Camden, the town where I grew up. For the last ten years those visits have included breakfast with Rush Kidder, at a small coffee shop overlooking the harbor where we traded stories of our workshop experiences, dilemmas raised by our audiences, helpful resources, and new ideas on ethics training. Sadly, there will be no such rejuvenating conversation this summer as Rush passed away suddenly in March at age 67. I was stunned at the news of his death but today I feel the loss even more viscerally. I have lost a fellow traveler in the quest for moral courage and the world has lost a champion for ethics. Rush Kidder made ethics relevant, important, and palatable, at a time when the prevailing attitude was that ethics were passé and indigestible.

           

I had known of Rush’s work founding the Institute for Global Ethics long before we actually met. His book How Good People Make Tough Choices was a compelling read, beautifully written, and solidly grounded in the literature on ethical decision making. The paradigm the book sets forth, that all ethical dilemmas can be classified in at least one of four categories (truth vs. loyalty, short-term vs. long term, justice vs. mercy, individual vs. other), is so intuitive and elegant that I used it as an organizing principle in my book on The Ethics of Practice with Minors. Rush managed to balance the complexities of ethical decision making – the ways that various perspectives (rules-based, care-based, ends-based) can shape the ultimate decision on what is ethical—yet he never fell into the trap of relativism. In person and in writing, he approached dilemmas with curiosity and gentleness. In fact, the description of Rush that most comes to my mind is delight. Rush was delighted to talk about dilemmas, to see people working their ways through difficult situations, to uncover new avenues for enhancing ethical fitness^TM. His spirit and approach moved ethics from a topic of condemnation to one of conversation. In his view, ethics are not stark determinations of right and wrong, but instead a careful dialogue to choose well when right and right conflict. Ethics are not only the province of long-dead philosophers– dilemmas confront us every day and each of us must possess the skills to determine what is right and the courage to act on that determination.

Perhaps the greatest gift I received from Rush was an introduction to the concept of moral courage. I had recently done a workshop where I thoroughly failed to connect with the audience. Only afterward did I realize that the challenge for the participants wasn’t in knowing the right thing to do, but in doing what they knew was right amid the fear of social and occupational reprisals. Shortly thereafter, I heard Rush speak on moral courage and at last I had a term to describe what I and those workshop participants needed! With that term in hand, I can investigate the personal and organizational barriers to action, the precursors to acts of courage, and the people who demonstrate both moral courage and moral cowardice.

Over our last few meetings, Rush and I talked about my plans for a book on cultivating courage. This is the summer when those conversations and aspirations are finally put on the page, I mourn the opportunity to see Rush’s delight in my progress and to receive his support and advice, but I rejoice in the gifts he has already given and in the opportunity to be part of his legacy.

The Risks of Poor Governance: Governance and Transparency Problems in The Case of Penn State/Second Mile Scandals

In my last two blog posts I reviewed the essential findings of the Penn State/Second Mile (PSU/SM) scandal and the role that conflicts of interest played in fostering and prolonging the scandal. This week’s post addresses the ways that poor governance and the lack of transparency may have contributed to the scandal.

           

Governance

Governance refers to the strategies organizations use to maintain oversight and accountability with laws, regulations and funding source requirements. In addition to administrators, Boards of Directors and Boards of Trustees bear the responsibility for sound governance. In the recent scandal, the Second Mile’s governance structures exacerbated its difficulty in monitoring and responding to risk. As Michael Wyland notes, it appears that Second Mile had four boards in addition to the governing board. A particular source of confusion involves the Honorary Board, populated with sports celebrities. In the wake of the scandal many people listed on that board denied knowing that they were on the board. At least one governing board member believed he was only on the honorary board.

Further, the governing board was also unusually large. According to its 2010 Form 990, the Second Mile board had 36 members-- two to three times as many as recommended for an effective, involved board. This number fosters the risk of collective irresponsibility, and may explain the confusion on the part of at least one member about whether he was, in fact, on the board.

It also appears that most governing board members were drawn from the corporate or philanthropic interests. These connections can be essential for the fund-raising and friend-raising aspects of nonprofit survival, but may not be sufficiently diverse, concerned, or informed to delve into the oversight needed for enterprise risk management (ERM). The board also lacked limits in the number of terms members could serve. Good governance encourages rotating membership and caps on terms, to encourage fresh perspectives and discourage cronyism and groupthink.  

Jerry Sandusky, founder and board member of Second Mile, was reportedly paid $57,000 annually by the charity, from 2001-2007. The rationale for these payments is unclear, but it raises serious questions about excessive insider compensation and the board’s awareness of these arrangements. 

            Beyond the structural problems, it is difficult to diagnose reasons for failures in governance by the board. Second Mile and its leaders have not been forthcoming about their processes or the allegations against them, However, the board’s failure to address the blatant conflict of interest created by a the Executive Director’s marriage to his direct report, the Executive Vice President would suggest that there were not firm hands on the tiller of governance.

            Similar complaints have been lodged about Penn State. Both Trustees and faculty members have expressed dismay at the administration’s failure to notify them at significant points in the scandal, notably, the 1998 police investigation, the 2002 observation of abuse in the Penn State facilities, the years of the grand jury investigation.

Lack of Transparency

            In the wake of Enron and other corporate scandals, legislators, regulators, and the public at large demanded greater transparency about organizational relationships, decisions and financial dealings. Yet in 2007, Penn State successfully lobbied to be exempt from the state’s open records law arguing that providing donor, salary, and other information would be costly and divisive. This carve-out from right-to-know legislation is rare: only two other states offer such exemptions. Because of the exception, Penn State was not obligated to publicly disclose information such as emails, contracts, meeting minutes and other data pertaining to Jerry Sandusky and the others affiliated with the scandal. Even if personnel protections might have limited the scope of information available, the immunity itself feeds a culture of secrecy and unaccountability. 

            Second Mile, ironically, has received the Guide Star Exchange Seal for its commitment to transparency. The designation certifies the provision of documents and policies aligned with good governance. Skepticism rests, however, in the organization’s execution of its policies. Second Mile has not been forthcoming in the aftermath of the scandal. What efforts were made to protect children or restrain Jerry Sandusky when reports were received about inappropriate conduct with youth in the organization’s care? How did administrators and board members view their roles and responsibilities in leading the organization? What response do they have to the troubling allegations of conflicts of interest, excessive compensation, and other governance issues? The agency has hired former Philadelphia DA Lynne Abraham to conduct an internal investigation, but makes no promises to release the report or its findings, casting future transparency into question.

The Risks of Poor Governance: Conflicts of Interest in The Case of Penn State/Second Mile Scandals

In my last blog post I reviewed the essential findings of the Penn State/Second Mile (PSU/SM) scandal. While ostensibly about the sexual abuse of children who were clients of the Second Mile charity, the case also contains significant lessons for organizations about the risks of poor governance. Some of the issues are particular to nonprofits, but most apply to public as well as private entities. As I see them, the risks fall predominantly in three categories: conflicts of interest, inappropriate governance structures, and lack of transparency. Certainly other conclusions can be drawn about ethical failings in the case, but this post focuses on the organizational errors as they apply to both PSU and Second Mile. Michael Wyland has written a thoughtful commentary focusing specifically on the Second Mile, and it is likely future insights will evolve as records are opened and reports written by task forces looking at both organizations. Today’s blog will address conflicts of interest and next week’s will conclude the series by addressing governance and transparency.

Conflicts of interest

            Conflicts of interest arise anytime an individual has loyalties to two or more parties, such that upholding the interests of one may work to the disadvantage of the other. Typically such conflicts arise from blurred boundaries, where it is unclear what role or responsibility one is exercising at a given time. They can also arise from dual relationships where individual associate with each other in multiple roles or settings. In small towns or rural areas, dual relationships cannot be avoided: in fact, the interdependence in such communities is prized and necessary for successfully meeting life’s needs. For example, an individual may be the financial advisor for a doctor, for whom the financial advisor is a patient. Perhaps the two also serve on community boards and socialize together. The conflict of interest arises when information from one role or setting contaminates or jeopardizes another role or relationship. For example, perhaps in socializing, the doctor learns that the financial advisor likes to gamble and drinks excessively. How will this information be used in the doctor patient relationship? In trusting the financial advisor? In supporting him for treasurer of a nonprofit board? The PSU/SM case offers numerous examples of problematic conflicts of interest.

·         Jerry Sandusky was the founder of Second Mile and an executive officer of the board. He was also a major fundraiser and he interacted with and donated gifts directly to clients. Irrespective of the accusations of pedophila against him, was Sandusky able to act in the interests of the Second Mile as an officer, given his history in founding the organization and his multiple other roles? Were administrators and other trustees able to carry out their responsibilities in the presence of the founder, donor, service provider and fellow board member? Or, did Sandusky’s multiple roles quell inquiry and dissent, particularly when explicit reports of inappropriate contact with youth were conveyed to Second Mile?   

·         Wendell Courtney was the legal counsel for Penn State and, according to the grand jury report, also served as legal advisor for Second Mile. In which capacity was he acting when he reviewed the substantial investigative report in 1998 in which Sandusky reported inappropriate physical contact with young boys? To which organization did he report? If he offered advice to one why did he not do so to the other?

·         Two Second Mile board members worked in the same organization in which they had a hierarchical reporting relationship? Did this influence their capacity to govern independently as board members? The 2010 form 990 acknowledges that officers, directors, trustees or key employees had relationship or business interests with one another, though the nature of these beyond the cases noted here is unclear.

·         Did board members have affiliations with PSU that might have blurred or compromised their fiduciary responsibilities to Second Mile? PSU employees were clearly involved in Second Mile in other capacities, for example, participating in fundraisers, as well as football trips and events to which Sandusky brought Second Mile clients. Mike McQueary played in a Sandusky fundraiser/ golf tournament three months after he witnessed a sexual assault by the former coach.

·         The Executive Director and the Executive Vice President of Second Mile were married to each other.  As Michael Wyland notes, “This represents both a management and a board-level conflict of interest, as Dr. Raykovitz would normally be expected to review Ms. Genovese’s job performance, set her compensation, and otherwise act as her supervisor at The Second Mile.

Ms. Genovese, by virtue of being married to the CEO of The Second Mile, is by IRS definition a "disqualified person" under IRC Section 4958. The board has a legal responsibility to monitor the transactions involving disqualified persons. The board must insist that documented procedures are followed to assure that the marriage relationship does not adversely affect The Second Mile and its interests as it enters into agreements (such as employment) with Ms. Genovese.”

While the relationship between two senior staff was noted on the Form 990, it is not clear what steps, if any, the board took to segregate their duties or avoid the risk of collusion or exploitation.

·        Insularity was also problem at Penn State. While not a statutory or ethical violation, the propensity to hire administrators and other staff from within, and the tendency for those hired to stay for extended terms can create a stale, self-referential environment with an inclination toward groupthink.

Conflicts of interest are not uncommon in small communities, or among people in large communities who have shared concerns, for example the professionals and families who care about autism. While conflicts of interest can’t always be avoided, they should be anticipated and addressed, In the case of Penn State and the Second Mile, efforts should have been made to diversify the board, identifying people without significant PSU ties as prospective members. Individual members should have been alert to their various roles and responsibilities and declined service, resigned, or recused themselves in instances where they could not objectively uphold their board responsibilities. The same would hold true in instances where information gained in one setting might create a conflict of interest for the other.

The potential for financial, social, or professional conflicts of interest should be addressed in board recruitment and orientation. Boards should have a clear conflict of interest policy and require annual disclosure statements by board members. Board chairs should preface the discussion of significant or controversial agenda items by asking if any members have conflicts of interest with the matter at hand (Boardsource, 2007). The same strategies might hold true for Penn State trustees and administrators, given the multiple, overlapping, long-term relationships between the university and community entities. The leaders of organizations and the individual volunteers and employees are all responsible for the identification and careful resolution of conflicts of interest. While the Second Mile’s 2010 Form 990 indicates that it has a conflict of interest policy, that key trustees and employees are required to disclose interests that could give rise to conflicts, and that the organization monitors and enforces compliance with the policies and disclosures, it is clear that lapses in scope and application of these requirements failed for many years.  

BoardSource. (2007). The nonprofit board answer book (2^nd ed.). San Francisco, CA: Jossey-Bass.