Archive for November, 2013

Milton Friedman once observed that the “business of business is business.”  While I don’t disagree in general with the great economist’s statement, I do find it a bit restrictive.  Every business has multiple stakeholders, and the needs of these stakeholders are often in conflict and must be balanced with the pure “business of business.”  For example, it can be argued that every business has to consider the well-being of its employees, the cost of which often exceeds what a hard headed economist or labor negotiator might argue is rational and reasonable.  Compromises are made.  Similarly, the communities in which companies operate need to be considered as does the local and global environment.  Yes, the business of business definitely extends beyond the mere selling or servicing of widgets and well managed companies understand and embrace that fact.  Not too far down this list is corporate philanthropy.

Withum Week of Caring '13First, a disclaimer.  They say that you should write about what you know; what do I know better than my own firm WithumSmith+Brown?  Besides, tomorrow is Thanksgiving and I am feeling a bit laid back and in a thankful and somewhat spiritual mood, so why not?  I am proud to say that Withum “gets it” when it comes to corporate philanthropy.  We don’t just sponsor charitable events to get our name out there (although we do some of that); we provide opportunities for corporate philanthropy in ways that are meaningful to our staff, partners, clients and communities (in other words, our major stakeholders).  For example, for the past three years, we have renamed Thanksgiving week the “Withum Week of Caring” and provided opportunities for our staff to get out in the community and begin to pay it forward.   This year, as one example, the New York office provided  volunteers to work with the kids at Street Squash, a great organization (and WS+B client) that runs a comprehensive youth enrichment program combining academic tutoring, squash instruction (believe it or not), community service, college prep, leadership development, and mentoring for public school students in Harlem and Newark.  Other organizations served by WS+B during the week of caring are the Manhattan Children’s Center, Habitat for Humanity, Homeless Solutions, and Ronald McDonald House.  During the three days before Thanksgiving, each of our staff is given the oppWithum Thanksgiving Can Sculpture Contestortunity to spend half a day at these organizations to provide hands on support.  In 2012, 381 folks participated; this year we anticipate up to 400 of our people (approximately 80% of the firm) to put on the Withum blue and lend a hand.  It is our hope that some of them may ultimately extend this “trial run” into a longer term personal relationship and giving opportunity.

Last week, we did something completely different.  Several of our offices participated in the Withum Can Sculpture Contest, building innovative “sculptures” of canned goods which were then donated to local food pantries.  With this event we hit the trifecta – we collected almost 2,500 cans of food for charity, we involved the staff in a fun, team building exercise, and we fanned the flames of interoffice competition.  In particular, our Red Bank and New York offices seem to have the makings of a real rivalry, complete with trash talking e-mail wars as only accountants can do.  Keep it going, guys!

On most Fridays throughout the year, WS+B sponsors $5 Jeans Fridays.  This event is as simple as it sounds – for a nominal contribution of $5, staff are permitted to wear jeans to the office.  Each week, a different charity receives the proceeds.  The fun part is that the charities are chosen by our employees and are often associated with a fund raising athletic event like a race, walk, or bike ride in which one or more of our folks is participating.  The recipient charity changes each week, with our internal sponsors raising not only cash, but awareness of the charitable cause.  One sponsored event that I found  particularly intriguing was partner Tony Nitti’s participation in the Leadville 100 MTB Bike Race benefiting the Chris Klug Foundation, an organization dedicated to promoting organ and tissue donation.  A 100 mile mountain bike race in Colorado climbing over 14,000 vertical feet and ending at an elevation of 10,000 feet! My lungs (and other parts of the anatomy) hurt just thinking about it!

Finally, charity begins at home.  Last year, Superstorm Sandy did a number on the tri-state region and Withum employees were not immune.  Inspired by that storm, WS+B’s management committee established the Withum Employee Hardship Fund, a 501(c)(3) organization designed to gather funds to help Withum employees in need.  I am very proud to say that 100% of my partners have contributed to the fund and our overall employee participation is around 75%.  We have already assisted a couple of employees slammed by Sandy as well as an employee faced with extraordinary medical bills.

So, is the business of business purely business?  The Withum Way suggests that the business of business includes paying it forward to benefit our communities, employees, and clients in ways that are neither sterile nor self-serving.  In our mind, corporate philanthropy can and should and will continue to sprout from all corners of the organization when it engages the majority of staff in a process that is interesting, meaningful, and above all, fun.

Happy Thanksgiving!

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I belong to a not-for-profit organization (NFP) that recently merged and sold off some excess real estate.  For the first time in the history of either legacy organization, or the combined organization for that matter, there are real funds available for investment and the board is debating what to do with them.  In my mind, the answer to this is crystal clear, regardless of the inevitable debate.  We finally have the beginnings of an endowment fund and we should treat it as such.  Of course, the combined history of the organizations argues against the swift adoption of this optimal result and pretty much guarantees a prolonged, difficult discussion about it.  Over their lifespans, the institutions essentially operated the way many families do – they lived “hand to mouth” barely making ends meet and had trouble doing all the things they wanted, let alone needed to do.  Unfortunately, and probably because they are made up of individuals, institutions are not unlike individuals and can have similar irrational reactions.  It is said that individual lottery winners, who never had two dimes to rub together but all of a sudden find themselves rich – “yeah, that kind of rich” –  often find themselves several years later right back where they started.  As irrepressible bus driver Ralph Kramden, played by Jackie Gleason on the classic TV series The Honeymooners, once accused his long suffering wife Alice: “You don’t know how to handle money.”  To which Alice (Audrey Meadows) replied, “Of course I don’t!  I never had any practice!”

So it goes with NFP’s, which is why they are regulated by the various states’ attorneys general as to their actions and why laws like UPMIFA (the Uniform Prudent Management of Institutional Funds Act) have been enacted.  All the states (except for Pennsylvania, Florida and Mississippi) and the District of Columbia have enacted some form of UPMIFA.  In New York, we call it (guess why) NYPMIFA.  Regardless of which version of alphabet soup it is, the law essentially requires NFP’s to manage their investing and spending at a rate that will preserve purchasing power over the long term.  In other words, it enhances and further codifies the concepts of investment prudence and fiduciary responsibility.

Fiduciary (fi-doo-shee-er-ee) (1) n. from the Latin fiducia, meaning “trust,” a person (or a business like a bank or stock brokerage) who has the power and obligation to act for another (often called the beneficiary) under circumstances which require total trust, good faith and honesty

Investment committees of the board can help tremendously in this regard.  Acting prudently, as reasonably intelligent and informed investors armed with appropriate information, is difficult for a full board to accomplish without having the heavy lifting done first by committee.  Such committees can be made up of investment professionals, but I would caution against using only investment professionals.  Other smart folks with a bit of a financial IQ can breathe some common sense into the proceedings.  The investment committee’s first charge should be to develop an investment policy statement (IPS), which details such things as the organization’s time horizon and investment philosophy, its payout requirements and definition of income, its asset allocation constraints, and its overall risk profile.  Such a statement must be ratified by the board and made part of its permanent operating procedures before implementation.  When acting prudently, it is important to remember that PROCESS is far more important than RESULTS.  Occasional losses will occur, particularly in bad financial times; how asset allocation and investment decisions are debated, decided, documented, deployed and deconstructed will go a long way to shielding the organization and its committee and board members from legal liability.  More importantly, the prudent process sets the table for a far greater probability of success than a nonexistent policy or haphazard implementation.

Wherever and whenever possible, I believe that the actual implementation of the investment policy (i.e., the actual investing) should be delegated from the committee to a professional investment advisor.  There are many types of such advisors, some better than others, but a good one will help keep your organization on track with its stated policy; in other words, acting prudently.  The investment committee should oversee the process and review the results, and make changes as necessary, but they should not take charge of the day-to-day investment decisions.  From a practical point of view, it is too much to ask of volunteers – it takes too much time, it is too easy to “screw up”, and it is too easy to be misunderstood by the board.  Delegation of the day-to-day to an investment advisor clears the way for the committee to act, on behalf of the board, as overseers of the process.

If your organization has money to invest, it is in an enviable position.  Don’t allow your board to blow it – safeguard your NFP’s investment assets using a prudent process, quarterly oversight, and reasonable asset allocation.  Remember that it is neither your money nor the board’s – it belongs to the cause for which it was donated or raised.  As a committee or board member, it is your obligation to protect and grow it.

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A little over a year ago, my home was devastated by Superstorm Sandy.  We sustained six feet of salt water intrusion in our basement along with 2 ½ feet in the first floor and garage.  We were without electricity and heat for three weeks and had to bunk at my mother-in-law’s house during that time.  Thousands of dollars later, we have rebuilt and gotten on with our lives, but the emotional scars persist.

Fast forward to today and view the impact of Typhoon Haiyan in the Philippines.  The city of Tacloban has been virtually flattened.  Infrastructure is not merely damaged, it is destroyed.  At this point, there are no dependable estimates of the number of dead; 10,000 is the one I see most bandied about.  Regardless, to quote Juanita Experas, a 63-year-old resident of a village near Tacloban:  “There’s no food coming, but that is not as big of a problem as dealing with the dead.  There are dead bodies everywhere, and it is making us sick.”


Not to downplay last year’s local destruction, but Haiyan makes Sandy seem like an inconvenient drizzle, light breeze and choppy seas.

One can only count one’s blessings.  Maybe it is the feeling of “there but for the grace of God go I,” or maybe it is just a deep seated desire on the part of human beings to reach out to those in distress through no fault of their own.  We genuinely feel for these people, and our empathy is only strengthened by the suffering we have endured.  We see past the racial, religious, social and political differences that divide us and want to reach out and help.  It is a basic and noble human inclination.

However, our “basic and noble inclinations” can go astray.  Assisting people one on one is relatively easy, but getting mass aid to tens of thousands who are homeless, foodless, health care-less and otherwise in a pretty bad way is another story.  Criticisms and accusations about what has been done and what should be done are mounting.  22 nations including the United States have rightly pledged support and are steaming warships and supplies to the Philippines as this blog is written.  But, without proper safeguards, much of the aid may end up in the wrong hands, and assistance to the powerless and needy may become controlled by the powerful and greedy.  And this storm, one of the most violent and destructive of all time, presents unique challenges.  In past storms, relief agencies and governments would look to infrastructure that was intact, or at least serviceable, to use in providing assistance to the afflicted.  In this storm, there is little infrastructure left!  What may have taken weeks or months in other areas to restore power and rebuild roads and buildings will take years to accomplish in the Philippines.   This is deadly serious and will test the long term resolve of their government and citizens as well as outsiders to make it right again, if that is actually possible.

Nevertheless, the charitable impulse is stirred when disaster strikes.  Before you reach for your checkbook, I urge you to research the organizations to whom you decide to send your dollars.  You want to help; find an organization that has the resources, experience and systems to actually put those dollars to work or get those in-kind donations on the ground and into the hands of the neediest.  For assistance in identifying these organizations, check out Robert Mackey’s blog, “The Lede”, in the New York Times (although heed the author’s disclaimer about not certifying the charities).  Another interesting website to peruse is the Center for Disaster Philanthropy.  To make sure that the bulk of your donation is used to help victims, research the organizations beforehand to see how efficient they are with their assets and operations (www.charitynavigator.org).  Peel the onion back a bit further to see how much money will actually go to the problem.  Well-meaning organizations, often religious based, may set up relief funds within their existing organizations to channel money to NGO’s on the ground that are actually providing services.  Unfortunately, this adds an additional layer of administrative expense… and is it truly necessary?  It may be better to give directly to NGO’s involved in providing services.  And, finally, forgive my seeming crassness, but in order to preserve your income tax deduction, make sure you contribute to a United States charity that is providing disaster relief rather than a foreign organization – contributions to foreign groups are generally not deductible!  You can check out organizations that are eligible to receive tax deductible contributions on the IRS website.  To prove my point, in the NYT blog referenced above, the Philippine Red Cross is cited as an organization that is “accepting donations and coordinating disaster relief.”  No doubt it is, and no doubt that it is a reputable member of the Red Cross network.  However, I don’t believe it is a U.S. based charity as I was unable to find it on the IRS website, www.guidestar.org, or www.charitynavigator.org.  In this case, it would probably be better to give to the American Red Cross and direct the contribution to Philippine disaster relief in order to save your tax deduction.

This Thanksgiving (“Thanksgivukkah?”) may we be mindful of our brothers and sisters in all areas of the world impacted by natural disaster, especially right now the Philippines, and give up a little bit of our good fortune to help them regain their lives and dignity.  I’ve always believed in “paying it forward” – post-Sandy, I believe in paying it back, too.

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Over the past 20 years, I have sat on several not-for-profit (NFP) boards, three of which I had the distinct honor of serving as president.  (It was certainly my distinct honor; how the boards and members-at-large may have actually felt may well have been another story.)  Anyway, these three boards could not have been more different.  My first board, that of the Nassau Shores Civic Association of Massapequa, Long Island was absolutely chaotic, probably because I presided over it incorrectly.  I felt that (1) every member of the board should always be heard; (2) whatever they had to say was worth hearing and considering and; (3) informality was better than formality.  (Ok, I know, I know, but give me break, I was young and idealistic!)  This was a small board of maybe 8 or 10 members which met on a monthly basis in various members’ living rooms.   While I believe our organization was ultimately effective in representing the community regarding civic improvements, engaging residents in volunteer activities, and providing social activities, especially for young families, the board itself left a lot to be desired.  The good news was that our budget was miniscule, so there was little we could really screw up.   The bad news was that the board did not govern or lead as it should, and my vice president and I ended up spending 15 or 20 hours a week for the three years of my term running all over Massapequa and the Town of Oyster Bay trying to do what a better managed board could have done.

Lesson # 1 – Boards need to be managed and kept on track.  Don’t be afraid to shut members down who are not adding value, and maintain order using Robert’s Rules.  Everyone wants to feel that something is getting accomplish – and they want to get home at a decent hour, too!  

businessman wearing  paper bagMy second experience as president of an NFP organization came about 11 years later when I served as the last president of Temple Judea in Massapequa and as a founding co-president of Temple B’nai Torah (TBT) in Wantagh.  TBT was formed when TJ and The Suburban Temple merged, with the new organization settling into the home of legacy Suburban.  In so many ways, this merger was one of my finest moments; we combined two great but struggling religious communities into a strong and sustainable, “reinvented” synagogue.  My experiences with both the board of legacy Judea and the board of the new TBT were remarkably similar, to wit – they were both populated with smart and passionate people who tended (myself included at times) to check their brains at the door and let their emotions take hold.  The religious boards, at 20+ members, were much larger than the board of the civic.  They, too, were difficult to control, but the larger size made the task more daunting.  The term “herding cats” comes to mind.  Everyone had an opinion on every topic, sometimes two or three, and every topic had to be debated, even on those rare occasions when everyone agreed!  (It’s always interesting to see people argue with one another using the same arguments.)  These were the most challenging boards I ever served on.  From my observations and experiences, I tend to think that religious boards may just be like that.  People serve because the passion that motivates them comes from deep within and, unfortunately, it does not always get distilled by the brain before being processed to the public.  As emotional and difficult to manage as these boards were, they were ultimately effective, successfully completing a much needed merger.  We were able to control them just enough so that work actually got done.  Five years later, life is good!

Lesson # 2 – Passion for the cause motivates board members to get involved.  Unchecked, however, it morphs into emotion and gums up the works.  Insist on respectful interchanges between board members and, echoing Lesson # 1, don’t be afraid to shut down those who are moving off track.  ImprovementsBearcat

My current gig is as the president of the Binghamton University Alumni Association.   In so many ways, this board is the most professional of the boards on which I have served.  Admittedly, unlike the other two organizations, we have the luxury of a professional director and staff to support our mission.  This enables us to truly focus on the business of the board.  For example, we recently spent a couple of years re-inventing ourselves.  Our previous president felt that we were adrift, so with the help of an outside consultant, we took a good, hard look at ourselves.  We defined and stated our mission and vision (not an easy task), and began working on implementation.  In other words, we reengaged the true business of the board from which we had strayed in recent years.  Through appropriate delegation of duties to board members, recruitment and engagement of nonboard committee members, and decentralization of service delivery into national and international chapters we do the work of a truly functioning board, overseeing operations, setting policy, and working in partnership with and giving direction to the professional staff to implement that policy.  We guide and oversee but don’t get bogged down in minutia and administrivia.  It works.

Lesson # 3 – Board members often roll up their sleeves and “get their hands dirty” helping to do the actual work of the organization.  That is okay for individual members, but it is not the purpose of the board itself.  The board exists to determine mission and vision and to guide the stakeholders in realizing that mission and vision.    

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