United Way board seen as too big and unfocused

Late last month, the chairman of the United Way of Central Carolinas' board of directors called a special meeting of the 68-member group.

A key item of business: the ouster of longtime president and CEO Gloria Pace King. But the chairman, retired Bank of America executive Graham Denton, shared that fact with just five others beforehand.

It wasn't the first time the bulk of the board had been kept in the dark. Two years ago, the board's inner circle – its executive committee – failed to brief the full membership when it approved a $2 million retirement package for King. Four board members say they learned about it only after the Observer and its media partner, WCNC-TV, revealed the deal in June.

The pension decision has buried the United Way in public criticism and damaged donor confidence in an agency that provides millions of dollars to 91 charities across the region.

King, one of the country's best-known United Way CEOs, has been asked to resign by Sept. 30 or face firing. The chairman of the board has resigned, as have two other members. The agency's annual campaign has been jeopardized.

United Way leaders have asked a task force to take a harder look at what happened and why.

Critics and some members have reached one conclusion: The board is too big and unfocused to govern the multi-million dollar charity.

Among the flaws they say the crisis has uncovered:

A culture in which a handful of insiders makes key decisions, leaving the rest of the board as virtual figureheads. Denton and five other members essentially sealed King's fate.

A leadership structure which seems unable to provide a clear explanation of King's retirement deal. It evolved over roughly six years, members agree. And although past presidents are always kept in the loop, several say they aren't sure how it happened or whether they understood what they were doing.

A governing body that asks too few questions on critical issues, and generally supplies unanimous yes votes to proposals submitted by its committees and leadership.

Meanwhile, the United Way has launched its annual campaign that last year raised $45 million, but this year faces the double barrels of a faltering economy and public fury over King's pay.

Much of the anger is directed at the board, which includes some of the city's most powerful corporate and civic leaders. The members who approved the package have apologized to donors, saying they badly misjudged what's appropriate pay for their CEO.

Board members outside the executive committee have been privately fuming about being blamed for a CEO pension package they didn't vote on. Further complicating matters is the chance that the deal might run afoul of IRS rules against excessive CEO pay.

UNC Charlotte Chancellor Phil Dubois said he intended to leave the board prior to the pay controversy. He has resolved to stay, but wants changes.

“It is not a productive governing structure,” he said. “And so when you have meetings run like that, it's no wonder no one has a meaningful stake in the operation.”

Denton stepped down last week, saying board members had lost trust in him and that some felt “betrayed” by the group's leadership.

He has said the pension problems stem from a “collective breakdown at many levels over a period of time.”

But Denton has struggled to explain what that means.

“There are too many holes,” he said. “That's where the task force comes into play – to try to reconstruct some of that.”

Observers outside the board remain perplexed.

“The $64,000 question here is ‘what the hell happened,'” said UNC Charlotte finance professor Tony Plath. “These people all have a track record professionally of knowing better than what they did.”

Best compensation

An Observer analysis of 31 United Ways, including the agencies in New York, Los Angeles and other major cities, found King to be the best-compensated CEO.

Questions about her $2 million retirement pay center on its 2006 approval by the board's executive committee. United Way tax forms say the pay came up as early as 2001, when it was “originally intended” to be enacted but wasn't. The forms don't say why.

Denton at first said the payout was the board “compressing what should have happened over eight years into four.”

“I frankly think we weren't aware of the rules,” he said. “We didn't understand.”

The board has since refused to answer repeated questions about what happened in 2001. Most board members who served back then have declined to comment or not returned calls.

The Rev. Mauricio West, chairman of the 2001 executive committee, has declined multiple requests for interviews.

The pension problem might have been avoided had the United Way staff followed its own policy regarding executive compensation, new board chairman Carlos Evans says.

Evans declined to release the policy, saying the issue was to be studied by the task force. But it includes “things you would normally have as part of your annual review of compensation,” such as peer comparisons and discussion among decision-makers.

Asked if King was the staff member who failed to follow the policy, Evans said: “We don't want to get into that.”

King has declined to comment. Her lawyer, Bill Diehl, has said she might sue for the more than $1 million outstanding on the retirement plan. The board now says it won't pay that.

Diehl said King didn't violate any policies, and he questioned whether Evans knows what he's talking about.

“I don't think he can identify the policy that wasn't followed,” Diehl said.

Board growth

The board has more than doubled during King's 14-year tenure. In 1994 when King was hired, the 32 members struggled to meet annual campaign goals.

It was King's responsibility to recruit a board that fully reflected the community. Under her, the United Way panel became a much higher-profile group, stocked with corporate leaders such as Bank of America CEO Ken Lewis and former Wachovia CEO Ken Thompson.

With executives leading the charge, the campaign jumped from $18 million to $45.3 million during King's stay.

Corporations want to help the needy, UNC Charlotte's Plath said, but the board seats also carry prestige and honor within the local business community. “You don't find junior level executives sitting at those tables,” he said.

Some United Way board members say the board grew as big as it did because the agency sees itself as the safety net for the community.

“There are other places where you can network more effectively,” said board chairman Evans. “This is a board that's primarily about community service.”

Board attendance

The full board meets monthly, 7:30-9 a.m., convenient for busy executives.

Attendance estimates vary. Dubois said about a third of the members show up; Evans says as many as 70 percent do.

Free-wheeling discussions happen in various committees, a former board member said. But during full meetings, King and her staff often supplied committee chairs with pre-written presentations – sometimes word-for-word scripts.

During such presentations, UNCC's Dubois said, board members “would sit quietly and listen attentively, with really no opportunity for meaningful input or exchange.”

Former board chairman Ned Curran said many of the full board's votes were unanimous.

“A board of that size is not likely to dig into details,” he said. “Work is going to be done in the committees, and people have to have confidence in the work of those committees.”

Executive committee

The executive committee is easily the most powerful. The 15 or so members decide whom to elevate to key posts, and have broad power to act for the full board.

It did so with King's retirement package without briefing the full board, Curran said.

Evans, the current chairman, said the full board approves the agency's budget. King's pay is included in it.

The board's bylaws allow the executive committee to act alone on CEO pay, but one expert said the full board should have been briefed.

“You would know (the deal) is going to be scrutinized, so you would make sure every board member knows about the situation,” said Linda Crompton, president and CEO of BoardSource, a group that trains nonprofit boards.

That 2006-07 executive committee included some of Charlotte's most powerful businessmen, including Carolinas HealthCare System Executive Vice President Paul Franz, Belk Inc. Chief Operating Officer Johnny Belk, and the banking CEO “Kens” – Lewis and Thompson. They have all declined comment, or couldn't be reached.

Curran, chairman of that committee, said he understands why some of his colleagues are upset about not being informed.

“We could have done a better job,” he said.

In deciding King's fate, Denton picked a group even smaller than the executive committee. He drafted former board chairmen Franz, Curran and Anthony Fox, plus future chairs Evans and Jeff Kane.

Denton's goal: Move quickly.

“You can't get the full board when something is changing weekly,” Evans said.

The board has charged Charlotte attorney Bob Sink with assembling a task force to look at changes. Members hope a smaller board will be among his suggestions.

Evans, the board chairman, said that, aside from the CEO pay problem, the group has done a good job directing the agency.

“This is actually a very good board made up of well-minded people who sincerely love their community and want to do the right thing,” he said.

“I'm not going to let anybody run them down.”

Michael Gordon and Gary L. Wright contributed.

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