A Small Matter of Abusing the Public's Trust

Sweet deal if you can get it:

Though his talent for fund-raising was cited to justify his ballooning salary, private donations to the Smithsonian Institution actually declined under its former chief executive, Lawrence M. Small, an independent committee said in a scathing report issued yesterday.

Salary and other compensation for Mr. Small, whose title was secretary, soared to $915,698 in 2007 from $536,100 in 2000, the 109-page report said. But ultimately, it added, the institution became more dependent on taxpayer funds and less on donations during his seven-year tenure.

Mr. Small resigned in March amid growing controversy over his lavish expense-account spending.

From 2000 to 2006, the report said, he also took nearly 70 weeks of vacation — about 10 weeks a year — and spent 64 business days serving on corporate boards that paid him a total of $5.7 million. Rather than rein him in, the Smithsonian’s Board of Regents stood passively by, the report said, allowing him to spend the institution’s money on copious personal expenses and to treat the board as irrelevant to decision making.

There's a side of me that wants to make some allowance in all this for the fact that Mr. Small was essentially given a green light by the very folks who were supposed to set the limits. I have no doubt it's a hugely complicated job to run the Smithsonian, and that's why a Board of Regents exists in the first place. But in this era of no accountability, where the buck seemingly never stops until it's rolled as far down hill as credibility will permit, I feel it's more than fair to join in the chorus of critics suggesting this was no small matter of abuse on the former chief executive's part. Even the worn-out and never truly convincing argument that top executives should be compensated disproportionately so long as they're delivering top performance doesn't pass the laugh test here:

In selecting Mr. Small, the committee wrote, the Board of Regents had hoped that his “experience in the business world” would benefit an institution grounded in science and the arts. But private donations declined during his tenure, reaching a low of $88 million in 2003. And while private money improved to $132 million in 2006, it noted, “that figure is about 10 percent lower than the amount raised in 1999, the year before Mr. Small took over.”

OK, so the economy also took a nose dive during that same time, and there are other factors that might have suggested Small was doing as well in the position as any human might, but if that were the case, then his terms for doing that job are even more offensive:

By the time he left office this year Mr. Small’s total compensation was $915,698. Part of that sum consisted of his annual housing allowance, which rose to $193,022 in 2006 from $150,000 in 2000.

The report said that “an individual who played a key role in the initial financial negotiations with Mr. Small” acknowledged the housing allowance was a “packaging device” for “delivering Mr. Small additional compensation in a manner that would conceal the true size of his pay.” The Regents were largely in the dark about the terms of Mr. Small’s initial compensation package, it said. [...]

“The mismatch between Mr. Small and the Institution appeared as early as the initial negotiations with Mr. Small when he made it clear that if he and his wife were not allowed to travel in first class, it would be a ‘deal breaker,’ ”“Over the years, Mr. Small placed too much emphasis on his compensation and expenses.”

As I'm sure you know, the indefatigable Tyler Green has been all over this story from the start, breaking the story of how not only was Small not raising the money he was hired to for the Smithsonian, but he was raking in all kinds of personal money sitting on some corporate boards that raised serious concerns about conflicts of interest:

Over the last few days the Washington Post's James Grimaldi has penned a series of damning stories about Smithsonian secretary Lawrence Small's spending patterns. This story concerns Smithsonian spending at Small's home and in his office, and in this story (co-written with Jacqueline Trescott) the Smithsonian's former inspector general reveals that Small attempted to interfere with an executive compensation audit.

All important stories (especially that last one). But I'm concerned about this: Lawrence Small sits on the boards of directors of several companies, including The Chubb Corporation and Marriott International.

In the post-Watergate era, Congress passed a series of governmental ethics reforms, one of which prevented Cabinet officers and the like from serving on corporate boards. Those reforms did not extend to the secretary of the Smithsonian. Small's directorships are publicly known and are even included in his official Smithsonian biography.

But does that make it right? Chubb is one of the world's largest insurance companies. They do a tremendous amount of business in the art and museum worlds. Should the leader of America's largest museum complex sit on Chubb's board?

Small's eventual permanent replacement (and there's ample speculation on who that might be [stay tuned]) will reap the regulatory rewards that this kind of abuse has sown:

Members of Congress have made it clear that the Smithsonian’s spending and its efforts to find private donors will be under harsh scrutiny as they debate its budget for fiscal 2008. The report is likely to be a centerpiece of its deliberations.
In it the independent committee proposed several radical reforms in the Smithsonian’s operations, including an annual review of senior management expenses by an internal audit committee; a salary for the secretary that would be competitive with those of chief executives at comparable nonprofit organizations; and new policies “to promote openness, transparency and effective governance consistent with federal regulations.”

I don't mind saying this is further evidence of what I've always felt was a gross miscalculation in the notion that the principles of cut-throat corporate business can be easily applied to the arena of public service. The latter implies a bit of self-sacrifice for the greater good that trumps the bottom-line-focused, barbarians-at-the-gates mentality that makes someone a success in the business realm. In Small's case, apparently we got the short end of the stick in that deal as well.