Thursday, June 21, 2007

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.

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17 Comments:

Blogger Sunil said...

I was listening to this on NPR yesterday evening and remember thinking that I agree wholeheartedly that Mr. Small should be taken to task, but I also though that the Board of Regents be equally responsible/culpable for not fulfilling its watchdog role?

6/21/2007 09:44:00 AM  
Blogger Mark said...

Shame on him! Only the beginning, when we finally get a look at the slime of the last 8 years, this unfortunately will be "small". The Chinese have what seems an effective response to official corruption, an I too harsh?

6/21/2007 10:02:00 AM  
Blogger Edward_ said...

To my mind the Chinese response to official corruption is a form of corruption itself. Seriously. It's barbarian to execute someone because they abused their power. Power corrupts.

The thing is, since we know that power corrupts, we must ensure the checks and balances on that power are intact and working well. I agree with Sunil that the Board of Regents has some fast talking to do here.

6/21/2007 10:08:00 AM  
Anonymous Anonymous said...

It's one big money grab in the '00ughts'.

We're now as corrupt as your average banana republic.

6/21/2007 10:37:00 AM  
Anonymous jason said...

...gross miscalculation in the notion that the principles of cut-throat corporate business can be easily applied to the arena of public service....the bottom-line-focused, barbarians-at-the-gates mentality...

Agreed, but why is this ever a good idea in any arena?

power corrupts, we must ensure the checks and balances on that power are intact and working well.

Or, maybe the public support for the allocation of concentrated power should be directly withheld altogether. It's possible that the public has too much blind faith in the system of so-called 'checks and balances.' Individual members of the public ignore their own culpability for the acts of their authorities by trusting that such a system will "sort itself out in the end." Meanwhile, the checked-and-balanced authoritarian barbarians run roughshod over our culture.

6/21/2007 10:57:00 AM  
Blogger Edward_ said...

Or, maybe the public support for the allocation of concentrated power should be directly withheld altogether.

What would that look like though? City states with no Federal government? A President who's more or less a figure head? What?

6/21/2007 11:43:00 AM  
Anonymous ml said...

When you realize how very little money museum staffers earn, then paying the director so much is appalling. Another example of the rich getting richer and the poor being kept in their place.

6/21/2007 11:50:00 AM  
Blogger Mark said...

I agree it's barbaric. In the China case, people and animals died from the greedy decisions. In the Smithsonian affair he was f-cking with our public treasure and National shrine. I'm VERY tired of the absence of ethical responsibility in corporate and Gov.. These people know better, without the need for hoops and hoops of time and money swallowing oversight.

6/21/2007 11:59:00 AM  
Blogger Aaron said...

I say lock him in the museum fo a night. I hear it can be preeeeety rough.

6/21/2007 12:07:00 PM  
Blogger Edward_ said...

I share your frustration, Mark. But I feel if we set the punishment too high, we won't get the best people for the position (what sane person would risk it?).

There's a reality to the fact that getting power will change people. A reasonable approach to that reality, in my opinion, is to spend the money to check that power. That solves two problems, it eliminates the need for a punishment that's too Draconian and it actually (should) serve to catch more abuse than would occur with Draconian punishment as the only deterent. Even with a disincentive as barbarian as execution, some politicians will, obviously, still risk it. Only oversight will keep tabs on those in power AND permit a more humane punishment for those who give into the temptation. Yes goverment types can, through their abuse/neglect, cost people lives, but someone has to do the job, and you want folks who are best qualified not to be scared off by the potential risks of failure being misread as abuse.

Consider the case of Michael D. (heck of a job) Brown[ie] , who, to my mind possibly cost people their lives in the wake of Katrina because of his incompetence. Should he be executed for it? Who would head up FEMA if that were the possible consequence of poor performance? How do you distinguish poor performance in such cases from abuse of power?

No, I can't sign onto anything that drastic. It would ensure only the most ambitious of fools end up filling such positions.

6/21/2007 12:16:00 PM  
Anonymous Jim said...

An anecdote FWIW: My wife subscribes to the Smithsonian magazine. Every month there is a letter from the Secretary. About two/three years ago I noticed that each month there was a different picture of Mr. Small (well-tanned) in a different suit in a different setting. I smelled a rat - it just seemed inappropriate and self-aggrandizing. Sure, change the picture every 6 months or so - but every month?! And I'm sure the photo session was a big deal...on the taxpayer's dime probably.

Let's just say I was not surprised in the least on what happened to this guy.

6/21/2007 12:41:00 PM  
Blogger Mark said...

You are such a man of reason, Edward and you even serve good wine at your openings! Ok, fair enough, just a hand or a small limb-yes, that small limb would do nicely. I hope this mess can be resolved quickly. Even basic maintenance of the facilities is dire straights, leaking roofs, etc.

6/21/2007 12:53:00 PM  
Anonymous jason said...

City states with no Federal government? A President who's more or less a figure head? What?

Well, if it is true, as you assert, that power corrupts, then is it enough of a significant difference to have three branches of nearly 600 corrupt leaders (ruling over a population of over 300 million people) instead of only one corrupt leader? Does it make sense to assume that rulers can effectively check one another's power if each one is already corrupt?

It seems to me that the ratio of nearly 600 U.S. rulers (executive + legislative + judicial) to 300,000,000 U.S. citizens still bestows a massive amount of power on those 600 individual rulers. So maybe the question should be: at what ratio of rulers to ruled does the amount of power become so low as to prevent corrupt government? If the two correspond (i.e., increase in power = increase in corruption), then corruption would approach zero as the ratio of rulers to ruled approaches 1 to 1. This would mean that corruption increases the further we get away from a condition of equally shared power, or self-government -- that is, no rulers and no states -- a far, far cry from our current U.S. Republic of representative rule. Of course, this would not only apply to the federal government, but to every form of rule, including those controlling the national arts institutions, such as the Smithsonian.

Although much has been written on the subject of self-government, I wouldn't want to say exactly what it would have to look like (which is the beauty of self-government, it can't be predetermined from above by a group of elites), it would have to be cooperatively organized and directly participatory. There are plenty of examples of this kind of self-organizing being accomplished among contemporaneous groups, including indigenous cultures that currently exist with little or no government. But if we are to get there, then we have to quit believing in this "checks and balances" bullshit, because it doesn't produce real democracy and it never will. It puts too much power in the hands of the few, and excludes the populace from the ability to control their own lives and culture. The abuse at the Smithsonian is just a small example of this.

6/21/2007 04:01:00 PM  
Blogger Edward_ said...

I wouldn't want to say exactly what it would have to look like

OK, in that case I don't feel compelled to say exactly what my very different, but very, very superior alternative to self-government would look like...I'll just insist you give it a try. ;-P

6/21/2007 04:59:00 PM  
Blogger Mark said...

I think todays Cheney news is timely. If you don't want an oversite committee observing your deeds, abolish it! The guy may no longer have a functioning heart, if ever, but he's got hutzpah.

6/22/2007 08:46:00 AM  
Blogger Henry said...

Don't they have a merit-based pay system? The executive's salary should be proportional to things like good fundraising results, low admin costs, high "prestige" (?), high attention to the preservation of current artifacts (like that abominable story about water leaks a few years back), etc. I'll bet their HR department already has all kinds of employee incentive and performance-rating policies on the books for all the other positions. All they need to do is write one for the chief. This would at least focus and ease the task of any proposed oversight committee.

6/22/2007 10:22:00 AM  
Blogger a fundraiser said...

They announced today that they beat budget by 20% and we wrote about it on our nonprofit fundraising gossip blog:

www.DontTellTheDonor.org

9/17/2007 10:47:00 PM  

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