Misaligned Governance

 

The question is often asked what went wrong and who was accountable for the USCF getting itself into such bad shape – almost to the point of dissolution. Some claim it was the executive directors fault, other claim it was the executive boards fault, some think it was the fault of past presidents, some even think it was the memberships fault be it life members, or scholastic members.

 

 

The Board of Delegates formulates general policy, adopts the annual budget, and writes the Bylaws. The Executive Board manages the affairs of the Federation, including employment and other contracts, between meetings of the Board of Delegates and performs other duties as specified in the Bylaws. If one analyzes it properly even though the Executive Board has full powers of a governing board the accountability, in the past, has often been ultimately that of the Board of Delegates who some believed were the board of directors of the USCF. The USCF started out without delegates. Begining in 1966 with the delegation of authority to a policy board, the current accountability chain was then codified in 1975 with the elimination of the older proxy system. With this the delegate system shifted from an aristocracy to an oligarchy but the rapid growth of membership during the 70's made it more dysfunctional in terms of accountability. The USCF delegates are in favor of accountability, just not for themselves. It seems enlightened absolutism is their idealized form of governance.

 

The organization began its drift during 1975-1978 resulting in the first in a long line of chess politicians becoming USCF President in 1978. Other noticeable times of extremely misdirected leadership and management occurred during 1989-1992 as well as 1996-1999 where the organizations hemorrhaging could no longer be contained setting the chain of events for where we are today. Important governance changes then occurred to solidify responsibility under an executive board.

 

 

So what is the problem with this board structure that helped create the situation we suffer from today? It is very complex but in its simplest terms the problem revolves around the confusion over the role of the Board of Delegates and lack of execution of ones fiduciary duty by the individual delegates and board members. I don't think this happened on purpose but in most cases it was just the delegates and board members did not know any better. A natural outcome of a political system rather than a business oriented system. This is an issue of accountability. This lack of accountability is often justified by the comment "They are a volunteer and not an employee." The delegates will rarely, if ever, act in a way they could be possibly held accountable for an outcome.

 

There is a prevailing view that those have done more for chess are most qualified as delegates and board members. Thus, delegates are usually accomplished chess players, tournament organizers/directors, coaches, state officials, or chess vendors. It is like having a group of accomplished musicians acting like the board of a symphony orchestra. However most delegates don't have senior management skills or experience with publicly held corporations or even an understanding of board responsibilities or policy governance. Their loyalty to friends and allies often supersedes any independent judgment. Delegates wrongly believe they are to make "strategic motions" and in reality suffer from no strategic planning, a hodgepodge of practices, whims of individuals, arm chair micromanagement, and capricious decision making. Many Delegates don’t attend required meetings. Decisions are made by people who come to the US Open whether they are officially a Delegate, or not. Those in the oligarchy have very little respect for newcomers who put time and effort into running to be elected to some USCF office. Our delegates may be excellent chess players, experts at running a chess club or chess tournaments but since most are not business professionals they don't have a clue about what it takes to run a successful multi-million dollar national membership corporation. Note the standard of care imposed upon a nonprofit director or officer is established by statute or by common law. The modern trend is to hold nonprofit directors and officers to a standard of conduct comparable to their counterparts in for-profit corporations. Notwithstanding this trend, nonprofit directors and officers may be held to a higher standard of care whereby liability is imposed for mere negligence or inattention, comparable to the standard of care imposed upon a trustee managing funds entrusted to his care.  Such higher standards necessitate greater professional senior management and governance expertise. This should include delegates as well as board members.

 

Delegates often focus on trying to promote what they personally feel the purpose of the USCF should be but not what it actually is. It is often claimed the purpose of the USCF is to support the local organizer or local affiliate. You also will hear the term used "our mission implies" and “potential mission components” to promote personal views of what should be. Such Delegates say they can only support the organization if it does what they want it to do. The net effect of promoting such feelings is putting ones special interests above the published mission and purpose of the corporation. It is critical to understand pursuant to the duty of obedience, directors of nonprofit organizations may not deviate from their duty to fulfill the particular purposes for which the organization was created. Nonprofit corporations are organized to achieve specific objectives or purposes, which are generally set forth in the organization's by-laws and charters. Adherence to the purposes of the organization is critical as they form the basis for the corporation's tax exemption and, thus, its status as a nonprofit entity.

 

Delegates often feel they have been selected to represent their constituency as a board member. They feel they must be an advocate for the interests of their state chapter or local affiliate. If they are a Life Member then they should be an advocate for Life Members, coach scholastic chess then an advocate for scholastics, if a tournament organizer than an advocate for organizers, a TD for tournaments, etc. There is always great concern that someone else’s special interest is better represented then their own. Delegates always seem to state what they feel the interests of the membership are, but never ask the general membership. Advancing the livelihood of themselves, their constituencies, or their friends is the practiced way to get things done. However, the duty of loyalty requires a director to maintain undivided allegiance to the interests of the organization and bars a director from using his position, the organization's information which he possesses, or the organization's property in a manner which allows him or his friends to garner a personal profit or a personal advantage. The board member must represent the best interest of all the members not just a special interest. The duty of loyalty, therefore, implicates questions of conflict of interest, corporate opportunity, and confidentiality.

 

With the implementation of OMOV there has been an attempt to mitigate the accountability issue. There has been a shift toward owner representation. As a first good step we now have improved alignment for the Executive Board.

 

 

This has however has created a situation where the Executive Board is accountable to the membership for results but the Board of Delegates still retains authority over the organization. Even though the Executive Board manages the affairs of the Federation between meetings of the Board of Delegates the true lines of accountability are blurred in the minds of many and the basic problems with delegate's lack of nonprofit skill and orientation can still be felt. The organization cannot be nimble or competitive as a business with a board of amateur delegates meeting only once a year. Also too many delegates still make money from the USCF or chess thus we still have vendors directing the members. The delegates are still accountable for nothing and only to the people who nominated them. Why would anyone expect anything to change if the same people and their allies are in charge year after year and have no accountability? The delegates are well meaning volunteers for chess an ultimately the organization will need to determine (as suggested below) how to properly align responsibility and authority, have clear cut accountability, and maintain a businesslike board of directors, while capitalizing on the chess expertise and participation of our delegates.

 

 

Once the USCF has a larger, more professional and businesslike Executive Board in place, with the appropriate bylaws and policies that reinforce fiduciary duty, the organization can move to the recommended accountability chain.