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Walsh University the Ethics of Accepting Designated Financial Walsh University The Ethics of Accepting Designated Financial Gifts to Museums: Considering Donations that Maintain Public Confidence A Thesis by Katherine May Department of Museum Studies Submitted in partial fulfillment of the requirements for a Bachelor of Arts Degree with University Honors April 2020 Accepted by the Honors Program 4/6/2020 Advisor Date 4/7/2020 Reader Date 4/6/2020 Katherine Brown, Ph.D., Honors Director Date 1 Introduction According to the American Alliance of Museums (AAM), the national professional museum association in the United States, “Museum governance in its various forms is a public trust responsible for the institution’s service to society.”1 Of its various obligations, a board of trustees’ most significant role is to oversee an institution’s fiduciary responsibilities and to set policy. Trustees are accountable for implementing the mission and ensuring that the institution adheres to ethical standards. However, public confidence is not easily earned because a concrete benchmark of success for a board of trustees is nonexistent. Instead, a board’s effectiveness is determined by the public’s point of view and opinions. Museum leadership must therefore go above and beyond legal requirements in order to maintain the public’s trust. Nevertheless, meeting the public’s expectations is less complicated in theory than in practice. In order for public confidence to be maintained, it is imperative for trustees to keep abreast of public opinion, a notion that continuously varies. This responsibility is in addition to the task of ensuring that the necessary funds are procured for the institution. With growing dependence on individual private donors, it is not uncommon for the benefactor to gain partial authority over the gift’s use. There are instances of large undesignated financial gifts (donations without conditions); namely Janet and Craig Duchossois’ $50 million to the Art Institute of Chicago in 2017, but similar examples are rare.2 Instead, it is typical for the public to read about large designated financial gifts, such as Ken Griffin’s $20 million gift to the Norton Museum of Art in 2018 that 1. “AAM Code of Ethics for Museums,” American Alliance of Museums, amended 2000, accessed October 12, 2018. https://www.aam-us.org/programs/ethics-standards-and-professional-practices/code-of-ethics-for- museums/. 2. Erin Rubin, “A $50 Million Gift with No Strings Attached? What It Took,” Nonprofit Quarterly, April 23, 2018, accessed July 6, 2019, https://nonprofitquarterly.org/50-million-gift-no-strings-attached-whats-bottom/. 2 secured Griffin’s name to the building.3 If the only apparent difference between Duchossois’ and Griffin’s donations is the renaming of a museum’s building, then what is the distinction between these two types of gifts? According to Ruth McCambridge of Nonprofit Quarterly (2010), gifts without conditions provide “a break from the constant unnecessary hamster wheel of applying yearly for grants […] and from receiving monies that may be restricted for one purpose when they really need them for another,” and can lead to “even dedicated nonprofits veer[ing] off mission periodically.”4 In other words, designated financial gifts pose a potential risk to trustees’ fiduciary responsibilities. Designated donations are not necessarily restricted but are intended for a specific purpose, such as a capital campaign, endowment, acquisitions, and education programs, among other reasons. Rather than balancing the needs of both the community and the institution, the scale is tipped in favor of one individual. Donations maintain further potential risks to trustees’ responsibilities when they are perceived as “tainted.”5 This typically occurs when a benefactor becomes associated with a scandal or an event, individual, or product that is condemned by the public. For example, a Guardian article revealed that a few Washington, D.C.-area museums have recently accepted financial donations from tobacco corporations, including the Smithsonian Institution’s National Portrait Gallery and the Newseum.6 Although the donations’ connection to a negatively- 3. Lisa Bertagnoli, “Ken Griffin Gives $20 Million to Florida's Norton Museum of Art,” Crain’s Chicago Business, July 31, 2018, accessed July 6, 2019. https://www.chicagobusiness.com/article/20180731/NEWS07 /180739968/ken-griffin-gives-20-million-to-florida-s-norton-museum-of-art. 4. Ibid. 5. Paul Dunn, “When a Donor Becomes Tainted,” Nonprofit Quarterly, March 21, 2010, accessed January 15, 2019, https://nonprofitquarterly.org/2010/03/21/when-a-donor-becomes-tainted/. 6. Jessica Glenza, “Big Tobacco: Top US Arts Institutions Under Fire For Accepting Donations,” Guardian, March 29, 2019, accessed July 6, 2019, https://www.theguardian.com/business/2019/mar/29/smithsonian- and-top-institutions-under-fire-for-accepting-tobacco-money. 3 perceived product may not directly interfere with an institution’s operations, like designated financial gifts may, it maintains the potential of breaching public trust by going against the values of society. Despite these two known qualities of financial gifts, “tainted” donations continue to be offered to museums. In light of this situation, it is important for trustees to understand how to best assess a donation to ensure it matches the institution’s mission and does not infringe on its autonomy. Also, trustees should understand how to communicate these motives to the public to promote transparency and ensure adherence to AAM’s Code of ethics to further establish public confidence. Therefore, an analysis of past donations will help reveal what impact the management of a large financial gift can have on public confidence, and which practices should be followed. This research will seek to answer the following questions: How do museum boards of trustees maintain public confidence when considering whether to accept designated financial gifts? How do donors’ beliefs impact the autonomy and perceived values of a nonprofit cultural institution? My research will consist of a review of previous research, an analysis of three case studies, and a culminating conclusion about the findings from each case study. The following designated financial gifts will be examined: the Sackler family’s $3.5 million donation to the Metropolitan Museum of Art (the Met) in 1974, Kenneth E. Behring’s $80 million donation to the Smithsonian Institution’s National Museum of American History (NMAH) in 2000, and David H. Koch’s $35 million donation to the Smithsonian Institution’s National Museum of Natural History (NMNH) in 2012. I will then create a scoring rubric for trustees of American museums to use when evaluating a potential designated financial gift based off findings from the 4 analyses. Building on research of financial gifts may promote healthy donor-trustee relationships and subsequently maintain the public’s confidence. Literature Review The literature review explores three areas relevant to my research: the role of nonprofit organizations and the importance of public confidence, how nonprofits protect public confidence, and how museums are financed and the ethics of accepting financial gifts. My project will review the relationship of these three areas and complement current research. The literature review and case studies ultimately highlight the importance of public confidence when considering designated financial gifts. Role of Nonprofit Organizations and the Importance of Public Confidence The National Council of Nonprofits articulates the role of nonprofit organizations within the United States. The Council, a national organization that supports America’s nonprofit sector, defines nonprofit organizations, or public charities, as groups that are intended for “public benefit.”7 This source explains that nonprofits are organized into a number of classifications, including – but not limited to – civic, health, arts, education, and religion.8 Although the services provided to the public by nonprofit organizations vary, all nonprofits, such as museums, are managed by individual boards of trustees that ensure an organization’s mission and subsequent 7. “What is a “Nonprofit?,”” National Council of Nonprofits, accessed June 10, 2019, https://www.councilofnonprofits.org/what-is-a-nonprofit. 8. Ibid. 5 posterity through principled governance and financial security.9 I will use the Council’s description to define the purpose of nonprofit organizations for my research. Trustees therefore maintain fiduciary responsibilities that are intended to deter legal misconduct. A Practical Guide to Museum Ethics is a comprehensive discussion about common ethical dilemmas within museums and museum leadership and is intended for any museum professional or leader. The book prepares museum professionals for a variety of potential ethical quandaries. Yerkovich explains each of the three fiduciary duties: duty of care, duty of loyalty, and duty of obedience in the context of ethical governance. Duty of care requires trustees to operate in a cautious, thorough manner to avoid negligence. Although established to deter wrongdoing that could potentially harm an organization, this commitment encourages trustees to perform to the best of their abilities. Duty of loyalty necessitates that the interests of an organization are placed before those of an individual trustee. It is important for a trustee not to exploit the advantages of their position, especially if one’s actions hinder the advancement of the organization. Thirdly, duty of obedience calls for the promotion of
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