Friday, June 23, 2023

Women's Nonprofit Leadership Initiative Calls For Board Diversity Data on 990s

Last week, The Women's Nonprofit Leadership Initiative called on Treasury and the IRS to change Form 990 so that it requires exempt orgs to disclose board diversity data.  The WNLI letter is remarkably well-written and persuasive.  I am not patronizing women by that description.  It just that I am not often impressed anymore by calls for "window dressing," I'd gladly settle for immediate substantive change (i.e., just stop all discrimination maybe?) in place of a few token women and minorities on boards.  But I am wrong, prolly.  I'm just not in a good mood about the fact there are driverless cars and robot vacuum cleaners everywhere like the Jetsons, but we still have to remind people not to be ethnocentric (or worse) on the job and in public accommodations.  Dressing up windows is a necessary step towards fixing the whole damn house, I guess. 

Anyway, the letter relies on and cites some real good scholarship written by Dr. Professor Atinuke Aidedran.  First the abstract from Tinu's scholarship: 

This Article addresses how to increase funding to nonprofit organizations that are led by minorities or serve communities of color, and how to hold corporations and private foundations who make public commitments to fund these organizations accountable for those commitments. The Article makes two policy recommendations to address these problems, while engaging with Supreme Court jurisprudence on mandatory disclosures to ensure that the proposals are narrowly tailored to institutional donors and include an opt-out provision so as not to chill the constitutional protection of the freedom of association.

The first is for charities to publicly disclose their institutional donors in Schedule B of Internal Revenue Service (IRS) Form 990. The second is to modify IRS Form 990 to include information on the race and ethnicity of top managers, boards of directors, and the communities an organization serves. These disclosures are crucial for determining organizations that are minority-led or that serve communities of color, and the institutional donors who donate to them annually. The Article addresses the benefits and tradeoffs of disclosure, and how to use nudges—watchdog organizations, certifications, and the public—to use disclosures to increase funding to minority-led and serving nonprofit charities.

Dr. Tinu drives home her point in subsequent scholarship.  She is striving for much more than window dressing, trust and believe.  Here is the executive summary from WNLI's letter: 

Proposal to Amend Internal Revenue Service Form 990 to Require Disclosure of Demographic Composition of Governing Boards

Executive Summary

We propose that the IRS modify Form 990 by including a question to require disclosure of how board members in the aggregate self-identify by race/ethnicity and gender. Such a question could be added to either Part VI, Section A: Governing Body and Management, or Part VII, Section A: Officers, Directors, Trustees, etc. While our proposal focuses on gender and race/ethnicity since that has been the subject of most research on the value of board diversity, we would support including LGBTQ+ and disability disclosure as well.

The signatories are prominent national and regional organizations and individuals in these and other categories: good governance, leadership for women and people of color, higher education, health care, philanthropy, law, business, and consulting. We believe that making such data available, along with data the Form 990 already provides to the public and the nonprofits’ numerous stakeholders, will help advance diversity, equity, and inclusion, encourage transparency, and – most importantly – enhance the governance of all affected organizations.

We base our request on these factors: (1) research links board diversity and good governance;1 (2) studies document the predominance of white males in the boardrooms of the largest and most influential nonprofits; (3) access to information on nonprofit board demographics is important and is difficult for stakeholders and interested members of the public to gather from available data. An important model for public disclosure now exists in the for-profit sector, where disclosure of such data, supported by the SEC, is now required of all Nasdaq’s listed companies and increasingly demanded of other for-profit companies. Following the Nasdaq requirements and in order to protect individual privacy, we are asking for reporting of aggregate, not individualized, data.

Asking nonprofits to disclose demographic data is unlikely to impose an undue burden on these organizations or on the IRS. The question would fit easily into the sections already requesting information about an organization’s board. The Form 990 currently asks nonprofit institutions for a list of board members and some additional information about their board participation. It also asks a number of questions related to good governance which are not required by law but are intended to, and effectively do, encourage better governance practices.

Questions about whether the organization has a conflict of interest policy or whistleblower policy clearly have this effect. Adding a question about board diversity on the Form 990, not on the 990-EZ filed by smaller organizations, would be very much in line with the goals and character of the 990. It would not only provide the public with information it needs and ought to be able to access, but it also would signal that board diversity is a good governance issue. We believe such an amendment is in line with the stated commitment of the IRS “to ensuring equity, diversity and inclusion are integrated in the policies, procedures and practices used to carry out our mission.” The IRS has the authority to amend the Form 990 to add such a question, as it did with the major additions to the Form in 2008, when it added questions about governance and management policies that are not required by the Internal Revenue Code. 

darryll k. jones

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