Article originally published in the American City Business Journals on February 13, 2017
Scandals at the Philadelphia Parking Authority and at the Philadelphia Housing Authority are teachable moments in what happens when boards don’t adopt best governance practices. Government authorities across the U.S. should take note.
In a decision on Sept. 27, 2016, the board of the Philadelphia Parking Authority allowed its then executive director, Vincent Fenerty, to keep his job after an investigation showed that he had sexually harassed an employee. The board reduced his personnel decision-making power, imposed other restrictions and made him pay the $30,000 charged by an outside investigator working on the case.
Felicia Harris, president of Philadelphia Commission on Women, said, “[Fenerty’s] continued employment sends the message that sexual harassment is OK, and that the harm caused can be erased by monetary payment. Sexual harassment can’t be written off like a parking fine.”
Shortly after the decision by the Parking Authority to permit Fenerty to remain in his position, the board learned that he sexually harassed another employee in 2006. Fenerty resigned on Sept. 28, 2016, knowing that this time the board would fire him.
The 2006 sexual harassment accusation was not reported to the board by the Parking Authority’s general counsel, a gross violation of good governance practices, nor did the board have the opportunity to vote on the $150,000 settlement offered to the victim, which she ultimately turned down.
It’s clear that the Parking Authority board did not learn from a similar 2010 scandal at the Philadelphia Housing Authority.
In that scandal, executive director Carl Greene settled four sexual harassment claims over five years by paying off the victims and not telling his board he was doing so. Greene faced similar acusations in the past, but he was hired anyway. Greene also faced a host of corruption accusations while at the Philadelphia Housing Authority, which resulted in a federal investigation. He was subsequently fired.
Describing the culture within the Philadelphia Housing Authority under Greene’s leadership as “toxic” is an understatement. Where was the board while all this was going on?
Do all government authorities have hotlines directly to the audit committees of their boards for employees to report wrongdoing by the leader or by the organization? Will the audit committee of the board take appropriate action against wrongdoers? Even if hotlines are in place, do employees believe that they won’t face retaliation if they use the hotline?
These are all standard best governance practices in public companies and in many private companies and nonprofit organizations.
The most important responsibility of any board is to hire and fire the CEO, establish levels of authority beyond which he or she needs to go to the board for approval and assess his or her performance against established goals. The board must also hold the CEO accountable for tone at the top and organizational culture.
Tone at the top encompasses the ethics, honesty and integrity with which an organization operates. Culture encompasses how members of an organization treat each other, as well as the organizational environment which hopefully allows employees to speak their mind and report wrongdoing without fear of retribution.
The CEO or executive director of the organization sets the tone and culture, and should be held accountable by the board for both.
Scandals occur in organizations in which tone at the top and culture are poor. These scandals are often reported on the front pages of the local or national press, damaging the reputations of the organization, its leader and its board members.
This raises the issue of the qualifications of board members of government authorities. Do they know how to be effective board members? Are they selected purely on their political connections or by patronage considerations, or are they chosen for their specific functional experience and expertise?
No employee should have to work in an organization in which ethical lapses or illegal activities occur, nor where employees lack confidence in using the hotline to report these activities. When government authorities are not operated using best governance practices, not only do the employees suffer, but the public is shortchanged as well. Both deserve better.
Stan Silverman is founder and CEO of Silverman Leadership. He is a speaker, advisor and nationally syndicated writer on leadership, entrepreneurship and corporate governance. Silverman earned a Bachelor of Science degree in chemical engineering and an MBA degree from Drexel University. He is also an alumnus of the Advanced Management Program at the Harvard Business School. He can be reached at Stan@SilvermanLeadership.com.
