Norton Bill for New Smithsonian Governance Structure Would Enhance Fundraising Capabilities Without Crowdfunding Appeals

Jul 22, 2015
Press Release

WASHINGTON, D.C.— Congresswoman Eleanor Holmes Norton (D-DC) today introduced her bill to strengthen both the Smithsonian’s governance and fundraising capacity, marking the first significant change to the institution since it was established in 1846.  Norton said her bill is particularly timely given that the Smithsonian launched a crowdfunding campaign on July 19 to raise $500,000 to preserve and display Neil Armstrong’s Apollo 11 spacesuit.  Norton said America’s finest cultural institution should not have to rely on targeted online crowdfunding campaigns to display its world-class artifacts.  Instead, the Smithsonian should have a governance structure that facilitates much larger fundraising efforts to build a solid endowment. 

Norton’s bill makes changes to the Smithsonian's governance structure by expanding and changing the current 17-member composition of its Board of Regents, which includes public officials—six Members of Congress, the Vice President of the United States, and the Chief Justice of the U.S. Supreme Court, and nine private citizens.  Norton’s bill brings the board to 21 members, comprised solely of private citizens.  Unlike officials such as the Chief Justice of the Supreme Court, private citizens are more fully able to reach out to the public and philanthropists for fundraising.  The bill would, however, preserve and strengthen the traditional role of the Speaker of the House, President of the Senate, and President of the United States in selecting members of the Board.

“The Smithsonian Institution, with its world-class museums art galleries, research facilities, educational showplaces, and the National Zoo, needs a board equal to the task of raising far more funds to help support this unique institution.” Norton said.  “Federal funds cannot cover all the Smithsonian’s unique expenses, as the search for funding Neil Armstrong’s spacesuit points out.”

Norton’s full statement introducing the bill follows.

Statement of Congresswoman Eleanor Holmes Norton

On the Introduction of the Smithsonian Modernization Act of 2015

July 22, 2015

Mr. Speaker, today, I introduce a bill to modernize the Smithsonian Institution and to enhance its governance and fundraising capabilities, in keeping with the recommendations of a number of experts, including the Smithsonian Independent Review Committee, chaired by former U.S. Comptroller General Charles Bowsher.  This bill, the Smithsonian Modernization Act of 2015, makes changes to the Smithsonian’s governance structure by expanding and changing the current 17-member composition of its Board of Regents, which includes public officials—six Members of Congress, the Vice President of the United States, and the Chief Justice of the U.S. Supreme Court—to 21 members, comprised solely of private citizens.  This change will strengthen both the Smithsonian’s governance and fundraising capacity, and it would be the first significant change in this old and revered institution since it was established in 1846. 

This bill preserves and strengthens the traditional role of the Speaker of the House and the President of the Senate in selecting Board members while eliminating the role of the Board in selecting private citizens for the Board.  The Speaker of the House and the President of the Senate will each send 12 recommendations to the President of the United States, who will select the 21 members of the Board from these recommendations. 

The Smithsonian Institution is an irreplaceable cultural, scientific, historical, educational and artistic complex without any public or private counterpart in the world.  Since its founding, the Smithsonian has developed an extraordinary array of world-class museums, galleries, educational showplaces and unique research centers, including 19 museums and galleries, nine research facilities, the National Zoo, and the forthcoming National Museum of African American History and Culture, which is now under construction.  The Smithsonian has grown with private funding, donations from cultural foundations, and contemporary artists, but most of its funding continues to come from federal appropriations.  Despite receiving 70 percent of its funding from the federal government, the Smithsonian has long had serious funding, infrastructure, and other needs.  Today, the Smithsonian is embarking on a seven-year, $1.5 billion fundraising effort, but its current board members who hold public office are severely limited in participating, as is usually expected of board members.  Under the Smithsonian’s fundraising plan, the 19 museums and research institutions are working together as part of a unified campaign to raise the necessary funds.  With this goal of $1.5 billion, it is more important now than ever that the Smithsonian’s ability to raise money be modernized.

Congress must help the Smithsonian strengthen its ability to build resources beyond what taxpayers are able to provide.  The most important step Congress could take today is to rescue the Smithsonian from its 19th-century governance structure, which keeps it from accessing needed and available private resources and limits close and critical oversight.  The Smithsonian Modernization Act provides a governance structure befitting the Smithsonian’s unique complexity.  The existing structure may have fit the Smithsonian over 170 years ago, but today the structure has proven to be a relic that does a disservice to the Smithsonian, the federal government, and the public. 

The present governance structure places immense responsibility to raise money on dedicated but overextended Members of the House and Senate, the Vice President of the United States and the Chief Justice of the United States Supreme Court.  These federal officials comprise almost half of the Smithsonian Board of Regents, and must perform their fiduciary duties as board members while giving first priority to their sworn responsibilities as important federal officials. 

            In 2007, an independent review committee found that the Board had violated principles of good management during the tenure of former Secretary of the Smithsonian Lawrence Small by allowing him to create an “insular culture.”  The committee’s report indicated that the Board had failed to provide the needed oversight and had overcompensated Mr. Small.  The report also found that Sheila P. Burke, the Smithsonian’s then-deputy secretary and chief operating officer, had frequent absences from her duties because of outside activities, including service on corporate boards, for which she personally earned more than $1.2 million over six years.  Further, the Smithsonian’s then-business ventures chief, Gary Beer, was dismissed for financial indiscretions.  This crisis, caused by unprecedented controversies and irresponsible risks, put into sharp focus the need for new revenue streams and for a modern governance structure.  The first full-blown scandal in the Smithsonian’s history, replete with embarrassing media coverage, damaged its reputation and perhaps the confidence of potential contributors.  The poor judgment and overreaching of Smithsonian personnel during that period demonstrate the need for new and concentrated oversight.

The current Board, of course, has taken some important action on its own. After irregularities were uncovered by the media, the Board responded to the controversies by creating a governance committee, chaired by Patty Stonesifer, a Regent and former chief executive officer of the Bill & Melinda Gates Foundation, with a mandate to comprehensively review the policies and practices of the Smithsonian and how the Board conducts its oversight of the institution.  The Board also established an Independent Review Committee (IRC), chaired by former U.S. Comptroller General Charles A. Bowsher, to review the issues arising from an Inspector General’s report, the Board’s response, and related Smithsonian practices.

The IRC was forthright in its investigation and recommendations.  The IRC stated explicitly that the root cause of the problems at the Smithsonian was an antiquated governance structure, which led to failures in governance and management.  According to the IRC, the Board must assume a fiduciary duty that carries a “major commitment of time and effort, a reputational risk, and potentially, financial liability.”  The IRC further argued that the Smithsonian, with a budget of over $1 billion a year, must have Board members who “act as true fiduciaries and who have both the time and the experience to assume the responsibilities of setting strategy and providing oversight.”  The IRC cited a lack of clarity in the roles of the Vice President of the United States and Chief Justice of the U.S. Supreme Court on the Board in particular, and said that “it is not feasible to expect the Chief Justice to devote the hours necessary to serve as a fiduciary agent.”  The same observation could be made of the Members of the House and Senate who serve on the Board.  The IRC recommended that the Board increase the level of expertise and the number of members to ensure that the Board has sufficient time and attention to dedicate to the Smithsonian.  My bill follows this guidance.

The Smithsonian’s own governance committee identified several Board weaknesses, concluding that the Board did not receive or demand the reports necessary for competent decision-making, that the staff whom the Board depended upon for oversight inquiries did not have direct access to information, and that the inability of staff to communicate red flags “crippled” internal compliance and oversight.

Only Congress, with the concurrence of the president, can amend the Smithsonian Charter.  The last change to the Board’s structure occurred over 30 years ago, but it only increased the number of private citizens on the Board from six to nine.  The Smithsonian Board is still a board dominated by highly placed public officials.

The number of Regents, however, is not the root problem.  My bill expands the Board from 17 to 21 members, but most importantly, it brings the Board into alignment with modern public and private boards by requiring all the Regents to be private citizens.  The search for private funds by Smithsonian management was a major cause of the recent controversy.  Faced with crippling budget problems, the Regents must be free to give new and unprecedented attention and energy to finding and helping to raise substantially more funds from private sources.  The new structure envisioned by this bill will improve oversight and the capacity for fundraising from private sources.  Unlike the eight federal officials on the current Board, the nine private citizens on the current Board are entirely free to assist in private fundraising.  Most importantly, private citizens have sufficient expertise to serve on the Board, and are able to devote the personal time and attention necessary to fulfill the fiduciary responsibility that comes with serving such a venerable and complex institution.

Considering the seriousness of the findings of the Board’s own governance committee, as well as of the IRC, the changes prescribed by this bill are nothing short of mandatory.  The reform of the fiduciary and governance issues that have brought public criticism to this iconic American institution must begin with the indispensable step of making the Smithsonian’s governance consistent with that of similar institutions today. Only congressional attention can reassure the public that the controversies that recently besieged the Smithsonian will not recur.  In the face of an unprecedented public controversy and a $1.5 billion fundraising goal, Congress would be remiss if it left the Smithsonian to its own oversight and devices alone. 

I urge my colleagues to support this bill.

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