Subject: Audubon Society in Peril (long)
Date: Apr 18 15:01:27 1994
From: David A Rintoul - drintoul at KSU.KSU.EDU

Greetings. SOme of you may know about this, some may not. But if you
are a member of a local Audubon chapter, please pass this word onto
the leadership of that society. On March 20, the board of the NAS met
to vote on firing the president, Peter AA Berle. By a vote of 20-10, they
retained him, but on a "short leash." After that meeting, five members
of the 33 mmember board have resigned, including the chairman, Sam Plum.
What follows is his letter of resignation. Read it and weep for the NAS.

If you want to do something, you can e-mail me for the addresses of
the NAS board members who are left and ask them what they are doing to
solve the problems now that Mr. Plum has left and Mr. Berle is still
in charge. I will also ask that you circulate these items widely
among Audubon members, and please feel free to write me if you want
more information. This letter appeared on the NAS COmpuserve Forum
this morning. Other information can be found there as well.

Dave

--
Dave Rintoul Internet: drintoul at ksu.ksu.edu
Biology Division - KSU Latitude 39.18, Longitude -96.34
Manhattan KS 66506-4901 Compuserve: 71634,32
(913)-532-5832 or 6663 FAX: (913)-532-6653
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Samuel A. Plum
120 East End Ave.
NYC, NY 10028
April 2, 1994


Mr. Donal O'Brien
Chairman
National Audubon Society
New York City, NY

Dear Don,

As you are well aware, I have become increasingly concerned over the
continuing and accelerating decline in the Society's financial
condition; in its ongoing lack of formalized strategic planning; in
its seeming inability to consistently provide directors on a timely
basis well reasoned and accurate financial information; and in its
failure to effectively and openly balance its resource focus on each
of the Society's core activities.

Whilst there are other areas of concern appropriately ripe for board
attention, it is my own judgment that, unless these concerns are dealt
with rapidly in a direct and firm manner, the Society risks much that
is has gained over the last several years. Indeed, I would be most
concerned as to the sustainability of its strong national presence as
an environmental force as well as its ability to effectively nurture
its core activities while fostering the strong broad participatory
chapter support so vital to mission fulfillment.

Given the extent of these concerns, I have concluded with great
personal sadness that I must step down as a director. However, in
doing so and at the risk of a somewhat elongated letter, I would like
to comment briefly on each of the basic concerns that has led me to
this conclusion.

Financial Deterioration. The Society's financials have deteriorated at
an increasingly rapid pace since the last full fiscal year and are
likely to continue to do so for at least the next two fiscal years
absent tough, immediate remedial action. The severity of this trend
is readily discernible if one looks at the financial results, actual
and projected, for the fiscal years 92/93 through 94/95 before taking
into account the cuts initiated at the end of 1993 by the task force.
In fiscal 92/93, the Society produced a net deficit of approximately
$300,000; this year (fiscal 93/94) that deficit is projected to
increase to $3.7 million; next year the deficit is projected at $5.5
million.

Even taking into account the $2.5 million of expense cuts activated at
the end of last year, the mounding of deficits will require
substantial further cost cutting. Specifically, the deficit for FY
93/94 and FY 94/95 are projected at $2.2 million and $3.0 million,
respectively. My own guess is that the FY 94/95 underestimates the
probable deficit by several hundred thousand dollars. In any event,
implicit in reaching break-even in FY 94/95 are at least $3.0 million
in further expense savings and, under that scenario, the $1.0 million
contingency reserve that the board has included in past budgets would
be fully utilized.

To my mind, however, there is a far more worrisome concern. At the
March board meeting at Dana Point, two things became abundantly clear
from senior management's review of the financial information. Firstly,
it was evident that, even with six months into the process, senior
management still did not have a firm grasp on the situation both in
terms of its understanding as to the full extent and nature of the
problem and in terms of the steps that must be undertaken to deal
effectively with it. This in turn has resulted in a purely reactive
approach, conducted in a reluctant and, in certain cases, truculent
manner by a management more concerned seemingly with process than
progress.

This lack of understanding of the nature of the problem is well
illustrated by a replay of the chronology of projections provided by
senior management from September of last year up through the March
board meeting. Briefly, during this period the board was advised as
follows:

(i). Prior to the September Board Meeting. Senior management produced
a break-even budget for FY 93/94 which assumed a contribution from the
magazine of $5.0 million, a level not remotely reflective of recent
experience or established trends.

(ii). The September Board Meeting. Several weeks later, senior
management reported that, due to the failings of a key magazine
employee, the FY 93/94 budget was now forecast to produce a $2.5
million deficit. To which the board responded by creating a task force
to review expense cut options in order to bring the budget essentially
back into balance.

(iii). The December Board Meeting. Due to the work of the task force,
it became clear that senior management's estimates of the FY 93/94
deficit were seriously flawed and that the actual deficit likely would
reach $3.7 million. Cuts of $2.5 million previously mandated by the
board were approved with the effect of reducing this deficit to $2.2
million.

(iv). The March Dana Point Board Meeting. The Monitoring Committee
advised the board that, whilst the deficit for FY 93/94 was still
inline with the $2.2 million figure, the FY 94/95 projections of
senior management of a $1.0 million deficit, which had been given to
potential debt credit support providers, was now estimated at $3.0
million.

This is hardly the chronology demonstrable of a senior management
either in control of a situation or even with an understanding of the
underlying problems.

Secondly, the Dana Point meeting raised substantially my own fears
that senior management had entered almost a denial phase not uncommon
in corporate restructurings where a pre-existing management team
becomes overwhelmed by the problems. Central to this concern was the
Friday agenda established by the chief executive. This agenda called
for a half day session to discuss a consultant's report which dealt
solely with organizational issues, was at best preliminary in nature
and, with respect to immediate action steps, made only two concrete
recommendations (the hiring of a chief operating officer and a
publisher) both of which had already been authorized by the board. Any
competent management, other than one overwhelmed by the problems at
hand or desirous of obfuscation, would have constructively utilized
that time to lay out the fiscal problem to the board and recommend
alternative responses thereto. This would have permitted the board not
only to become more fully informed but allowed senior management to
get the board's view as to which responses would be most compatible
with the Society's mission. In these situations, time is the enemy
and developing a firm understanding of the problem and an action plan,
the only cure.

This unwillingness to come to grips with the Society's financial
problems was also evidenced at the meeting with the outside panel of
senior publishers which you, Don, also attended. At that meeting, Lisa
Long, president of Time Magazine, with the full concurrence of the
other panelists, suggested that Audubon magazine's editorial appeared
to have shifted too far away from member's interests; to which the
chief executive officer responded that, if one were to take the
magazine back editorially, he would resign. Those were hardly the
words of a responsible manager dealing with a financial crisis of
major importance. One would imagine that such a manager would be
willing to consider all courses of action which would contribute
positively to the Society's financials while remaining consonant with
the Society's mission.

Finally, I would comment that the financial deterioration in
particular poses problems relative to refinancing the existing $20
million headquarters building debt. A number of directors, including
myself, have consistently felt that fiduciary prudence dictated
funding the debt out on a long-term fixed-rate basis. It was
generally our view that so large an exposure to short-term debt was
inappropriate for an institution of our size; that a potential rise in
short-term interest rates would have a severe budgetary impact at a
time when the Society's discretionary revenues are rapidly declining;
and that there existed substantial exposure should the Society not be
able to renew its letter of credit.

My underlying concern over the debt refinancing at this juncture is
whether senior management is in a position to make full and accurate
disclosure relative to such a financing and, if so, whether such
disclosure would negatively impact the borrowing cost or impair the
placement. Candidly, given the broad concerns that I have raised
above, taken together with other matters discussed at the December and
March 20th board meetings, I am not comfortable that I, as a
fiduciary, could vote to approve such a financing absent a careful
review of all disclosures made by senior management to the placement
agent or underwriters.

Organization Planning. In his consulting report, Karl Matthiasen
indicated that there was an absence of any in-depth formal strategic
planning by the Society. Frankly, I find that appalling for any
organization of this size and with the multiplicity of activities. I
can but conclude two rationales for the absence of such planning: (i)
poor leadership by senior management or (ii) an unwillingness to
formalize priorities which, but their nature, would require board
review and concurrence.

Equally of concern, however, is that the lack of formal planning
extends down to the unit level and that the exposure to the Society is
very real and, in specific cases, measurable. For example, it was
abundantly obvious that Audubon magazine did not have a written,
coherent and unified business plan and that, when one was requested by
the task force, it took several weeks to pull together and was
woefully lacking. Quite probably, this was the reason that it was the
careful analysis of a board director that first alerted the board, and
presumably senior management, as to the on-going serious erosion in
the magazine's contribution to the Society.

This lack of planning was also well evident to the task force during
its review of American Birds. The magazine had been projected
originally to reach break-even at 40,000 subscribers; but, for
unstated reasons, when the magazine reached roughly 19,000 members,
its promotional funding was substantially reduced with the not
surprising result that the number of subscribers declined to
approximately 12,000. Had a proper business plan been set in place
with appropriate measurements for success and established time lines
for achieving specific intermediate goals, responsible decisions could
have been reached far earlier on as to whether to continue the
magazine or terminate it. Because this planning did not exist, we will
never know whether the magazine could have reached its targeted
break-even and the Society will have lost at least several hundred
thousand dollars unwinding a failed enterprise, not to mention
disenfranchising a not unimportant element of our membership.

Amazingly, despite the concerns over planning raised by the task force
in this regard and their echoing in the Karl Matthiasen report, I
continue to encounter this lack of basic planning in new endeavors
being undertaken by the Society. Hello World, which I personally
suspect holds seeds of some potential, is a case in point. To date,
senior management has embarked on the development phase of this
project yet it has failed to review the matter formally with the board
and obtain its approval to go ahead. Quite simply, the appropriate
process would have been to submit a plan to the board, through the
communications committee, outlining the concept, objectives, market
competition, funding and other societal resources required, and the
time line and success measurements to be employed - in short, a
financial/business plan and investment analysis. At a point in time
when the stability and possibly profit viability of the Audubon
magazine is in question, anything less is, in my view, derelict.

Financial Reporting. I continue to be increasingly concerned as to the
occasional significant gaffs that seem to be made in financial
information being supplied to directors. I do know from my own days as
chairman of the Finance Committee that the chief financial officer
does encounter resistance in obtaining financial information, most
notably from the magazine but also from other divisions as well.
Moreover, there has been a lack of comprehensive review of financial
information for accuracy and completeness before the material has been
presented to directors.

Two cases are illustrative of this. Firstly, the analysis of the
request for $1.5 million from the endowment to fund a major one time
direct mail campaign for the magazine was replete with errors both in
assumptions bearing little relationship to past experience and purely
mathematical errors. Worse, despite these problems having been
discovered by the Finance Committee and pointed out to the chief
executive prior to the committee rejecting the proposal, senior
management had the temerity to utilize essentially the same analysis
in a subsequent presentation to the full board where it was
appropriately deferred. Had the problems with the analysis not been
surfaced by the directors, the results would have been a huge loss for
the Society's endowment fund and further impairment of the
organization financially.

Secondly, at the March meeting at Dana Point, senior management
disclosed not only the $3.0 million forward deficit but also that the
proposed terms on the refinancing of the debt submitted by one of the
key credit support providers contained an asset to debt covenant based
essentially on a book value analysis of the Society's unrestricted
endowment funds. The covenant as described was exceedingly restrictive
and even a modest decline in portfolio value would have placed the
Society in default. It was subsequently found to have been incorrectly
calculated by almost $11 million. While this had a happy ending, the
error itself leaves one fiduciary edgy.

Simply put, this organization, with its serious fiscal problems,
can not afford to be exposed to at nest the indifferent
operational and reporting capabilities evidenced by senior
management. And yet, the Society's recent history is rife with
these problems.

Operational Focal Balance. Over the course of the last several years
it has become increasingly apparent that the chief executive officer
is unable or unwilling to maintain a balanced focus on each of the
Society's core activities. This has resulted in inadequate supervision
by him of senior staff; at best poor, certainly haphazard planning;
the placement of weak personnel in key positions; and a lack of
consistent integration of the Society's operations.

As board members, we have increasingly encountered the more severe
problems that have resulted from this imbalance and they, in and of
themselves, have been very harmful financially and operationally to
the Society. The most obvious of these is the failure of the Audubon
circulation manager who adopted a very poor circulation strategy with
the knowledge and support of the chief executive in his role as
publisher. This strategy which involved substantial shifts in the
frequency, packaging and timing of the direct mail campaign was
embarked on without sufficient testing and resulted in a devastating
financial loss to the magazine. Moreover, the chief executive as
publisher failed to properly supervise this senior manager at a time
when she substantially exceeded her authorized budget.

This is a similar problem with the Education division, the former head
of which, we are told, misdirected the application of substantial
donations, incurred unauthorized expenses and, one gathers, operated
the division in an inappropriate manner. As you will recall, Don, you
told me at the time that you were astonished that the chief executive
failed to identify the management problem earlier on as they were
evident to the staff directly under the then head and, at least with
respect to the instability of the individual involved, sensed by
yourself.

The real concerns to me, however, are not the problems that have
already come to the fore and are reasonably well know to all of us as
directors. Rather my fundamental concerns lie with the problems that,
while already well established, have not as of yet been appropriately
dealt with and count materially impact the Society further down the
road.

The most obvious of these is the failure of the chief executive
officer to hire a new head of the Education division for well over a
year. There is absolutely no excuse for the substantial delays except
dereliction of responsibility. Two problems manifest themselves from
this inaction. First, we as a Society have failed to ensure proper
stewardship on behalf of the foundations which have provided funding
support for our educational activities and that is not a reputation
off of which to build. Secondly, without talented leadership there can
be no creative directing of this endeavor and ultimately the Society's
reputation of leadership in the environmental educational field will
suffer.

A similar but more disturbing pattern has emerged relative to the
science division. It was generally discernible to all that the last
head of science retained by the chief executive officer lacked the
pre-requisite skill set for the position. However, after he was let
go, no replacement was brought in to fill the slot. Again, Don, you
will recall a meeting of the Finance Committee in which you put
forward a motion which was fully supported by those present and duly
noted by the chief executive to find a replacement. This was
substantially supported by the full board. And yet there was no effort
undertaken by senior management to find a suitable replacement.

Whether or not funding can be obtained for a head of science or the
appropriateness of a science unit has subsequently been raised; but to
me it is totally beside the point. The chief executive officer was
asked by the board to fill the position. He did not, and in so doing
failed to deal openly with the board in a timely manner. As a result,
we are now presented with a fait accompli in that the deficits
preclude hiring a head of science and to date no effort has been made
to find separate funding for that position.

This seeming propensity on the part of the chief executive officer to
deflect board views that run contrary to his own was also demonstrated
during the task force process. It was the view of most of the task
force directors that, in achieving the requisite expense cuts, the
focus should not be on large cuts from the regional/chapter area, at
least until very sharp cuts had been made in general and
administrative costs and in both the New York and Washington offices.
It was their general view that such cuts, if taken from the
regional/chapter area could seriously undermine local support.
Notwithstanding this, at the December meeting, the chief executive
officer laid out cuts which rested on significant expense reductions
in this very area - none of which had been approved by the task force.

Finally, in my judgment, which I believe to be shared by a significant
number of other directors, there are serious potential problems with
the development office. The new head of development, whilst having
performed in a reasonable fashion in the corporate donations area,
lacks the creativity, experience and fire necessary to run a major
development effort effectively. It is most unfortunate that, at the
time of his being considered for this position, both you and I voiced
strong reservations over his qualifications, views with which the
chief executive concurred. Within two weeks of our conversation with
the chief executive officer, he promoted the individual to head of the
group, not having had the courtesy to discuss the appointment with the
chairman of the development committee who shared our concerns.

I understand that the chief executive officer has sought to justify
his actions on the basis that there was no one else available from the
outside. He has indicated that he had one good candidate but lost him
when, back in early December, he felt obligated to disclose his own
problems with the board. Assuming that such was the case, the chief
executive's actions were ill considered at best. If this was the one
good candidate and he was as strongly interested in joining as has
been indicated, the appropriate course of action would have been to
defer discussions for two weeks until after the board meeting.
Whether such a strategy would have worked we will never know.
Whatever the case, the Society was left with a weakened development
group at a critical time and was ill served because of it.

Further, there are no on-going efforts to find a suitable candidate on
the basis that the current head of the group should be given time to
prove himself. Under normal circumstances, I would be entirely
sympathetic to that proposition. But these are far from normal times
and, absent revenue enhancements, further cuts will have to be
endured.

There are other issues, some controversial in nature, which have been
raised in the Decembers and two March meetings. I do not believe that
they are necessary to bring up in this letter. Indeed, it is my view
that the concerns raised above are sufficient to mandate the
replacement of the current chief executive officer. I have arrived at
this conclusion some time ago; however, it was not a conclusion that
was arrived at easily or quickly nor was it arrived at without a sense
of sadness. There is no question that Peter has great talent as a
spokesperson for the environmental movement and as a
discerner/developer of key issues. Nonetheless, he is wholly
inadequate as a president and chief executive officer of the Society
and, frankly, too costly to be retained in those capacities.

Nor do I believe that there is a way to patchwork the organizational
structure in a manner which will accommodate his essentially loner,
somewhat combative style of management while allowing the Society to
benefit from his narrower, but certainly positive attributes. The
expediency of bringing in a chief operating officer and publisher, no
matter how talented, will not accomplish this. When conflicts develop
between the parties - and rest assured they will develop - Peter will
go on a full court attack. I have seen how effective this can be at
the board level and do not believe that a chief operating officer or
publisher could prevail against it.

These conclusions and my own judgment that time is truly of the
essence lead me to conclude that I can not effectively fill my
functions as a director. The board has met and slightly less that two
thirds of the directors have voted to support a continuation of
Peter's stewardship, albeit on a probationary basis. Those directors
and, for that matter, the chief executive officer should be allowed to
go forward in reasonable harmony to determine whether Peter can build
a broad spectrum of support on the board.

However, I believe that Peter lacks the skill set necessary not only
to deal with the problems at hand but also to grow the organization in
a properly balanced fashion. I do not believe Peter possesses the
level of leadership requisite in a chief executive officer in
effectively supervising his senior staff, in integrating operations or
in hiring the talent necessary to meet the challenges facing the
organization. I worry as a fiduciary that he will continue to honor
the board more in form than in substance and that the board's policy
setting and oversight responsibilities will be diminished as a result.
I remain most concerned that further delays in replacing the chief
executive officer with more balanced professional leadership likely
will cause unnecessary further impairment to the Society. And I am
concerned that the methodologies employed not only to shore up his
support and more generally his view as to the Society's activities is
inappropriate to an organization such as ours, but that is a personal
comment and I will not belabor the point.

I do recognize the concern expressed to me by you, Don, and by other
board members that Peter has developed a national position as one of
the top environmental leaders. I would disagree with you, however, in
the seemingly little import that is attached to the role of the
Society as the platform which has enabled Peter to achieve this
position. One should not discount the Society's one hundred plus year
history of environmental leadership; nor should one discount the
Society's well deserved reputation as a standard bearer for
responsible environmental positions backed by good science; nor
discount the support of a membership organization with over 450,000
members; nor, most importantly, discount the impact that, through the
support of a wide network of uniquely dedicated volunteer chapter
presidents and regional directors, the mobilization of the grass roots
organization brings to the table on critical issues. It is a platform
for which any environmental leader worth his salt would give his eye
teeth.

For my own part, I take great pride in having been afforded the
opportunity over these years of working as a director for the Society.
Regrettably, I leave behind a group of directors for whom I have great
respect; but look forward to continuing to build on the friendships
made during my tenure. My very best to each of you personally and in
your efforts on behalf of National Audubon.



Regards,


Samuel A. Plum