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Date: Tue, 26 Apr 1994 07:50:35 -0700 (PDT)
From: Dan Victor <dvictor at u.washington.edu>
Subject: Audubon Society in Peril (2 of 2)
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From Skip's list covering BIRDCHAT, BIRDCNTR,
BIRDEAST, and SeaBIRD
Date: Mon, 25 Apr 94 15:53:57 EST
From:Skip_Russell at intersolv.com

[part two -- continued from first message]
-------- cut here -----------------------------------------------------------
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
-------
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