It is good for EA funders to have seats on boards of orgs they fund [debate]

By Nathan Young @ 2023-05-25T13:50 (+37)

It has come to my attention that many people (including my past self) think that it's bad for funders to sit on the boards of orgs they fund. Eg someone at OpenPhil being the lead decision maker on a grant and then sitting on the board of that org.

Let's debate this

Since I said this, several separate people I always update to, including a non-EA said this is trivially wrong. It is typical practice with good reason:

EA is not doing something weird and galaxy-brained here. Particularly in America this is normal practice
Having a board seat ensures that your funding is going where you want and might allow you to fund with other fewer strings attached
It allows funder oversight. They can ask the relevant questions at the time rather than in some funding meeting
Perhaps you might think that it causes funders to become too involved, but I dunno. And this is clearly a different argument than the standard "EA is doing something weird and slightly nepotistic"
To use the obvious examples, it is therefore good that Claire Zabel sits on whatever boards she sits on of orgs OP funds. And reasonable that OpenPhil considered funding OpenAI as a way to get a board seat (you can disagree with the actual cost benefit but there was nothing bad normsy about doing it)

Do you buy my arguments? Please read the comments to this article also, then vote in this anonymouse poll.

And now you can bet and then make your argument to try and shift future respondents and earn mana for doing so.

This market resolves in a month to the final agree % + weakly agree % of the above poll. Hopefully we can see it move in real time if someone makes a convincing argument.

I think this is a really cool real time debate format and we should have it at EAG. Relevant doc

Jason @ 2023-05-25T14:33 (+18)

While I voted weakly agree, I would add some caveats:

Anyone who is considering a dual-hatted situation like this needs to clearly understand that they are assuming two different roles and that their obligations in each role will differ. When acting as a nonprofit board member, for instance, the individual owes a duty of loyalty to the nonprofit. They need to be particularly alert to situations in which recusal or even resignation may be required.
In each case, the potential conflicts of interest need to be analyzed. If a conflict exists but is waivable, then it needs to first be waived by someone who can legitimately do so. For instance, in the Claire example, I think there is a conflict between Claire being involved in proposing a grant and in making a recommendation on whether to fund that grant. I also think that conflict is waivable by the ultimate donor. In contrast, if the funds were coming out of a publicly-supported charity, I would likely find the conflict non-waivable because there is no practical way to get ultimate-donor consent.
It's undesirable to have too large a proportion of funder-linked seats in a public charity. Many larger non-EA nonprofits have rather large boards, which allows them to absorb several seats for major donors (or big fundraisers) without creating too many downsides. For example, having one funder-linked seat out of five seats total would bring this closer to neutral for me. If the board were smaller than that, it would probably move me into negative territory.

Shakeel Hashim @ 2023-05-25T14:08 (+15)

I agree with everything you said here, and would also add an analogy: in the for-profit world it is very common, and actively encouraged, for major investors to have board seats, because it ensures the investor has some level of control and visibility over how their money is used — which seems very reasonable to me.

Nathan Young @ 2023-05-25T14:10 (+13)

Now I think this, because of course I think this, but we could run a monthly poll of community frustrations, isolate the disagreements and run debate posts like this.

I think this would be much healthier than the current paradigm. Each post discusses one narrow issue, hopefully we can update somewhere by the end of it. Experts have actual reason to get engaged.

ChanaMessinger @ 2023-05-25T15:54 (+2)

I haven't thought hard about this yet, so this is just a quick take: I'm broadly enthused but don't feel convinced that experts have actual reason to get engaged. Can you flesh that out more?

christian.r @ 2023-05-26T16:07 (+4)

Just a note that the Likert scale in the poll is not symmetrical ("Agree" vs. "Strongly Disagree")

ChanaMessinger @ 2023-05-25T15:56 (+4)

Again quick take: would be interested in more discussion on (conditional on there being any board members) takes on what a good ratio of funders to non funders is in different situations.

lilly @ 2023-05-25T14:01 (+3)

I think the question you're asking is ambiguous in a way that matters. Your example—"someone at OpenPhil being the lead decision maker on a grant and then sitting on the board of that org"—is not typically what the arrangement of being a funder/board member looks like. While funder/board members drive the direction of an organization and help determine its general funding priorities, being the point person on decisions about specific grants is quite different from this. In the latter case, a funder/board member would also, effectively, be serving as an employee of the organization, because these organizations have full-time grantmakers. That would (likely) make them intimately involved in the day-to-day workings of the organization, and could more easily introduce serious COIs. The arrangement of funder/board member seems fine; the arrangement of funder/board member/grantmaker doesn't.

Jason @ 2023-05-25T14:11 (+8)

I'm confused by some of the references to "organization," which could refer to the organization receiving a grant (e.g., EVF) or the grant-recommending organization (e.g., Open Phil). Could you clarify which you mean?

Nathan Young @ 2023-05-25T14:09 (+2)

Claire Zabel sits on the board of EVF, and also signs off their grants. Right.

Which of your examples is this more like?

I struggle to really understand the difference, though I guess you're right that there is one.

Jason @ 2023-05-25T14:35 (+8)

One way in which the Claire example could differ from other examples is that she owes both a duty of loyalty to EVF and a duty of loyalty to the donors to whom she is making the grant recommendation. If the donor themself is on the board, there is only one duty of loyalty floating about (it doesn't make sense to say the donor-trustee has a duty of loyalty to themself as a donor).

Larks @ 2023-05-25T14:59 (+8)

Private equity employees often sit on the boards of portfolio companies, even though technically it's not their money - it belongs to the investors in the fund. These PE employees then owe duties to both the other investors in the portfolio company and to the investors in the fund.

Jason @ 2023-05-25T17:08 (+4)

Good analogy. This arrangement has been implicitly consented to by the fund investors, so I think it is generally quite fine. I'm more willing to find an implied COI waiver in this context than in most charity contexts for two reasons:

First, private equity fund investors are generally quite sophisticated, and they both understand and desire that someone from the fund sit on the portfolio-company board. I assume that is also true in the Claire example, but there are many charity-related examples where that is not the case.
Second, the aims of the various entities tend to be more necessarily aligned in the for-profit example: everyone wants to make money. Although they might disagree on the best path to get there, money is universally quantifiable in a way that charitable impact is not.

ezrah @ 2023-05-28T10:41 (+2)

Great post, I'm glad this is up for debate.

I'm mostly worried about situations where the majority of the board is made up of different representatives of a single funder / donor. For the example of Claire - I think it's fine that she represents OP interests to CEA. I'm more worried when the other board members and executives are also very strongly OP affiliated - then it seems like the nonprofits ability to carry out it's mission is harmed. If a nonprofit has an appearance of independence but in practice is managed / owned by a different organization, that seems problematic. Of course, in the case of CEA, I have no idea what went into the decision making process and what the counterfactual looks like (for example - where there other people who wanted that role?), and it's quite possible there are good reasons for this especially post FTX, so I'm less critiquing the results and more of a process that looks like philanthropy -> nonprofit, but in practice is parent company -> subsidiary.