Documents show that recommendations of the independent review committee were watered down and that the Chief Justice John Roberts does not wish to give up his role as chancellor of the institution. Other documents show that the late Chief Justice William Rehnquist and former Republican Senator Howard Baker were directly responsible for Lawrence Small's 45% salary increase in 2001, which was not reported to the full board.
The Washington Post (James V. Grimaldi) released background materials relating to the recent resignation of Smithsonian general secretary Lawrence Small. The story that accompanies the materials focuses on Mr. Small's mendacity, frequent absenses, and control issues, echoing themes in the report of the independent review committee that was also released. But the documents tell another story that illustrates the resistance to reform within sitting charity boards.
The independent review committee had made a recommendation that would have changed the status of the Chief Justice of the Supreme Court to that of a non-fiduciary regent who would simply preside at the meetings of the board and lack a vote. They declined to go the obvious next step, which would be to remove the obsolete requirement that the Chief Justice be the ex officio chancellor of the Smithsonian, "because the Chief Justice has made it clear that he wishes to remain associated with the Institution." (Page 18 of the IRC report, page 22 of the pdf version)
Then, the recommendations that the regents adopted and released yesterday (prior to the release of the IRC report) further watered down the IRC recommendation and simply changed the duties of the Chief Justice/chancellor, while retaining his vote on the board. The sequence of events, releasing the regents' recommendations first, obviously draws attention away from the fact that the IRC recommendations were not adopted.
Why this matters is shown in the exhibits released with the IRC report, specifically exhibit 7 on page 30 of the pdf file. It is a memo on February 12, 2001 from former US Senator Howard Baker (R-Tenn.), chair of the regents' executive committee, with cc: to the other executive committee members: the late Chief Justice William Rehnquist and Wesley Williams, Jr., a former partner with the Covington & Burling law firm of DC. It authorizes the increase of Mr. Small's base salary from $330,000 per year to $480,000 per year (a 45% increase) and accepts the general principle suggested by Mr. Small that the secretary's salary should be compared to the 75th percentile of a group of chief executives of research universities and selected nonprofits.
The IRC report notes that this action was taken by the executive committee alone, without full board approval (page 67 of the report, 71 of the pdf file). Both the auditors and the IRC requested evidence of board approval and did not receive it. When the board finally approved the salary in 2004, it was not informed of the magnitude of the increases and was misinformed that the salary was at the 50th percentile of the selected comparison group, although by then the compensation of $774,358 was well above that level.
From a governance standpoint, these are far more damaging revelations than those of Mr. Small's excesses and overbearing personality. It is a Washington version of the general princple that celebrities aren't good choices as trustees with oversight responsibility.
However, it appears that the matter of board restructuring (which would require Congressional approval) will not be considered. The regents did not make it part of their recommendations and Sen. Charles Grassley's statement is a one-page endorsement of the regents' response, in contrast to his blasts against the American Red Cross and the trustees of American University. Sen. Grassley takes the view that Mr. Small was the sole culprit and omits all references to the failings of the regents well described in the IRC report.
So once again, Washington insiders apply a different set of rules to themselves than they apply to the rest of the country.