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AN ETHICAL DILEMMA AT THE CUMBRIAN CULTURAL
ENDOWMENT FOUNDATION (A)
The Rise of Cumbria's Third Sector
Cumbria is a small country in Eastern Europe. Since the collapse of the communist
regime in the late 1980's, Cumbrian leaders have been relatively successful in their efforts
to introduce principles of democratic leadership and market-based economic reforms. As
in many other former communist countries, foreign aid plays an important role in
supporting such modernization efforts across Cumbrian society.
Foremost among those organizations receiving foreign aid is the Cumbria Cultural
Endowment Foundation (CEF) established in 1985 by prominent British philanthropist
John Pound. It is the first non-governmental organization (NGO) to exert considerable
influence on the development of Cumbria's non-governmental or "third" sector. With the
help of Western consultants, CEF has been instrumental in the passage of national
legislation concerning NGOs, which gives them the official status common to nongovernmental organizations in most democratic countries. CEF has an annual budget of 2
million pounds, funds which are dedicated to the promotion of cultural, educational and
social initiatives across Cumbria (see Attachment 1). Although most of its financial
resources still originate with John Pound, the CEF is nonetheless an independent
organization which actively seeks other donors from Cumbria and abroad.
CEF Leadership and Governance
Maria Miskevitch has served as executive director of the CEF since its inception. Known
for her energetic, open style, she has done an excellent job of developing the organization
and securing its financial stability. Ten years after joining the Foundation, Miskevitch
takes great satisfaction in the knowledge that CEF enjoys a highly favorable reputation
among foreign donors and Cumbrians alike. The Foundation is known for the priority it
places on fairness in awarding funds and for its welcoming attitude toward anyone who
visits the CEF office. It is widely recognized that CEF's success is due largely to
This case study was funded by the Institute for Local Government and Public Service in Budapest, Hungary. Its
distribution through the Electronic Hallway system is made possible through the Pew Charitable Trusts' generous support
of the Public Service Curriculum Exchange. This case was prepared by Tiina Randma, Director of the Department of
Public Administration and Social Work at Tartu University in Estonia, as a part of Ms. Randma's participation in the
1994/1995 Course of the Case Project for Central and Eastern Europe, a project of the Cascade Center for Public Service.
The Public Service Curriculum Exchange, a multi-university consortium, is administered by the Cascade Center for Public
Service, a branch of the University of Washington's Institute for Public Policy and Management.
This case study is intended as a basis for class discussion and is not intended to suggest correct or incorrect handling of
the situation depicted. The Public Service Curriculum Exchange wishes to thank the agency and individuals involved for
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service.
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Copyright 1995 Cascade Center for Public Service
Public Service Curriculum Exchange
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An Ethical Dilemma at the Cumbrian Cultural Endowment Foundation (A)
Miskevitch. Her strong communication skills have served her well in lobbying members
of Parliament, high-level civil servants, and representatives of the mass media to support
policies which strengthen CEF and other non-governmental organizations in Cumbria.
Miskevitch's close friends know that her ambitions reach beyond her current post at CEF.
She views this position as a starting point for a future diplomatic career. Several years
ago she graduated from the Cumbrian School of Diplomats — the first step in achieving
her long-term goals. In addition, she has received tacit encouragement about her future
plans from the President of Cumbria himself.
CEF is governed by a seven-member board of directors, which is chaired by Cumbrian
businessman Alex Popenko. All board members are well-known Cumbrian citizens who
hold high-level posts in government, education, the arts and law. Miskevitch
characterizes the board members as intelligent and sophisticated individuals who
nevertheless represent different and often conflicting interests. Being on the CEF board is
a very prestigious job which, albeit unpaid, not only provides members with the power to
make decisions for CEF but also permits them to indirectly affect a number of policy
areas across Cumbrian society. Although the Foundation's bylaws technically state that
the maximum board-term is two years, several board members have served at CEF since
its establishment. So far, the question of changing board membership has been
successfully avoided at board meetings. All of the board members, Miskevitch, and her
staff of eight people have developed strong working relationships based on mutual trust
and concern for doing good work.
CEF Proposal Evaluation Methods
After many years of experience, the following program evaluation protocols have been
developed by CEF board members and staff:
1) CEF staff project-coordinators communicate with applicants and provide them with
guidelines for writing proposals.
2) At least two independent experts evaluate every proposed project several weeks
before the board meeting at which the project is to be reviewed.
3) Before each board meeting, all board members visit the CEF office to review project
proposals and related expert evaluations, and to discuss them with staff members.
4) Final decisions about awards are made at the CEF board meeting. CEF staff members
are often invited to participate in order to provide more information about specific
projects or about the goals of the individuals and groups submitting applications.
The board typically meets four times a year. Meetings tend to be long (6-7 hours) due to
the large number of applications. At a regular board meeting, general questions are
discussed first, followed by the review of specific proposals. There are two types of
applications: group proposals and individual proposals. At every meeting, a percentage of
the annual budget is allocated for both types of projects. The Foundation has an annual
budget of two million pounds, of which 10% is designated to cover administrative costs.
An Ethical Dilemma at the Cumbrian Cultural Endowment Foundation (A)
The remaining 90% is divided by four in order to give the Board a rough estimate of the
total funds to be awarded at each of its quarterly meetings. Sometimes the Board awards
more, sometimes less, although the budget and the total award figures must be reconciled
by the end of each year. Since they involve considerably larger sums, board members
usually pay much more attention to group projects. Individual grants are of secondary
priority. Moreover, during the past year, the Board has often discussed whether CEF
should accept individual applications at all.
Board meetings are usually led by Executive Director Miskevitch. Although she reports
to the Board, she always takes the initiative at board meetings, where her opinions carry
substantial weight. Miskevitch has a vote at the board meetings. In accordance with the
CEF bylaws, the board uses an open voting system, with decisions being made by simple
majority. In the case of a tie vote, the Chairman of the Board is entitled to one additional
vote.
A Critical Week in CEF History
In February of 1995, CEF invited people from all over the world to celebrate its 10th
anniversary, which was proudly dubbed "a week of philanthropy." More than 400 guests
would attend. CEF benefactor John Pound had also promised to come, which made the
event even more significant. Many activities were planned for the week, including a
regular board meeting; a banquet for Cumbrian authorities and their guests; a meeting
between Pound and the President of Cumbria; and an international conference on
philanthropy. The local press took a great interest in all of CEF's anniversary plans.
Cumbrian's principal TV channel had signed an agreement with Miskevitch to broadcast
every event but the board meeting. Live interviews were planned from the conference
center, the President's Office, and the banquet hall.
The regular board meeting that week began as usual, although everyone appeared to be
eager to finish early in order to prepare for the banquet that evening. The first part of the
meeting, which was devoted to general business, passed quickly. Miskevitch led the next
discussion, summarizing the applications to be considered and the total funds requested.
There were 153 group proposals for a total of 420,000 Cumbrian Crowns (cc), and 87
individual proposals totaling 30,000cc. The presentation of the group proposals had been
well-prepared by staff. Looking forward to the evening's events, board members were not
inclined to argue about any of the group applications. So when board members left the
room on-time for their final coffee break, only the discussion of individual proposals was
left on the agenda.
A Presidential Request
In the middle of the break, the CEF secretary called Miskevitch to the phone. Miskevitch
did not usually take calls during board meetings, not even at coffee breaks. This time,
however, her secretary insisted that it was urgent; a Presidential aide was calling.
Miskevitch picked up the phone immediately, certain that the call was to confirm that she,
An Ethical Dilemma at the Cumbrian Cultural Endowment Foundation (A)
John Pound, and Alex Popenko were to meet with the President at 10:00 a.m. the next
day. At the other end of the line, a nervous aide began asking questions about the board
meeting. She finally got to the point: it was the President's wish that the CEF Board give
an individual grant of 2,000cc (the maximum permissible for individual grants) to Robert
Redko, the son of the President's good friend. The aide added that this was a special
presidential request. If the Board did not grant it, the appointment with John Pound
would be canceled. The Presidential aide stressed that she needed a response from CEF
by the end of the evening.
Miskevitch was extremely disappointed. It was not the first time in the history of CEF
that someone outside of the Foundation had tried to sway a Board decision. Applicants
have been known to try to influence individual Board members before proposals are
discussed at the quarterly meetings. However, these attempts had up to now been in vain,
particularly when they required a breach of CEF policy as the Redko case would have.
These situations had been kept secret from Pound out of fear that he would curtail his
contributions as he had already done in other Eastern European countries where bribery
had occurred.
The ethical dilemma was problemmatic enough, but Miskevitch was even more surprised
by the attitude of the President's office. She had met him several times and had always
received his support for legislation concerning NGO's. The President had been
consistently appreciative of CEF and grateful to its founder, John Pound. Cumbria's
Chief Executive was not hesitant to assert his power, but he also had a reputation for
ethical behavior. However, he often changed his mind suddenly, so Miskevitch did not
doubt that he might easily snub Pound the next morning.
Although it was one out of eighty-seven individual proposals, Miskevitch remembered
Robert Redko's application. Redko was a 17-year old wunderkind who had been admitted
to the undergraduate program at Oxford University in England. His parents had visited the
CEF office several times to discuss their son's outstanding abilities. Miskevitch recalled
one Friday afternoon in particular, when Robert's mother dropped in after office hours,
waving her son's application papers and loudly singing his praises to anyone within
earshot. After she had left, the CEF staff discussed the situation regretfully. Despite
Redko's obvious talent, CEF could not help him. Due to limited resources, CEF policy
prohibited support of undergraduate students. No exception had ever been made in this
regard.
Time Runs Out
Maria Miskevitch glanced nervously at her watch. There were only five minutes left until
the end of the break. She closed her eyes for a split second and saw everything she'd
worked so hard for beginning to fall apart: CEF's (and her) impeccable reputation; her
future career plans; and a draft law on tax exemption for NGO's now sitting in Parliament
and awaiting Presidential approval. In only two hours, Miskevitch and Mr. Pound were
scheduled to give the opening speech at the anniversary banquet. She had to act quickly.
An Ethical Dilemma at the Cumbrian Cultural Endowment Foundation (A)
Attachment 1 Selected Group Projects
Supported by CEF (September-December 1994)
Seminar on Infant Survival
"Environment and Our Future"-- a program for high school students
Supporting 12 theater administrators to study at the British Royal Theater
Publication of the "Encyclopedia of Sociology"
Curriculum development for public administration programs at Cumbria's National
University
Seminar on international security
Computerization of two libraries
Funding of 10th annual Pipe Festival
Development of study materials for a new course on civic education
Establishment of a Student Advising Center
Visit of three professors from England's Manchester University
Internships in Great Britain for thirty Cumbrian English teachers
Teaching innovations at Art University
Production of the educational video "Children in Danger"
Establishment of the Audiovisual Media School
Providing legal aid services within the Institute of Human Rights
Textbook competition to support curricula in social work
Publication of the booklet "Anti-AIDS / HIV-Control"
Support participation of the Cumbrian Youth Symphony Orchestra at the Edinburgh
Arts Festival
Renovation of the Art Hall building
Support for special conference on "Family as the Guardian of Tradition"
Development of a technical infrastructure for medical information systems
Advanced retraining program for young unemployed professionals