Vermont’s nonprofit sector… a study in governance
We’re supposed to be “a nation of laws,” with an evolving body of statutory law established by the Congress and state legislatures that also put in place regulatory boards such as the EPA, FAA, FTC nationally and, here at home, the VT Public Utility Commission, Green Mountain Care Board, Professional Responsibility Board.
Add to this the social-benefit missions of the country and Vermont’s diverse nonprofit sectors and we have an architecture of institutions that codify and reflect a continuum of Americans’ ethical beliefs and guide our decisions as we work together to maintain civility and enhance the common good. But when nonprofit boards misunderstand governance conventions, missions are put at risk — usually due to human failings such as abuse of power, greed, ignorance of governance convention, or the naive “gee-whiz, we’re all honest” mindset, which is uncomfortably close to willful ignorance.
As of June 2024, there were 5073 (501(c)3 Vermont nonprofit organizations established to deliver on a specific mission and another 1400 nonprofit trade-advocacy nonprofits. Mission-driven organizations work in a variety of areas such as: public education, the environment, arts and culture, healthcare, human rights, journalism and media, and criminal justice.
My experience chairing twelve Vermont and national nonprofit boards, during which time I oversaw eight leadership changes, reinforces my sense of how thin the veneer of understanding among nonprofit boards is around governance conventions and trustee responsibilities and ethics. At the heart of their responsibilities is being wholly independent of their institution’s paid leadership. A failure here puts the whole enterprise at risk of failure.
Among the worst mistakes I’ve seen boards make is failing to do candid annual performance reviews of their executive director (ED), holding the person fully accountable for delivery-on-mission. Such a review includes open input from staff, community leaders, and the constituents they serve. A candid review depends on an independent board, and too many EDs hand-pick their board members, surrounding themselves with well-meaning friends they believe will make their job easier. But boards must be self-perpetuating, with a focus on diverse candidate skills and community connections. An independent board’s first and most important task is to hire, and then review, compensate, and hold the ED accountable for delivery on mission, while also ensuring the financial, ethical, and legal integrity of the organization. This is why it’s the trustees, not the ED, who bear ultimate liability for organizational failure.
One sector where this breadth of misunderstanding is harming Vermonters is in healthcare where some hospital boards are apparently ignorant of their job descriptions or have been deprived of their trustee authority by the organization that appoints them, as is the case with the UVM Health Network (UVMHN). This obliviousness to their duty of public accountability — and the inherent liability — is wreaking material and fiscal havoc on Vermonters.
Two egregious current examples of governance failure are UVMHN and Blue Cross Blue Shield-VT (BCBS-VT).
In the first case, the UVMHN Board’s — about which I have written extensively — abject failure to review the performance of and hold accountable to mission its president, Dr. Sunny Eappen, exemplifies nonprofit board governance failure that damages the very Vermonters the Board is committed to serve. During Dr. Eappen’s tenure, total operating expenses have risen from $1.9B to 2.3B, (24.6%). And, in an organization failing miserably on all fronts when measured against the core tenets of its mission — population health – meaning healthcare quality, access, and affordability, why is the UVMHN Board proposing a $188,575 raise for its CEO and $124,724 for its CFO in 2026 instead of warning or dismissing Dr. Eappen? The Board’s role is not just to assess financial performance; its key strategic role is, when all is said and done, to assess performance-on-mission.
Instead of improving healthcare access, quality and affordability, Dr. Eappen and his overstaffed team of nonclinical administrators and managers are focused on enhancing Vermonters’ perception of their performance. They’re spending money on a massive and costly publicity campaign focused on key decision-makers like legislators and business leaders when conventional wisdom tells us it’s cheaper and more effective to be good at what you do than to spend money trying to convince people you’re better than you are. These funds should be spent on improving clinical services.
Another sad example of bad governance in healthcare is the struggling insurer of 230,000 Vermonters, Blue Cross Blue Shield – VT (BCBS-VT). It’s appropriate for a president to suggest potential trustees to the Board’s Nominating and Governance Committee, but the Committee must decide for themselves who serves on their board. Presidents don’t select their board members as has been the case with BCBS-VT. Also, unlike most other nonprofit boards, the BCBS-VT trustees are paid a stipend beyond incurred expenses. Having served on 22 nonprofit boards over 55 years, I’ve never earned a dime beyond reimbursement for legitimate expenses.
The BCBS-VT president, Don George, whose 2024 compensation package totaled $1,010,105 ($943,890 salary plus $66,215 in additional compensation) has announced his retirement in December of this year (2025). So, between ’21 and ’24, while facing insolvency as their payment reserves shrank to a week’s worth of claims, why did the Board choose to award him a 38% increase, and for his VP/treasurer, a 40% increase? During the same period, the BCBS-VT Board also paid key executives some $280,000 in retention incentives, $910,600 in affiliation/project incentives and $1,852,275 in variable compensation totaling $3.04M or 10% of its total reserves at the end of 2024. Is this the best use of funds? What is the Board’s logic here?
In fairness, much of the financial chaos at BCBS-VT is due directly to Vermont’s largest hospital, UVM Academic Medical Center (UVMMC), charging its commercial insurers some $801,927,336 in FY 2023 up from the prior year’s $373,677,045, an increase of 115% according to the National Academy for State Health Policy (NASHP).
According to ProPublica’s Nonprofit Explorer, the trustees of MVP, Vermont’s other nonprofit health insurer, paid its CEO, Chris Del Vecchio, $2,181,970 in 2023 plus $540,508 additional income and $190, 086, totaling $2,912,564. Board members are also paid. The chair’s compensation is $89,500 with other trustees averaging $60,000.
VT Statute 18VSA SS 9371 mandates that healthcare spending must balance the healthcare needs of Vermonters with their ability to pay for such care. After reviewing Blue Cross Blue Shield’s and MVP’s proposals for rate increases, Green Mountain Care Board (GMCB) Chair Owen Foster says executive salary spending is not making Vermont’s health care more affordable. To their great credit, and consistent with statute, the GMCB reduced the current UVMMC 2026 budget request by $88M.
According to Common Good Vermont, healthcare and education generate the lion’s share of the nonprofit community’s $10B in revenue and $3B in wages. One in five Vermonters works in the sector, at an annual wage averaging $62,510. It’s a vital part of Vermont’s economy and we must learn to better use it to support the common good. But the dismal truth is that too many Vermont nonprofits working to make the lives of Vermonters better are handicapped by their own poor understanding of how nonprofit governance is meant to function. Nonprofit board service is more than a resumé builder; it’s a major contributor to the common good in all sectors…worth getting right for all Vermonters.