The board of the Ford Foundation, one of the country's largest private charitable foundations, has decided to keep its chairman despite allegations by federal regulators that he participated in an accounting fraud when he was chairman and chief executive of Xerox Corp.
The decision came after the chairman, Paul A. Allaire, agreed to pay a $1 million penalty and forfeit $7.6 million in bonus pay and gains made on stock sales at Xerox and interest on those sums.
He was also barred from serving as a director of a public corporation for five years as part of the settlement reached last month with the Securities and Exchange Commission, which said he and five other Xerox executives allowed the company to overstate its profits by $1.4 billion over four years. The officials have neither admitted nor denied wrongdoing.
Allaire's future
After the settlement, four members of the board's executive committee, which makes decisions on behalf of the board between its meetings, discussed what Allaire's role at the foundation should be, and after consulting with 12 other board members, they concluded that no changes were necessary.
"We were committed to doing what we considered and consider the right thing, and that is what is best for the foundation, which is to stay with a man who has been an exemplary leader," said Kathryn S. Fuller, president and chief executive of the World Wildlife Fund and a member of the executive committee. Allaire is a member of the committee but did not take part in the discussion.
Allaire could not be reached for comment, and a spokeswoman for Xerox said the company no longer handled his media relations.
Allaire has served as a trustee of the $10 billion Ford Foundation since 1997, becoming chairman in 2000. In that position, he was paid $26,850 for the year that ended Sept. 30, 2001, the latest year for which figures are available.
Greater scrutiny
The foundation's decision to retain him comes at a time when the practices of the nonprofit world are attracting greater scrutiny.
Foundations are trying to persuade members of the House of Representatives to eliminate legislation pending before the Ways and Means Committee that would force the organizations to spend more of their assets on charity, and their efforts have heightened public interest in their affairs and conduct.
"This is not a good time for the nonprofit sector to be attracting attention in this kind of way," said Evelyn K. Brody, professor at Chicago-Kent College of Law.
There is growing debate among nonprofits over whether stricter standards of accountability that were imposed on corporations in the aftermath of scandals at companies such as Enron Corp., Tyco International Ltd. and WorldCom Inc. should also apply to tax-exempt organizations.
Though the Sarbanes-Oxley Act of last year, which required greater disclosure and accountability at corporations, does not apply directly to nonprofit institutions, many lawyers who advise charities are wondering whether the legislation has broader implications.
