Volume 40, Issue 12 December 2005
When it Comes to Board Elections,
How Balanced is Balanced?
Benney and Perilstein Discuss the
NFRC’s Recent Board of Directors Election
The National Fenestration Rating Council’s (NFRC) recent board of director’s election has stirred quite a bit of controversy among some members of the commercial fenestration industry. The controversy began prior to the election, when GANA executive director, Stan Smith, removed himself as a board member nominee for what Smith believed was an improper classification of his participation category (see the November 2005 USGlass, page 16). The NFRC, however, did not remove Smith from the ballot, and his name appeared in the “Fenestration” category.
Critics cite this and the fact that individuals from inspection agencies were placed in the fenestration category as proof of a bias against the glass industry. The NFRC says this is not the case.
Over the next four pages you can read this point-counterpoint discussion between NFRC executive director Jim Benney and Max Perilstein of Arch Aluminum and Glass and draw your own conclusions.
Point: The Importance of Being Balanced
by Jim Benney
Imagine a world without balance where you’re never quite sure which way your world will tip. It’s unsettling at best. Then imagine an unbalanced organization where one-sided parties get to make all of the decisions based on their own self-interests. That may work for other organizations or perhaps even some governments, but that world cannot exist within the NFRC.
I often hear people refer to NFRC as a trade association. Not true. NFRC is organized as a tax-exempt not-for-profit “scientific and educational” charitable corporation under Section 501(c)(3) of the Internal Revenue Code. As such, we are required to conduct our affairs in the public interest. In other words, our mission is not to promote any area of the industry or the specific interests of NFRC’s member organizations. For NFRC to operate successfully in the public interest, it is imperative that a sense of trust exists in the NFRC name.
One way we encourage this trust is through the election of a balanced board of directors. In turn, it is the legal responsibility of the board to ensure that NFRC continues to follow its goals of:
• Providing fair and accurate energy performance ratings for fenestration products (both residential and nonresidential);
• Publishing ratings that help the public when selecting energy-efficient fenestration systems; and
• Conforming to its charitable responsibilities.
This mission continues to be important as energy-efficient window technologies become more prevalent and the number of states requiring NFRC-certified products increases.
The Board of Directors
Since the birth of NFRC, our bylaws establish three general categories that make up the board of directors: the fenestration industry category (five seats); the lab category (one seat) and the general interest category (six seats). Because NFRC is a 501(c)(3) charitable organization and not a trade or industry association, the board is weighted toward representation from the general interest category. This appropriately balanced board helps assure that we continue to work for the public interest.
This year we had six open board seats and a large number of people designated for potential nomination from the membership. From this pool of talent the board reviewed the nomination disclosure questionnaires submitted by the designees and approved a slate of nominees for the various open categories. Each board category has specific definitions and criteria as written in NFRC’s longstanding bylaws and it is the board’s responsibility to place candidates in their proper categories. In this regard, each qualified candidate is placed in the specific membership category in which he or his affiliated organization belongs.
Once the nominations were approved in the appropriate categories, the slate of candidates is presented to the voting membership for election. (NFRC uses a Web-based voting system run by an independent third-party contractor to collect and tabulate the membership votes.)
Once elected, directors must act only in the best interests of NFRC during their board service. This responsibility is subject to two primary obligations: a duty of care and a duty of loyalty.
“Duty of care” requires the director to act in a reasonable and informed manner when participating in board decisions and overseeing NFRC’s management. Directors must be informed of the facts and circumstances relevant to upcoming decisions so they can use reasonable judgment in making those decisions. This duty requires active participation in board duties and regular attendance at board meetings.
NFRC Always Comes First
The “duty of loyalty” is one of the most difficult, yet important, things we ask of board members. It requires individuals, when acting as a board member, to exercise their powers in good faith and in the best interests of NFRC, rather than in their own interest, their employer’s interest or in the interest of any third party. Simply put, it’s NFRC first, your own interests last. Board members must be very careful to avoid conflicts of interest, preserve confidential NFRC information until released to the public by NFRC and avoid engaging in a business opportunity for NFRC with any party with whom the director has a business or financial relationship.
I know it’s sometimes hard to separate the interests of one’s own organization from doing the public good, but it’s crucial for NFRC’s success. It’s a fine line we all walk—one that requires selflessness, awareness and, most importantly, a constant focus on whom we serve: the public. In other words, a keen sense of balance.
Jim Benney serves as executive director of the National Fenestration Rating Council based in Silver Spring, Md.
Counterpoint: Another Perspective on “Balance”
by Max Perilstein
Obviously, the NFRC feels a need to continue to press its agenda on the public—this public being the glass and glazing industry—with article after article and press release after press release featuring gross oversimplifications and manipulations of the facts.
Let’s get one thing straight off the top, and before I address the “balanced board” issue: the glass and glazing industry is 100-percent behind energy efficiency and, without question, desires solutions that will help achieve that while serving its customers. Our issues aren’t with the codes or the ratings themselves, but the way they are created and enforced. It appears that the goal is not to serve the public, but to make money—lots of money.
Is it for Profit?
During our debate in Boston at the interGLASSmetal/fenestration WORLD show in November, I asked Jim Benney: “Would you not agree that the proposed non-residential program has been developed with a profit motive rather than as a public service?” He replied “No, of course not.” To which I followed, “Then it should be free!”
If the NFRC were truly about serving the public, then it would streamline and cut out steps that make no sense—on every level. But the money is the issue here. Several board and ex-board members have major financial stakes in the success of the programs. Every time they can add a step or create a program their wallets get fatter. They are consultants, inspection agencies and test labs. The money comes from adding those unnecessary, costly extra steps that are put in place only to appease goals of certain powerful members and board members within NFRC. Example: even if in a program where an NFRC-accredited agency validates performance, that would not be good enough because the NFRC wants another set of eyes ($$) to look at it (validate that first test) and then, yes, one more ($$) by asking for paperwork or onsite inspection. Would any logical person think that is needed, especially when you add in the legally binding documents involved in most commercial projects? So in simple terms, one NFRC accredited test is not good enough, you will need three. While task groups toil, in the end it won’t matter. As Jim admitted in Boston, the NFRC is not “a member-driven organization” so all of those task groups and subcommittees are window dressings because whatever the board wants, the board does. Remember they are a 501(c)(3), a charity. They scream it over and over. Even Jim admitted during the debate that the NFRC is on the same level as the United Way. Seriously, that powerful 501 (c)(3) status is the same as your well-known charities.
Gross Oversimplification Alert!
According to the NFRC:
“…Our bylaws establish three general categories that make up the board of directors: the fenestration industry category (five seats); the lab category (one seat) and the general interest category (six seats).” So right now you’re thinking, “Hey, that looks balanced.” Smart. In perception it is, but in reality, nope. See every seat has very specific criteria. You just don’t have five people willy-nilly from the “fenestration” industry. No each specific seat must meet a requirement that was developed by the board of directors. Would you consider someone from an inspection agency as a part of the “fenestration” industry? The NFRC does. So it is not as simple as Jim states, as even the “general interest” categories have specific designations, such as code and regulatory and energy efficiency organizations. The board make up now consists of two test labs, one inspection agency, one consultant, one lawyer, one state code official, two energy efficiency organizations and four product manufacturers. Funny, I do not see that as simple as six of this and five of that.
You can not have balance (or fairness to the glass and glazing industry) when your board make up is pre-determined by hard and fast criteria that allows certain players to play in categories in which they should not be. So after the recent board of director’s election, Marcia Falke, who is the owner of a third-party verification inspection agency, won the spot reserved for the “fenestration” industry. Ms. Falke, according to her election bio, derives 72 percent of her income from NFRC-related activities. Jim Benney talks about how the NFRC board must act in the best interest of the NFRC and not personally, but in this case those two work in lockstep! She is only one example among many. If you were talking about people who were “volunteers” while working for other organizations that is a different story (example, Jim Larsen from Cardinal), but with the NFRC getting two/thirds of its budget from their programs (according to Jim Benney at the Boston debate), and board members such as Falke getting more than two/thirds of their income from NFRC, when does the public get served? On issues that would be considered a conflict of interest, do the board members and board ex officio’s remove themselves from the process? Not a chance, they are in there fighting tooth and nail to get the best possible program for them. So when Jim Benney says, “It’s NFRC first,” of course it is! Why not? It’s also easy to be loyal when these are the stakes.
Of the current board, none are involved in a majority of their “business” with commercial construction. This would not be an issue if they were not trying to police the commercial industry. Commercial fenestration is dramatically different than residential, yet the board has the ultimate power to make rules that will affect our industry dramatically. So where is the balance? How can the public, who will ultimately pay for all of these ratings, validations, inspections and labels, trust that their best interests are being held when the board of the NFRC and many of its members are sitting in prime financial growth positions based on implementations of programs?
Max Perilstein is the vice president of marketing for Arch Aluminum & Glass based in Tamarac, Fla.
© Copyright 2005 Key Communications Inc. All rights reserved. No reproduction of any type without expressed written permission.