Michael Hudson had been executive director of the Arkansas Regional Organ Recovery Agency of Little Rock for about a month when he made several promotions in September 2014.
The personnel moves set off a chain of events that resulted in Hudson being fired one month later and the voiding of two of the promotions, which had included raises of more than 30 percent annually. One of the employees whose promotion and $35,000 raise were rescinded has sued the nonprofit organization, which recovers human organs for transplants and research.
That wasn’t the end of ARORA’s problems, which nonprofit consultants say are common when board members and executive directors don’t know their roles.
ARORA’s medical director, Dr. Bill Fiser, resigned a month after the promotions were announced. Fiser, however, returned to ARORA about a week later and became its interim executive director after Hudson was fired. Fiser held the title until December 2014, when Alan Cochran took the position.
Cochran declined to comment about the agency because of the pending lawsuit. He also wouldn’t comment on the causes behind ARORA’s $35,330 loss for the fiscal year that ended Sept. 30, 2015, when the previous year it reported net income of $1.4 million on the Form 990 it submitted to the IRS. The loss came after ARORA’s revenue for the fiscal year that ended Sept. 30 fell 11.5 percent to $10.2 million.
Felicia Bowman of Little Rock, a black woman who received a promotion to chief financial officer under Hudson, sued ARORA for racial discrimination after the nonprofit stripped her of her title.
The pleadings in Bowman’s lawsuit in Pulaski County Circuit Court shed some light on the reasons behind the termination of Hudson, who the board said didn’t have the authority to make the promotions.
“Role clarity is one of the biggest issues for nonprofit organizations,” Mollie Cullinane of the Cullinane Law Group of Austin, Texas, which works with nonprofit organizations, said in an email to Arkansas Business. “Successful nonprofits have boards of directors and key staff people who have clear understanding of their duties. Problems arise when roles are confused.”
Like other consultants interviewed for this story, Cullinane was not familiar with the details of ARORA’s case.
Long-time Director Leaves
In the fall of 2013, ARORA’s longtime executive director, Boyd Ward, announced he was retiring at the end of the fiscal year in September 2014, after about 15 years of service.
Under Ward’s leadership, the number of organs harvested annually doubled from about 35 to 70 and the number of tissue donations, such as skin and bone, rose from more than 50 to more than 350, according to a June 2013 article in the Arkansas Democrat-Gazette. During that time, the agency grew from about 10 employees to 61, the article said.
ARORA’s board hired a firm to conduct a nationwide search for Ward’s successor. But, as it turned out, the next executive director was already at ARORA.
Hudson started at ARORA in 2004 and was named its director of hospital development in 2006, according to his LinkedIn profile.
In April 2014, ARORA’s board announced that Hudson would be the next executive director. The board decided that Hudson and Ward would serve as co-executive directors until Ward retired in September 2014.
The handover came sooner, however, and Hudson took control of the day-to-day operations on Aug. 1, 2014.
The honeymoon between executive director and board was short-lived.
Promotions Handed Out
On Sept. 3, 2014, Hudson announced several promotions.
Bowman, who was hired at ARORA in 2004 and had been director of finance and human resources, was promoted to chief financial officer and given a $35,000 raise, according to filings in her lawsuit. For the period that ended Sept. 30, 2014, Bowman’s total compensation was $121,147.
In addition, Audrey Coleman was promoted from director of public education to chief operating officer and given an annual salary increase of more than 30 percent, according to the filings. Coleman’s salary wasn’t listed in the court filings or on ARORA’s tax filing.
Two days after the promotions were announced, Hudson emailed the chairman of the board, Dr. Robert L. Archer, to inform him of the moves, Archer said in an affidavit filed Feb. 26.
Hudson said the promotions “had virtually no effect on ARORA’s financial bottom line,” Archer said. And Archer believed Hudson had the authority to structure his management team.
That changed, however, about two weeks later when “information came to light that there had been no financial impact study done in connection with any raises associated with the promotions,” Archer wrote. In addition, “the Bylaws did not permit the executive director to create new corporate officers such as COO or a CFO; and that the new positions of COO and CFO had not been advertised internally or externally.”
There were other changes at ARORA as well. On Oct. 6, 2014, Fiser, ARORA’s medical director, announced his immediate resignation. Fiser, who had a total compensation package of $139,200 for the fiscal year that ended Sept. 30, 2014, had been “upset” by the announcement of the promotions, according to Bowman’s lawsuit.
ARORA’s attorney, Elizabeth Murray of the law firm Friday Eldredge & Clark LLP of Little Rock, acknowledged in her court filings that Fiser had announced his resignation but denied that Fiser had been upset.
Bowman’s lawsuit said that the board “was shocked by Dr. Fiser’s resignation and instructed Mr. Hudson to start looking for a replacement.”
According to Bowman’s lawsuit, Archer then asked Fiser to return.
Fiser agreed to come back to ARORA, but on the condition that Hudson be fired and ARORA rescind the promotions he made, Bowman said in her lawsuit.
Murray denied those allegations in her filing on behalf of ARORA.
On Oct. 12, 2014, the board accepted Fiser back and began making moves to fire Hudson.
Archer, the chairman of the board, said in his affidavit that on Oct. 16, 2014, “other issues involving poor judgment” by Hudson came to light, but the affidavit didn’t specify what they were. During that meeting, the board decided to fire Hudson on Oct. 27, 2014, Archer said.
One of the issues the board had with Hudson was his creation of the COO and CFO positions without authority or approval of the board under ARORA’s bylaws, Archer said.
“Further, other staff members were promoted into positions without following ARORA’s hiring polices,” Archer said. “Lastly, Mr. Hudson’s adjustments to the CFO and COO salaries without disclosing to the Board was deemed to be unacceptable.”
Archer, who is a professor and vice chairman in the Neurology Department at the University of Arkansas for Medical Sciences, said through his office that ARORA’s policy is not to comment on personnel issues or pending litigation.
Hudson, who is now the manager of hospital services at the Nevada Donor Network, also declined to comment, citing the pending litigation.
In November 2014, the board reviewed the job changes that Hudson made and rescinded the promotions and raises to Bowman and Coleman. The board found that neither the titles nor the raises were justified, Archer said.
Complaint to EEOC
Bowman filed a complaint with the U.S. Equal Employment Opportunity Commission on Dec. 1, 2014, alleging that her promotion was canceled because she is black. The EEOC said it couldn’t make a determination in the case.
In March 2015, Bowman filed a lawsuit in U.S. District Court against ARORA, asking a judge to order the EEOC to investigate her claims.
She represented herself in the lawsuit at first, but later hired attorneys Janet Pulliam of Little Rock and Martin Bowen of Searcy.
In August 2015, Bowman was fired from ARORA for breach of confidentiality and insubordination, according to Archer.
In September 2015, Bowman dismissed her lawsuit in U.S. District Court and filed one in October in Pulaski County Circuit Court against ARORA, alleging racial discrimination and retaliation. She was seeking front and back pay and other damages.
In its response, ARORA denied Bowman’s allegations of wrongdoing and said the case should be dismissed.
A court date hasn’t been set.
Consultants’ Response
Typically, a nonprofit’s board of directors writes the job description and sets the salary only for the executive director, said Simone Joyaux, a consultant for nonprofits.
The board shouldn’t be involved in setting the salaries for the other employees. That job should be left to the executive director, who could make the moves “as long as you had budget permission,” said Joyaux, who is based in Rhode Island and wasn’t familiar with the ARORA case.
She also said a nonprofit’s bylaws shouldn’t be so detailed as to say that an executive director doesn’t get to create positions. “Good bylaws would never get that specific,” Joyaux said.
But if the money for a new position is not in the budget, then the executive director would have to go to the board for approval.
Joan Garry, principal of Joan Garry Nonprofit Consulting of New York City, said she believes that the executive director and the board should have a solid relationship, and that the executive director would want guidance from the board before a decision to add positions was made.
“So on paper, the executive director has the charge of hiring, firing and managing the staff, but I strongly advise my clients to engage with their board,” said Garry, who also wasn’t familiar with ARORA’s case.
She said it’s essential that an executive director ensure that the board isn’t surprised about a personnel move.
“The lesson here is an executive director may have the authority to make certain kinds of decisions, but they have an equal responsibility to bring forward to their board decisions that they would like to make that impact the budget or present potential liability to the organization,” Garry said.
Arkansas Regional Organ Recovery Agency, Little Rock
For Year Ending Sept. 30
| 2012 | 2013 | 2014 | 2015 | |
| Total Revenue | $10,034,371 | $10,512,126 | $11,517,972 | $10,193,615 |
| Total Expenses | $9,304,260 | $9,654,329 | $10,130,998 | $10,228,975 |
| Net Income | $730,111 | $857,797 | $1,386,974 | -$35,330 |
Source: IRS 990 Forms
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