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12/3/11

PRIVILEGED, PERSONAL AND CONFIDENTIAL

December 3, 2011

TO:

The Board of Directors of the William J. Clinton Foundation John Podesta

FROM:

Victoria B. Bjorklund Jennifer I. Reynoso

RE:

Governance Review I.

 

Introduction We have been engaged to conduct a decadal governance review of the William J.

Clinton Foundation (the “Foundation”) and its relationship with its affiliates

(collectively, the

“Charities”). This memorandum summarizes the results of our governance review, including our

interviews with members of the Boards of Directors and staff of the Charities, and our review of certain governing and other documents of the Charities. Specifically, our review started on October 27, 2011. We conducted our first interview on November 1, 2011 and the last on November 17, 2011. We conducted 38 interviews, 25 in-person and 13 by telephone. We met with, among others, the President, Bruce

Lindsey, John Podesta, members of the Foundation’s Board of Directors (the “Board”), members

of the Immediate Office of the President, the Chief Financial Officer and Chief Operating Officer of the Foundation, heads of the Clinton Global Initiativ

e, Inc. (“CGI”), the Clinton Health Access Initiative, Inc. (“CHAI”) and the Alliance for a Healthier Generation, Inc. (the “Alliance”), as well as individuals from marketing, scheduling, advance, correspondence, and

other areas.

 

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We showed interviewees our list of 22 questions. We indicated that their names would not be attached to any specific responses. We asked interviewees to rate the effectiveness

and efficiency of the Foundation’s operations; the effectiveness of the process determining

operational priorities; the effectiveness of the budget and employee review processes; where they saw the Foundation in ten years; who they saw as having substantial influence over the Foundation; whether they had disclosed actual or potential conflicts of interest; and what changes in operations or governance they would recommend. We also requested and reviewed numerous documents received from Scott Curran, Assistant General Counsel, including, among others, the Articles of Incorporation and By-Laws for each of

the Charities, as well as the Foundation’s Employee Handbook, Global

Code of Conduct, Conflict-of-Interest Policy, Board minutes, financial statements, and IRS Forms 990. II.

 

Executive Summary Almost all interviewees: 1. stressed the need for a stronger Board and stronger management; 2. stressed the need for the Board and the managers to meet, lead and manage; 3. called for strategic planning; 4. called for sustainability planning; and 5. called on the Foundation to develop the infrastructure of a best-in-class charity. When we asked interviewees to rate the effectiveness and efficiency of the

Foundation’s operations on a scale of 1 to 10, many elected to give different ratings for

effectiveness and efficiency. They rated the effectiveness in the 7-to-8 range based on the number of people receiving life-saving drugs through CHAI, the agreements negotiated by the Alliance with the beverage companies, and/or the commitments made through CGI. However,

 

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these same interviewees rated the current efficiency of the Foundation at a low 1-to-4 level. They called for the Charities to develop the infrastructure necessary to support a best-in-class organization. The rapid growth of the Foundation and the Charities, their substantial programs, and their high profile are all reasons governance should be enhanced at this time. Therefore, we recommend the following: 1. Reinvigorate the Boards of the Charities by adding new, experienced directors and create appropriate committees. 2. Create and execute more Board oversight, planning, accountability, and CEO and COO supervision of operations. 3. Manage conflicts of interest. 4. Review and upgrade management practices. 5. Improve internal controls, including expense reimbursement procedures. Each of these recommendations is discussed below. III.

 

Legal Duties and Responsibilities of the Board of Directors and Officers A.

 

Introduction The Foundation is an Arkansas Nonprofit Corporation. As an Arkansas Nonprofit Corporation, the Foundation is subject to the Arkansas Nonprofit Corporation Act of 1993. The Foundation is authorized to do business in New York, and therefore we would expect that the  New York State Attorney General would argue that the Foundation is subject to certain  provisions of the New York Not-for-Profit Corporation Law.

1

 The Foundation is exempt from

1

 Section 1318 of the New York Not-For-

Profit Corporation Law (the “NPCL”) states that unless

otherwise provided, the directors and officers of a foreign corporation conducting activities in  New York are subject, to the same extent as directors and officers of a domestic corporation, to the provisions of Section 719 (Liability of directors in certain cases) except subparagraph (a)(4) thereof, and Section 720 (Action against directors and officers for misconduct). This Section will not apply to the Foundation if its principal activities are conducted outside New York; the greater part of its property is located outside of New York; and less than one half of its revenues for the preceding three fiscal years was derived from sources within New York. See Section 1321(a)(3) of the NPCL.