The Smithsonian Institution – Lessons in Governance (Part Three)

The Independent Review Committee (IRC) charged to review the issues raised by the Washington Post and by Senator Grassley regarding management and governance of the Smithsonian Institution was chaired by former Comptroller General of the United States, Charles A. Bowsher, who selected the other members:  Stephen D. Potts, chairman of the Ethics Resource Center, and A.W. "Pete" Smith, Jr., former CEO of the Private Sector Council and of Watson Wyatt Worldwide.  Below are some highlights of the IRC’s Report to the Board of Regents dated June 18, 2007 (the "Report").  The Report discloses that while it was submitted to the Board for comments, the IRC retained authority of its final content.


  • The compensation of the Secretary (the highest ranking staff member), Lawrence M. Small, far exceeded the compensation of his predecessors.
  • The term of the Secretary’s compensation were not fully disclosed to the Board.
  • The Secretary’s expenses were not reviewed for reasonableness.
  • The Secretary and Deputy Secretary have been absent from the Smithsonian for substantial periods due to vacation and compensated service on corporate boards (compensation that far exceeded the officers’ compensation by the Smithsonian).
  • The Board exercised inadequate oversight over the Secretary (frequently deferring to him, allowing him to run and dominate meetings, set the agendas, and determine who would contact the Regents and what information would be provided to them).
  • The "Gatekeepers" of the Smithsonian (its General Counsel and Inspector General) were marginalized by the Secretary’s actions.
  • The Smithsonian’s internal financial controls and audit function are inadequate (more specifically, (i) an insufficient commitment of resources, (ii) a lack of comprehensive and formal accounting procedures and policies, and (iii) a failure to comply with its own policies and procedures with respect to accounting for expenses). 
  • Smithsonian Business Ventures (SBV), the division responsible for managing the commercial activities of the Smithsonian, has operated with insufficient oversight from the Board or senior Smithsonian management.
  • The Smithsonian appears to remain a strongly ethical institution despite the problems with the Office of the Secretary and SBV.


  • The Regents must act quickly to address the governance crisis.
  • The expenses of the Secretary and his wife should be subject to an audit for reasonableness and the expenses of senior management should be subject to annual audits.
  • The compensation of the Secretary should be reasonably competitive and transparent and take into account the Smithsonian’s unique nature.
  • The Smithsonian should have an active governing board with a Chairman who can provide the time and proper oversight.
  • Congressional Regents should accept fiduciary responsibilities (and be willing and able to devote the time necessary to carry out those duties personally).
  • The Board should be expanded or reorganized to to allow for the addition of Regents with needed expertise.  (If the Smithsonian desires to have positions for individuals that honor them for their contributions, including their financial generosity, it should establish non-fiduciary advisory boards.)
  • Internal financial controls, audit functions, and the role of the General Counsel and Inspector General must be strengthened.
  • Smithsonian executives should be permitted to participate in only nonprofit board activities subject to prior approval.
  • The selection of the next Secretary must reflect the governance challenges facing the Smithsonian (the Secretary must work for the Board and set the ethical tone at the top, not sidestep it).
  • Click here for the full Report.