The Midwestern Comtemporary Art Museum
Case Analysis
Summary of Facts and Circumstances
The Midwestern:: Contemporary Art (MCA) Museum is one of the nation’s largest facilities devoted to modern art, opening its doors to Great Lakes in 1967. The MCA bought its first building, a three story townhouse, in 1977. In January of 1989, the MCA board hired Keith Schmidt as executive director. In April of 1989, a man with the name of Peter Smith began his chairmanship at MCA, after already being on the board since 1981.
Peter Smith and Keith Schmidt often had intense debates at board meetings. Most of their arguments had to deal with the speed of MCA’s expansion, which was pushed by Schmidt. Smith had a more conservative approach to the situation and did not approve of the rapid changes Schmidt had planned for the museum. Due to problems between Smith and Schmidt, Peter Smith resigned from the board in December 1991. Shortly after that, the board approved of a $55 million capital campaign for construction of MCA’s new facility, $37.5 million of which was pledged by the board. The Smiths disappeared from the art scene at the end of 1991 and missed all payments on their $5 million pledge toward the planned new building for the museum. The problems started when MCA realized the construction funding on their new building, which started underway in 1993, depended on the Smith’s pledge.
News got even worse when the Financial Accounting Standards Board made a new policy that required all non-profit organizations to record pledges as income, which was to begin December 15, 1994. Usually the procedure was that they would not record the pledges until the actual transfer of money from donor to museum occurred. This caused an even more financial hardship on the museum, and in late 1997, MCA found itself in a financial crisis due to a high debt load resulting from construction and because of the Smiths’ unfulfilled pledge. The pledge was supposed to be paid fully by June 1997. Nonetheless, the new MCA facility opened
Summary of Facts and Circumstances
The Midwestern:: Contemporary Art (MCA) Museum is one of the nation’s largest facilities devoted to modern art, opening its doors to Great Lakes in 1967. The MCA bought its first building, a three story townhouse, in 1977. In January of 1989, the MCA board hired Keith Schmidt as executive director. In April of 1989, a man with the name of Peter Smith began his chairmanship at MCA, after already being on the board since 1981.
Peter Smith and Keith Schmidt often had intense debates at board meetings. Most of their arguments had to deal with the speed of MCA’s expansion, which was pushed by Schmidt. Smith had a more conservative approach to the situation and did not approve of the rapid changes Schmidt had planned for the museum. Due to problems between Smith and Schmidt, Peter Smith resigned from the board in December 1991. Shortly after that, the board approved of a $55 million capital campaign for construction of MCA’s new facility, $37.5 million of which was pledged by the board. The Smiths disappeared from the art scene at the end of 1991 and missed all payments on their $5 million pledge toward the planned new building for the museum. The problems started when MCA realized the construction funding on their new building, which started underway in 1993, depended on the Smith’s pledge.
News got even worse when the Financial Accounting Standards Board made a new policy that required all non-profit organizations to record pledges as income, which was to begin December 15, 1994. Usually the procedure was that they would not record the pledges until the actual transfer of money from donor to museum occurred. This caused an even more financial hardship on the museum, and in late 1997, MCA found itself in a financial crisis due to a high debt load resulting from construction and because of the Smiths’ unfulfilled pledge. The pledge was supposed to be paid fully by June 1997. Nonetheless, the new MCA facility opened