Ethics and Philanthropy
The economic challenges of recent years and the ever-increasing scrutiny of nonprofit organizations has required our sector to demonstrate more fully the merits of our financial accounting and the ethical management of charitable donations.
When media coverage of a few nonprofits that have abused donations hits the Internet, it casts a shadow over the entire sector. Certainly, the media should warn the public of dangerous organizations. But I keep hoping they will balance their coverage with reports about the vast majority of nonprofits that do an excellent job and maintain the highest standards of behavior in their service to the public. I would like to thank CNN for the newsletter, “The Good Stuff,” which is a nice step in that direction, and Devin Thorpe for his social good interviews on, “Your Mark on the World.”
A few years ago, the National Council of Nonprofits shared the following statement about the situation we face continually.
“The greatest threat to the not-for-profit sector is the betrayal of public trust, the disappointment of public confidence. Virtually all knowledgeable observers of the not-for-profit scene believe that an overwhelming proportion of not-for-profits are honorably run … that admirable context, however, does not provide much protection to the sector when a sequence of highly publicized disgraceful not-for-profit misdeeds occurs.”
– Joel Fleishman, Scholar, Author, Professor of Law and Public Policy, and Director of the Heyman Center on Ethics, Public Policy and the Professions, Duke University
Those outside the nonprofit fundraising profession are often ignorant of the ethical standards to which our sector adheres. For instance, I am asked surprisingly often if I will tackle a nonprofit fundraising project and be paid a percentage of the total funds raised. But the fact is, doing so could inspire fundraisers to focus on personal gain rather than on the good of the nonprofit’s mission and funding needs. It also puts the burden of success or failure on the fundraiser or fundraising team, rather than on the nonprofit asking for donations. That is a joint responsibility!
The Foundation Center provides a helpful section on its website for Fundraising Ethics.
“In recent years, controversies at major nonprofit organizations have created new public concern about, and focused media attention on, the ethics of fundraising. National trade and professional groups have responded with the establishment or revision of codes of ethics for their members.”
GuideStar is a favorite resource for information about nonprofit organizations and nonprofit funding institutions like foundations. I frequently check to see if the nonprofits with which I work and volunteer are present on GuideStar, and if they have taken the time to complete their respective profiles (board member list, budgetary information, tax returns and the like). I urge nonprofits to join the GuideStar Exchange: GuideStar Exchange Requirements and Benefits. The process involves completing their profiles to the fullest extent and thereby being as transparent to the public as possible.
One nice thing about securing an official “seal” from GuideStar is that it costs you nothing. The process of completing your profile fully is not about how much money your nonprofit raises, how large you are and the like. It is about how professionally you operate and how transparent you are to the public. Nonprofits large and small may equally secure the gold and platinum seals. And once you do, I urge nonprofits to post those seals on their websites as a badge denoting ethical behavior.
As an aside, I do not rank nonprofits myself using charity rating platforms. Those operate with formulas determined by others. They seek to determine how effective and efficient nonprofits are through their own lens. If you follow them strictly, then you are simply letting someone else’s standards influence your decision making. Rating platforms can be a good general guide, but nothing beats reviewing a tax return on GuideStar.
The Better Business Bureau’s Wise Giving Alliance is another excellent source for ethical guidance, one that hones-down on how nonprofits raise charitable donations. My concern with the application process is that nonprofits generally must have had an external audit, an expensive process that smaller and often quite stellar nonprofits simply cannot afford. Possible alternatives for the BBB to consider might be a certain number of years filing professional tax returns and securing a GuideStar gold or platinum seal for transparency, for instance.
Here is an insightful BBB infographic you might enjoy (click on the image to reach the web page).
You might also enjoy reading a more informal discussion about ethical behavior in my popular article, “Cowboy Ethics: Ten Principles to Live By.” I continue to think having a nonprofit plenary speech or two during conferences about nonprofit ethics through the lens of “Cowboy Ethics” would be both enjoyable and enlightening.
I have also found that some nonprofit professional associations encourage people to join and pay an annual fee that involves having members sign a statement of ethical behavior. I have on several occasions heard nonprofit fundraisers say they believe they must join in order to be considered ethical in the eyes of the public, and to make a firm statement that they adhere to ethical standards.
After several decades in the field, this seems manipulative. Fees to join these groups can be expensive, and that is tough on the budgets of independent professionals, startups and smaller nonprofits. And if members sign the statement, there is no guarantee they actually read and absorb the information contained in it. They would seem to have bought “good ethics,” which of course is not possible.
But there are other ways to demonstrate ethical behavior as noted in this article and elsewhere on Carolyn’s Nonprofit Blog. Why not create a special page on your website outlining your nonprofit’s commitment to transparency and to ethical behavior when it comes to how it operates and manages donors and private donor information? Why not secure the GuideStar gold or platinum seal and affix it to your website? These are just a few of the ways you can gain credibility while not allying yourself strictly with one nonprofit support organization or another.
Yes, ethical behavior is critical for our sector. But let’s rethink how we go about attaining and promoting it.
In closing …
“If you don’t have integrity, you have nothing. You can’t buy it. You can have all the money in the world, but if you are not a moral and ethical person, you really have nothing.”
– Henry Kravis, American businessman (b. 1944)