There has been a strong spotlight on nonprofits in the last several years, from taxation issues to ethical concerns. Unfortunately, a few nonprofits have made the headlines as a result of ethical and governance malfeasance and so more nonprofits are under scrutiny and overall have lost public trust.
I had the honor recently of leading a workshop at the University of Texas at Dallas, Institute for Excellence in Corporate Governance, on Ethics and Conflicts of Interest for nonprofit CEO’s and Board members. We talked about the absolute need to implement effective Ethics and Compliance policies to combat the issues facing many businesses today, not just nonprofits.
I reminded participants that ethics is a set of moral principles. Ethical issues arise in nonprofits in compensation, conflicts of interest, publications and solicitation, financial integrity, investment accountability, and strategic management.
Eroding public trust
Unfortunately, public trust has eroded over the years due to some very public scandals involving nonprofits. In fact, a Harris Poll found that only one in 10 Americans strongly believed that charities are honest and ethical in their use of donated funds. Nearly one in three believed that nonprofits have “pretty seriously gotten off in the wrong direction.”
And a Brookings Institution survey found that about one third of Americans reported having “not too much” or no confidence in charitable organizations, with 70 percent feeling that charitable organizations waste “a great deal” or a “fair amount” of money.”
The key aspects of nonprofits are accountability, trustworthiness, honesty, and openness to every person who has invested time, money, and faith into the organization. Nonprofit organizations are accountable to the donors, founders, volunteers, program recipients, and the public community. Public confidence is a factor in the amount of money that a nonprofit organization can raise, and can significantly hurt their ability to meet their mission.
Start at the top
Instilling an ethical culture starts at the top with setting high standards for everyone, making difficult decisions consistently and having a culture that embraces continuous improvement. In organizations that do not have an ethics and compliance program, 68% of employees have observed two or more types of misconduct in a year’s time, compared to just 22% in a culture that has a well-implemented program.
In those organizations only 60% of their employees reported the incidents, and nearly 40% stayed silent, largely due to feelings of futility or fear. And indifference is harder to combat than fear. Staying silent is not the answer.
I reminded the attendees that responsible organizations are true to their missions; responsible organizations act as if outcomes matter and responsible organizations are candid and transparent.
And I also reminded them of the Ethics Quick Test, in this case attributed to TI (Texas Instruments), that can be a pulse taker if there are doubts on what their ethical decision needs to be:
- Is the action legal?
- Does it comply with our values?
- If you do it, will you feel bad?
- How will it look in the newspaper?
- If you know it’s wrong, don’t do it! If you’re not sure, ask. Keep asking until you get an answer.
Raising the bar on all things ethical, having a program and processes in place that are meticulously followed; knowing and acting as if all eyes are upon them – because yes, being a nonprofit means everyone is always watching you – with so many issues and concerns today that need addressing it has never been as important for nonprofits to accomplish the work they do. To accomplish their missions, having public trust is critical. Ethics has never been more important.