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By David Ingram
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Nonprofit organizations are often assumed to be perfectly ethical in their dealings with donors, employees, volunteers and the people they serve, as nonprofits generally exist for altruistic purposes. Surprisingly, however, nonprofits can come under scrutiny for lapses in ethical decision-making the same as their for-profit counterparts. The distinct structure and purpose of nonprofit organizations creates unique ethical dilemmas that managers must be aware of and avoid.
Honesty And Transparency
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Although it may be common to paint a rosy picture of the expected impact of for-profit companies when seeking funding, nonprofit organizations have a responsibility to portray the needs they serve and the impact their organization makes as accurately as possible. Analysis of the organization's spending patterns must be as accurate as possible, even if the results show that the company is spending too much on organizational growth and too little on programs.
According to guidestar.org, nonprofits should allow public access to their financial statements and the results of financial audits as well.
Donor Privacy
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A nonprofit can collect a significant amount of personal information about its donors, including credit card and bank account numbers. Protecting this information is vital to the ethical maintenance of donor databases. It can be tempting for nonprofits to sell their donors' contact information, such as mailing and email addresses, for a quick cash inflow, but this can be considered an unethical practice if the organization does not receive express permission from each donor before selling the information.
Conflicts of Interest
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Members on boards of directors are chosen for their connections, resources and experience. Some of the very connections that make a board member valuable, however, they can be a cause of a breach of ethical conduct. A classic example arises when a nonprofit utilizes the services of a company with which a board member has extensive ties, when the same service could be obtained at a lower cost or with higher quality from another source.
Conflicts of interest can arise when nonprofits pander to the desires of their most valuable donors as well. Large donors can often impact the way an organization spends its funds, funneling money into the donor's pet projects or preferred recipients when the money could achieve a higher impact elsewhere. Executives or board members receiving personal gifts from large donors can influence spending decisions as well, creating a breach of ethics.
Strategic Management
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Nonprofit executives and board members have a responsibility to keep their organizations focused on their core missions, and on achieving the highest impact possible in their area of specialization. This mission can become blurred at times, as organizational goals, such as market expansion and revenue growth, can take the spotlight away from achieving meaningful impact. According to ssireview.org, because nonprofits do not pay taxes, they carry an implied fiduciary duty not only to their donors, but to all taxpayers, to keep their focus on meeting the needs of the groups they serve.
Compensation
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Top-level nonprofit managers dedicate the same amount of time and effort to building the organization and ensuring its success, but common compensation practices of the for-profit world come under scrutiny in nonprofit organizations.
Such practices as travel expense reimbursem*nt, paid vacation time and lavish travel packages can cause outrage among an organization's donor base. Executive compensation is one of the elements that should be presented as transparently as possible to donors and the public to avoid allegations of secrecy and the mishandling of funds.
References
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Writer Bio
David Ingram has written for multiple publications since 2009, including "The Houston Chronicle" and online at Business.com. As a small-business owner, Ingram regularly confronts modern issues in management, marketing, finance and business law. He has earned a Bachelor of Arts in management from Walsh University.
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