Ethics and Nonprofits
Unethical behavior remains a persistent problem for nonprofits and profits alike. To help organizations solve the problem, the authors examine the factors that influence moral conduct, the ethical issues that arise specifically in charitable organizations, and the best ways to promote ethical behavior within organizations. [Excerpted from article]
Corporate misconduct has long been the subject of media attention, and the last decade has seen growing incidents of moral dilemmas in both the for-profit and nonprofit sectors. The 2007 National Nonprofit Ethics Survey found that slightly more than one-half of employees had observed at least one act of misconduct in the previous year, which is similar to levels found in the for-profit and government sectors. Furthermore, nearly 40% of nonprofit employees did not report these incidents, believing that reporting would not lead to corrective action and that they might be the subject of retaliation from management or peers.
Other research in nonprofit performance shows similar results. A 2008 Brookings Institution survey found that about a third of those in the U.S. have “not too much” or no confidence in charitable organizations, and that 70% felt these organizations waste a “great deal” or “fair amount” of money. A 2006 Harris Poll found that only about 10% strongly believe that charities are honest and ethical in their use of donated funds, while almost one-third believe that nonprofits have “pretty seriously gotten off in the wrong direction.”
Research identifies four factors that influence ethical conduct, including moral awareness, moral decision-making, moral intent, and moral action. In addition, there are six areas in particular where ethical issues may arise in the nonprofit sector:
- Compensation. Salaries and perks can be perceived as an issue, particularly where an organization is “struggling to address unmet social needs.”
- Conflicts of interest. Some transactions create ethical dilemmas, but nonprofits may oppose restrictions because they rely on insiders to provide donations or goods and services at below-market rates.
- Publications and solicitations. Public trust includes concerns about truthfulness and accuracy in nonprofit reports.
- Financial integrity. Ethical dilemmas ensue where donations that may have undesirable associations or conditions.
- Investment policies. Socially responsible investors should ensure that their finances are consistent with their values.
- Accountability and strategic management. Nonprofit organizations can help each other do better when pooling information and benchmarking performance.