Seven Ethical Challenges for Nonprofits

Tim Burchill, executive director of The Hendrickson Institute for Ethical Leadership at Winona, Minn.-based St. Mary’s University of Minnesota, says the ethical challenges that nonprofit organizations face in regards to fundraising can be broken down into seven categories.

1. Tainted money. Burchill says this category is a media favorite. While some organizations restrict who they’ll take funds from — e.g., Mothers Against Drunk Driving won’t take money from alcohol companies; American Cancer Society won’t take money from tobacco companies; etc. — many other groups don’t make such distinctions. Burchill says there is no money that is inherently bad, but each organization needs to decide for itself what qualifies as tainted money relative to its mission.

2. Compensation. This is a topic the Association of Fundraising Professionals spends a lot of time and energy on, namely “the issue of percentage-based compensation,” Burchill says. Fundraisers in the philanthropic sector should be motivated by the missions of their organizations, not by self gain. Percentage-based compensation can result in fundraisers profiting from donations to the organization. Making a personal profit should never be what motivates a fundraiser to elicit donations. Burchill adds that it’s OK to give bonuses, but bonuses can’t be tied to the amount of money a person raises.

3. Privacy. Issues surrounding the proper use, recording and distribution of donor information are a major concern for nonprofits. It also can be a challenge for consultants who might have multiple clients in the same community.

4. Stewardship. “I think we have to continually monitor whether or not we are indeed honoring the restrictions on gifts — and not just the letter of the restrictions but the spirit of the restrictions,” Burchill notes.

5. Honesty and full disclosure. Does your organization give potential benefactors enough information on your issues and mission to make informed decisions?

6. Conflicts of interest. These conflicts mostly involve situations where board members do business with an organization they serve on the board of. “It also, for fundraisers, has to do with things like being asked to be an executor of an estate,” Burchill adds.

7. Appearance of impropriety. “There are lots of things that we can do as fundraisers that are legal, but they aren’t ethical, and I think that we need to be cautious of those sorts of things,” he says, citing as an example a fundraiser accepting a personal bequest from a benefactor of an organization for which he works.

To avoid ethical dilemmas, Burchill says, have clearly articulated missions and value statements and be honest to them. Organizations should not get involved in situations with gifts that would lead them to compromise these values. Ask yourself if taking any particular action would compromise your mission and reflect badly on the organization, and if it could negatively impact the people you serve.

Finally Burchill says, organizations should develop a formal code of ethics. St. Mary’s, he says, has created one for its development staff that is a part of their contract, which staffers must sign.

Tim Burchill can be reached via www.smumn.edu.