Merriam Webster defines ethics as: “the discipline dealing with what is good and bad and with moral duty and obligation.” Careful and precise handling of standards especially rings true when applied to charitable organizations. Today, watchdog organizations, the IRS, media outlets, the public, and countless other actors scrutinize nonprofit leaders’ business ethics and decision-making practices. Review this short guide for implementing ethics policies to ensure that your team is doing everything it can to effectively steward your nonprofit’s integrity and reputation.
Why Instill Ethics?
Unethical behavior by nonprofit team members erodes trust in individual nonprofits and the charitable sector as a whole. Give.org’s 2019 Donor Trust Report highlights findings from a recent survey of more than 2,100 adults across America, in which 70% of respondents rated the importance of trusting a charity as “essential” before donating. Sadly, just 19% of respondents said that they highly trust charities. According to the Donor Trust Report:
“The top reasons cited as prompting trust are (1) the charity’s reputation, (2) honesty and transparency, and (3) the donor’s ability to verify through research and credentials. On the flip side, greed and high compensation, negative reputation, and lack of honesty and transparency are often cited as the most popular reasons a charity is distrusted.”
Ethics Philosophies and Pitfalls
While ethics and compliance functions exist in many nonprofits, they don’t always produce the beliefs and behaviors they aim to ingrain in employees. Avoid these three common and crucial mistakes that nonprofit teams make when instilling a culture of ethics or when implementing ethics and compliance policies:
- Pouring on the pressure: Nonprofit employees might feel a pressure to perform that sometimes conflicts with a corporate emphasis on integrity. Aside from prioritizing personal gain or intentionally committing harm, pressure—while much less sinister—is likely another leading cause of unethical behavior. Don’t give your employees reasons to rationalize taking ethical shortcuts. Whenever the pressure is on, be sure to share reminders about expectations for ethical conduct along with peak performance.
- Failing to hold employees accountable: When ethical misconduct occurs but is not rectified, this creates an internal culture of distrust and disenchantment. Allowing employees to get away with misconduct is unethical behavior in itself and only invites more malfeasance. Either follow through on accountability measures or see your staff harbor skepticism and suspicion.
- Keeping ethics invisible or unspoken: As ethics are mostly personal, individual staff members have varying degrees of commitment, knowledge, and skill regarding ethical decision-making. As the individual decision-making process is internalized, employers can’t know for sure the ethics standards or criteria their employees live by day-to-day. To identify and correct attitudes that might enable ethical misconduct, employers must make visible the hidden mental frameworks that each employee uses to make their judgment calls. Employers must also empower their teams to practice making decisions that more consistently align with the organization’s corporate values. Case analysis or scenario-based ethics training allows employees to test their ethical inclinations in an environment safe from retribution while learning to improve their ethical decision-making practices with formative feedback from supervisors and peers.
Implementing Key Ethics Policies
The National Council of Nonprofits published a robust suite of ethics resources for charitable organizations, along with state-based standards of excellence. See resources listed below. Along with putting your ethics program on paper, be sure to train employees to balance competing pressures and make more ethical decisions on behalf of your nonprofit.
Identifying and Managing Conflicts of Interest
One of many best practices in ethics, managing conflicts of interest, is currently an exceptionally high priority for maintaining public trust as a nonprofit. Conflict of interest (COI) policies are examples of how nonprofits can demonstrate their commitments to ethics, accountability, and transparency.
Conflicts of interest (COIs) present a potential risk to an organization because they prioritize personal interests over organizational interests. Potential COIs must be identified and explored because serious COIs can potentially involve fraud, legal violations, or violations of a board’s fiduciary duties. Even a perceived conflict could bring reputation risk to an organization and cause stakeholders to feel concerned over the leadership’s transparency and integrity.
To best manage conflicts of interest:
- Recognize that not all conflicts involve ethical missteps; conflicts can arise any time an individual team member’s interests could potentially conflict with the organization’s interests.
- Accept that not all conflicts are inherently wrong; some are acceptable or are in the organization’s best interest.
- Establish a COI disclosure form and a COI policy that lays out procedures for managing potential conflicts; define the COI review process and possible actions the board might take to reject any transaction or activity that presents an unacceptable COI.
- Ensure that your board regularly completes the COI disclosure process and remains informed about all potential conflicts.
- When reviewing potential COIs, focus on fostering productive board dialogue and determining whether the identified COIs are acceptable for the organization or present undue risk or ethics issues.
Learn more about managing COIs and review a sample COI disclosure form in the Nonprofit Risk Management Center’s article, “COI: Candor Or Inhibition? Managing Conflicts of Interest.”
National Council of Nonprofits, “Ethics and Accountability for Nonprofits,” “https://www.councilofnonprofits.org/tools-resources/ethics-and-accountability-nonprofits
National Council of Nonprofits, “State-based Standards,” https://www.councilofnonprofits.org/tools-resources/principles-and-practices-where-can-you-find-best-practices-nonprofits
Nonprofit Risk Management Center, “COI: Candor Or Inhibition? Managing Conflicts of Interest.” https://nonprofitrisk.org/resources/articles/coi-candor-inhibition-managing-conflicts-interest/