By Lorrie J. Carey, MPAUNC – GreensboroNonprofit Management and Leadership

The Importance of Ethics in Nonprofit Management

I. Introduction: The Concern

II. Nonprofit Ethics Defined

III. Why Ethics Are Important

IV. The Benefits of Ethics

V. Ethical Checklist

VI. Four Categories of Ethics

VII. Creating Ethical Standards

VIII.Ethics Training

IX. Strategies to Manage Ethics

X. Questions to Answer

XI. Conclusion

Contents

Nonprofit Ethics are Deteriorating

“Financial fraud is now more prevalent among nonprofits than among private businesses and

government offices, according to 2007 data from the Ethics Resource Center.”

(Philanthropy Journal, 2008)

The Concern

“The greatest threat to the not-for-profit sector is the betrayal of public trust, the disappointment of public confidence.”

Joel FleishmanProfessor of Law & Public Policy

Director of the Heyman Center on EthicsDuke University

The Concern

• Honesty

• Treating people with respect

• Transparency

• Actions you would be comfortable reading on the front page of the paper

• No individual profits from the organization

• No conflicts of interest

• Fundraising honesty/accountability(Schmidt, 2004)

Nonprofit Ethics Defined

“The good will earned by accountable and transparent nonprofits is one of, if not the most important of its assets.”

Elizabeth SchmidtProfessor of Nonprofit Law & PracticeCollege of William & Mary Law School

Why Ethics Are Important

• Moral compass to guide leadership

• Promotes the cultivation of teamwork

• Builds employee/volunteer confidence

• Decreases liability for criminal acts and personnel issues

• Identifies the organization’s values

• Promotes a positive public image

Carter McNamara, MBA, PhD, Authenticity Consulting, LLC

Complete Guide to Ethics Management: An Ethics Toolkit for Managers.

Benefits of Ethics

Relevant information

Involvement test

Consequential test

Universal Ethical Principles test

Fairness test

Universality test

Preventative test

Light of Day test

Pekel & Wallace, Fulcrum GroupTen Step Method of Decision Making

Ethical Checklist

The Independent Sector provides four categories for ethics resources on their website:

Legal Compliance & Public Disclosure

Responsible Fundraising

Effective Governance

Strong Financial OversightResource Center for Good Governance & Ethical Practice

Four Categories of Ethics

“Maintaining the public trust is crucial to the success of the nonprofits and foundations. That helps charitable organizations win resources – including donations of time, money, and other support.”

Independent SectorWashington, D.C.

Four Categories of Ethics

1.Mission: well developed & formally approved by board, evaluated regularly

2.Governance: governing body should be representative of the community

3.Conflict of Interest: policies should be in place

4.Human Resources: are diverse and policies set clear expectations

Utah Nonprofits Association, 2002

Creating Ethical Standards

5. Financial Accountability• Financial reports on a timely basis - available to

public • Organizational means to report suspected fraud• Written financial policies for investment/

purchasing/reserves

6. Legal Compliance• Federal/State/Local Laws• Fundraising/ Licensing/ Labor/

Advocacy/ Taxation/ Finances

Utah Nonprofits Association, 2002

Creating Ethical Standards

7. Openness• Truthful public information• Responsive to public interest

8. Fundraising• Respect wishes of donors• Manage raised resources being mindful of

public trust• Be responsible for those fundraising on your

behalf• Use truthful solicitation materials

Utah Nonprofits Association, 2002

Creating Ethical Standards

9.Public Policy Advocacy• Have written policies for advocacy• Provide only facts to the public

10.Information Management• Personal information is confidential• Have policies for who can access

organization informationUtah Nonprofits Association, 2002

Creating Ethical Standards

1. Orient employees about organization ethics

2. Train management about ethics

3. Make sure leadership committed to ethics

4. Involve staff in development/review of ethics policy

5. Engage in discussion of ethical resolution

Carter McNamara, MBA, PhD, Authenticity Consulting, LLC

Complete Guide to Ethics Management: An Ethics Toolkit for Managers.

Ethics Training

6. Include ethical performance in performance appraisal

7. Lead by example

8. Put ethics guidelines in writing

9. Have board/management/staff/volunteers sign an “Oath of Ethics”

Carter McNamara, MBA, PhD, Authenticity Consulting, LLC

Complete Guide to Ethics Management: An Ethics Toolkit for Managers.

Ethics Training

1. Rely on employee values Problem - Values vary

2. Compliance – Minimum Standards & PenaltiesProblem - Employees/ volunteers won’t rise above minimum standards

3.Ethical exhortationProblem - Organization “high standards” are undefined

4. Managing valuesProblem - Defining a set of values & minimum standards

Kirk Hanson, DirectorMarkkula Center for Applied Ethics

Santa Clara university

Strategies to Manage Ethics

Managing Ethics Requires Leadership/ Management Effort!

Communicate Educate Implement Model Apply Reflect values Reward values Renew values every three years

Kirk Hanson, DirectorMarkkula Center for Applied Ethics

Santa Clara university

Strategies to Manage Ethics

1. Does your organization want to promote an ethical culture?

2. Does your organization have policies relating to governance, conflict of interest, financial oversight, responsible fundraising, legal compliance, and public disclosure?

3. Do you evaluate your mission regularly?

4. Does your board and staff represent the multiple groups in your community?

Questions to Answer

Ethical standards are imperative to maintaining positive nonprofit operations and the public trust.

Time and effort and buy-in at all organizational levels must occur in order to develop and execute an ethical culture in nonprofit organizations.

Conclusion

Nonprofit ethics seen deteriorating. (2008). Philanthropy Journal. Retrieved from http://www.philanthropyjournal.org/news/nonprofit-ethics-seen-deteriorating

Fleishman, J. (n.d.). Ethics and accountability in the nonprofit sector. Retrieved from http://www.councilofnonprofits.org/resources/resources-topic/ethics-accountability

Schmidt, E. (2004). How ethical is your nonprofit organization? Retrieved from http://www2.guidestar.org/rxa/news/articles/2004/how-ethical-is-your-nonprofit-organization.aspx?articleld=827

McNamara, C. (n.d.). Complete guide to ethics management: an ethics toolkit for managers. Retrieved from http://www.managementhelp.org/businessethics/ethics-guide.htm#anchor33077

References

Pekel, J. & Wallace, D. (n.d.). Ten step method of decision making. Complete guide to ethics management: an ethics toolkit for managers. Retrieved from http://www.managementhelp.org/businessethics/ethics-guide.htm#anchor33077

Independent Sector. (2011). Strengthen accountability. Retrieved from http://www.independentsector.org/accountability

Utah Nonprofits Association. (2002). Standards of ethics. Retrieved from http://www.nonprofit.utah.org/una/standards.html

Strategies for Managing Ethics. (2011). Retrieved from www.youtube.com/watch?v=M6FAZI3G-6I