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Nonprofits need to pay attention to ethics, especially when it comes to fundraising. Without clear fundraising ethics, you could quickly lose community trust and fail your beneficiaries.
Begin with trustworthy fundraisers
To practice ethical fundraising, you need trustworthy fundraisers. To make sure they go about their work ethically, treat fundraisers with respect and invest time in training before they solicit a single donation. For example:
- Help fundraisers understand and articulate your organization's mission
- Set guidelines for what fundraisers should disclose about your organization's work
- Make sure fundraisers know and comply with all applicable laws
Insist on honesty
Fundraisers need to know that their solicitations and any materials they provide about your organization must be honest. Enforce a zero tolerance policy regarding intentional misrepresentation and misinformation. Fundraisers should never deal in or exploit donor or prospective donor information.
When doing face-to-face fundraising, it's important for fundraisers to clearly identify who they are and which organization they represent. Donors should feel free to ask questions and receive forthright and accurate answers.
Stress financial transparency
Show a commitment to ethical fundraising by being transparent with your organization's finances and fundraising practices. Make it easy for visitors to find this information on your website. Share details about your board composition, programs, outcomes, staffing and how donations are spent.
Keep in mind that it is not appropriate to compensate a fundraising professional or other staff member based on a percentage of money raised. Donors who contribute to a nonprofit expect to see that money go to the organization.
Similarly, do not misstate your fundraising expenses. Underreporting fundraising expenses only perpetuates unrealistic expectations about nonprofit overhead costs.
Respect your donors
To show respect for donors, be sure to:
- Conclude face-to-face approaches politely and immediately upon request
- Send timely gift acknowledgements
- Respect any restrictions a donor may place on a gift
- Provide timely reports to trusts and foundations
- Ask how donors wish to be acknowledged (such as on your organization's website or in the annual report)
Establish a code of ethics
A code of ethics can be a useful tool in guiding your staff and volunteers to practice ethical fundraising.
The Code of Ethical Standards from the Association of Fundraising Professionals (AFP), for example, states that a fundraiser aspires to build personal confidence and public support by being trustworthy, practicing honesty in relationships, and being accountable for professional, organizational and public behavior. Members of AFP, an organization that promotes ethical and effective fundraising worldwide, must observe the code or risk being denied membership.
The Ethics and Accountability Code from the Pennsylvania Association of Nonprofit Organizations (PANO) states that an organization's fundraising program should be maintained on a foundation of truthfulness and responsible stewardship. The code also says that fundraising policies should be consistent with an organization's mission, compatible with its organizational capacity, and respectful of the interests of donors and prospective donors.
Similarly, the Code of Fundraising Practice outlines standards for charitable fundraising organizations across the U.K. The code, which is enforced by the Fundraising Regulator, states that fundraising organizations must be legal, open, honest and respectful — and must not place undue pressure on a person to donate.
Curb aggressive tactics
No matter how ethical your fundraising practices are, your organization isn't likely to raise much money unless your fundraisers are assertive in promoting your cause confidently and directly. That means reaching out to the community to explain why your organization is great and encourage donors to support your cause.
However, it's possible to approach fundraising too aggressively. For example, putting too much urgency in your appeals for money may cause donors to question whether your organization is well run or even on the verge of closing — not exactly donor draws. If your organization is too focused on money, your mission and purpose also might get lost in the mix.
Acknowledge complaints
If you receive a complaint about your organization's fundraising practices, don't hesitate to respond. Record details of the complaint as well as contact information for the person lodging the complaint. Then, take quick action to determine what happened — and prevent it from happening again.
Think of donors as investors
Fundraisers must work hard to convince donors to invest in your organization. Use positive marketing and share stories of your successes to help people feel good about giving. Then, use your ethical practices to make the most of it.
References
Association of Fundraising Professionals: Code of ethical standards
Association of Fundraising Professionals: Donor bill of rights
Fundraising Regulator: Code of Fundraising Practice
National Council of Nonprofits: Ethical fundraising
The Pennsylvania Association of Nonprofit Organizations: An ethics and accountability code for the nonprofit sector (2016)
The Fundraising Authority: The entrepreneur's guide to non-profit fundraising by Joe Garecht
Nonprofit Bridge: 9 fundraising mistakes your nonprofit is making by Kristen Gramigna (2014)
Non-Profit Chas: Aggressive fundraising, transparency, and the worst case scenario by Chas Grundy (2010)
NonProfit PRO: 'Cheerfully aggressive' fundraisers? by Gail Perry (2014)
GuideStar: How ethical is your nonprofit organization? by Elizabeth Schmidt (2004)
Psychology Today: How to be assertive, not aggressive by Lynn Taylor (2013)
Association of Fundraising Professionals: Values promoted by the AFP code of ethics
GrantSpace: Where can I learn about ethics in fundraising?
Stathis Gould | November 5, 2013 |
In a Compliance Week blog post, editor-in-chief Matt Kelly commented that MF Global demonstrates all the worst ways that senior management can let “tone at the top” go wrong (“MF Global: Tone Deaf at the Top, and Then Disaster,” April 8, 2013). Kelly cites three sentences taken from a post-mortem published by a trustee investigating MF Global:
“Before MF Global went public, it acquired several disparate companies it never properly integrated. As one subordinate wrote in April 2010, “There is little business or dispositional integration between the many offices and branches. There is, in short, no house culture. The unwieldy corporate structure lacked cohesion both in its culture and in its operating structure.””
Effective approaches to instilling ethics and integrity, and using codes of conduct, are key elements of ensuring sound corporate governance and management control. The Committee of Sponsoring Organizations of the Treadway Commission (COSO)’s principle one of the control environment in the Internal Control Integrated Framework covers the need for the organization to demonstrate a commitment to integrity and ethical values. The related points of focus for achieving such commitment include the following:
- Setting the tone at the top: the board of directors and management at all levels of the organizations demonstrate through their directives, actions, and behavior the importance of integrity and ethical values to support the functioning of the system of internal control.
- Establishing standards of conduct: the expectations of the board of directors and senior management concerning integrity and ethical values are defined in the entity’s standards of conduct and understood at all levels of the organization and by outsourced service providers and business partners.
- Evaluating adherence to standards of conduct: processes are in place to evaluate the performance of individuals and teams against the entity’s expected standards of conduct.
- Addressing deviations in a timely manner: deviations of the entity’s expected standards of conduct are identified and remedied in a timely and consistent manner.
Codes of conduct help to reassure investors and other stakeholders, in particular those looking for socially responsible investment, integrity, and a commitment to ethics. Furthermore, employees generally prefer to work for organizations committed to values and ethics, and consumers tend to prefer to buy from organizations with strong records of adherence to standards of conduct and socially sensitive behavior.
As part of their leadership role and professionalism, professional accountants have a responsibility and opportunity to ensure the entire organization is attuned to high ethical standards and aligned with the values, goals, and objectives of the organization. Foremost, those in senior positions can help to set the tone at the top by displaying and encouraging professionalism and ethical behavior. An important way of influencing ethical practices and behavior in organizations is to ensure that senior management places a high premium on ethical behavior, and tone at the top. Tone at the top dictates the integrity of an organization and how employees will conduct themselves. The right tone at the top permeates throughout an organization and can be facilitated by a values-based code of conduct.
IFAC’s guidance Defining and Developing an Effective Code of Conduct for Organizations highlights the important role that accountants can play in driving and supporting organizational ethics and fostering a values-based organization. By applying a values-based approach—leading by example rather than relying on written policies and rules—accountants can promote a culture that encourages employees to internalize the principles of integrity and to “do the right thing” by allowing them to make appropriate decisions given specific circumstances.
A good example of a values-based approach is the PepsiCo Global Code of Conduct, designed to provide employees with specific guidance on how to act ethically while performing work for PepsiCo. It reinforces Pepsi’s core values and is the foundation of their strategic mission of Performance with Purpose.
All PepsiCo employees are expected to embrace the principles of the Code and:
- Show respect in the workplace;
- Act with integrity in the marketplace;
- Ensure ethics in PepsiCo’s business activities; and
- Perform work responsibly for PepsiCo’s shareholders.
Tone at the top also needs to be connected to the tone at the middle. An interesting observation by Michael G. McMillan, director of ethics and professional standards at the CFA Institute, is that most unethical behavior that we have all read about lately has not occurred in the “c-suite” but rather at the “m-level” (“Culture of Integrity Requires Financial Firms to Renew Focus on Middle Management,” Enterprising Investor blog).
Middle managers and their subordinates, not top level executives, have been at the center of most of these scandals. Therefore, if financial institutions really want to create a culture of integrity, they must also establish a “tone at the middle.” The chief financial officer and senior management will play a critical role in aligning tone at the top to behavior and actions in the middle and on the front line through effective systems of management control, performance management, training, and “walking the talk.”
Increasingly, organizations are using their codes of conduct and compliance programs as a means of engaging, educating, and raising awareness among employees. For example, Pet Supplies retailer Petco changed its code of conduct from a list of dos and don’ts to a shorter, livelier document with examples of situations employees might face on a day-to-day basis. A values or principles-based code, rather than a prescriptive approach, generally has more scope to influence employee decisions and actions.
Key questions for assessing your approach to ethical leadership
- Do organizational values, standards of behavior, and organizational support mechanisms reinforce and encourage integrity at all levels?
- Does the leadership of the organization demonstrate high standards of integrity?
- Do they practice what they preach and set a good example?
- Do directors and senior management provide a clear signal to other employees and outside stakeholders that integrity is important to the performance and reputation of the organization?
- Does adhering to the principle of integrity override short-term gain?
- Does the organization’s leadership ensure that strategy, policies, information, and culture sustain a reputation for integrity?
- Are the organization’s objectives and strategy in line with its standards of business conduct? For example, does the strategy impose unrealistic short-term performance targets that may encourage behavior that lacks integrity?
- Does the organization have a code of conduct that defines integrity and outlines the behavior it expects directors, employees, and other stakeholders to uphold?
- Does the code and compliance program adhere to regulatory and listing requirements, including for enforcement?