“Big Picture” Ethics and Nonprofit Decision-making

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May 1, 2012; Source: NPR

Is acting unethically a conscious choice, or are there other factors at play?

The latest story about a nonprofit executive director, finance manager, or board member who has embezzled from their organization provokes a variety of reactions, including anger, indignation compassion (usually for the victims; rarely for the accused), and bewilderment. What causes someone in a responsible position—usually with high levels of income, education, and a solid professional reputation—to lie, cheat, or steal?

Ann Tenbrunsel, a researcher at Notre Dame who studies unethical behavior, suggests an intriguing answer. Often, it’s not a moral failing or a conscious decision to do wrong that leads people astray. Instead, the origin lies in how the decision is framed. In this NPR story, for example, the owner of a mortgage business is horrified to learn that his seemingly profitable business isn’t profitable at all. In order to preserve cash flow, keep his business afloat, and keep his employees paid, he inflates his income on a loan application. He does this despite having a strong commitment to ethical behavior, born, in large part, on his own brother’s conviction for fraud.

The term researchers use for these apparently aberrant decisions is “bounded ethicality,” meaning that it’s difficult for any of us to always see the ethical big picture. We make ethical decisions using specific, situational frameworks. Each situation has its own definitions of “right” and “wrong.” We shouldn’t lie, but that dress never makes your wife look fat. We shouldn’t lie on the business mortgage application, but lying becomes not only acceptable to us, but even a positive thing if it means keeping people employed and meeting one’s ongoing commitments.

The story is quick to point out that the theory of bounded ethicality is not an excuse for illegal or unethical acts. Rather, it is an explanation for the thought processes that accompany these illegal or unethical acts.

Knowing this presents all organizations and their leaders with a challenge: how do we assure that situational decisions are made in full knowledge of the ethical big picture? For example, how do we balance passion for mission with the need to act ethically when we’re closing in on that major gift that assures mission fulfillment? How do we remember that there are ethical considerations and standards that transcend, and hopefully influence, the current situation? As leaders, how do we infuse “big picture” ethics into our organization’s decision-making without making every daily decision a subject of ethical debate?

We would love to hear from readers on their experiences with such bounded ethicality in their own work lives. –Michael Wyland

About

Michael Wyland

Michael L. Wyland, CSL, has more than thirty years of experience in corporate and government public policy, management, and administration. An expert on nonprofit governance and public policy issues, he has been featured and quoted extensively in media including The Wall Street Journal, The New York Times, CNN, Fox News, Washington Post, The Chronicle of Philanthropy, and The Nonprofit Quarterly. He currently serves as an editorial advisory board member and contributor to The Nonprofit Quarterly, with more than 100 articles published since 2012. Michael is a partner in the consulting firm of Sumption & Wyland. Founded in 1990, the firm provides board governance consulting, public speaking and training, and executive coaching to nonprofit organizations. Sumption & Wyland has assisted more than 200 nonprofits with strategic planning services from pre-retreat research to staff-level implementation assistance and effectiveness monitoring. Speaking topics include board-CEO partnerships, nonprofit executive transition issues, and overviews of the nonprofit sector of the US economy. Michael was born in Washington, DC and raised in the Northern Virginia suburbs. Prior to co-founding Sumption & Wyland, Michael managed the computer operations for an independent oil & gas investor in Dallas, Texas and served as a staff assistant to a U.S. Representative. During his college years, he spent one summer working at the US Department of Labor and one summer working at the US Department of Justice. His past volunteer service includes various leadership positions at the local, state, and national level with the Young Republicans. He has been the secretary and president of a condominium homeowners association and the treasurer of a professional association serving computing professionals. He served as a Trustee and Vice President of Sertoma Foundation, and has been elected president of his local Sertoma club twice. In 2014, Michael was elected Chair of the South Dakota Commission for National and Community Service (Serve SD), on which he has served since its founding in 2011. He is currently working as a senior advisor to establish a national charity dedicated to the elimination of prejudice, expanding the scope and reach of the 120-year old Pi Lamba Phi fraternal organization. Michael's writing for NPQ often addresses healthcare policy and governance, scandals involving nonprofits, and the governance and policy implications of nonprofit stories in the news. He was widely quoted and cited for his work analyzing the governance issues related to the Jerry Sandusky/Penn State/Second Mile scandal in 2011. More recently, he has written more than 30 pieces for NPQ relating to the IRS scandal. In addition, he presented a paper at the national 2014 ARNOVA Conference about the IRS scandal and its implications for regulation of political activity by nonprofit organizations. Michael lives in Sioux Falls, SD with his wife, Margaret Sumption, and their dog. They have one adult son. In his leisure time, he likes to read histories and biographies, play golf, cook, and be a companion to his wife.

  • Garth

    I suspect this is where the big advantage that good non-profit boards have to offer – the ‘critical distance’ of not knowing all the details – can help them keep more of a focus on the big picture, including the ethical big picture. No guarantees, but extra assurance of a strong, independent board.

  • Paul Sturm

    I teach the ‘Ethical Issues in Nonprofit Management’ course for graduate students at Notre Dame of Maryland University and share with them the best advice I received from one of my mentors who said “A nonprofit organization is a public trust. Always remember you’re spending other people’s money.”

    I take my students through several case studies and role-plays where they experience the complexities of ethical dilemmas. That said…I believe there would be far fewer scandals in the nonprofit sector if executives and managers were mindful of my mentor’s words.

  • Nathan Slovin

    It is lonely at the top and knowing this and also knowing that I could not speak with subordinates I discussed decisions I needed to make with a mentor and in later years with my Past President‘s council. Their detached position often times helped identify red flags that I was not seeing and enabled me to adjust my decision or go back to the drawing board.

    Beyond that I have followed the rule that if I could not make public my decision making process and my decision to others then I would not make the decision.

    Finally, in relation to my first point I find that many executives do not have anyone to confide in. My recommendation to anyone sitting in the top seat is to find a trusted advisor who is not afraid to speak honestly with you.