The Nonprofit Ethicist | Summer 2005

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Editors’ Note: We want your quandaries and conundrums! Below you will find the first installment of a new Nonprofit Quarterly column, “The Nonprofit Ethicist”. It is designed to help answer your questions about any situation in or around your nonprofit in which an ethical choice is required of you. There are so many such situations in our work we wanted to start unearthing them for discussion. We invite letters to the Nonprofit Ethicist from our readers. Letters should be no more than 350 words and should include:

  • A vivid but short description of the situation you find yourself in, and
  • Your question

Letters will be run anonymously and, of course, we will reserve the right to choose the most poignant!

Dear Nonprofit Ethicist:

I have been sitting on the board of a local community multi-service center for two and a half years. I live right around the corner from the center and I know a lot of the staff from one thing or another. I guess I have always been involved with the organization in some way. Anyway, I was asked to join the board by the board president. When I came on, we were also just bringing in a new executive director. She was hired after a series of directors came and went quickly. Funders see her as somewhat of a savior for the agency.

Long story short, the board has gradually shifted into two camps. One supports the executive director no matter what, and the other seems angry about a couple of major issues. I think the most troubling of these is the fact that at least three of the board members in that first camp are related to staff members who have been hired by this executive. In two cases, the job performance or salary level of those staff members has been questioned. Most recently, the competence of the CFO was questioned by the auditor. That conversation became unbelievably convoluted, and nine months later we have yet to take any decisive action beyond issuing a warning. We have, however, changed auditors.

I am worried about liability issues, and I’m also wondering who I am primarily accountable to on an ethical basis and how I should live that out.

Dear Worried,

Answering the last question first, I like John Carver’s rule: “Your primary responsibility is to those in whose names you do business.” This means, as I interpret it, that since you take money on behalf of the community, your first “fiduciary responsibility” is to them. Now how do you live that out in this situation?

Your instincts are good. Inbreeding is bad for critters and it’s no better for nonprofits. You may be right that there is a connection between employees not doing their jobs and having relatives on the board—the fact that there appears to be a pattern at least raises problems of perception in a situation where your reputation should be considered a core asset. The situation is also obviously causing internal mistrust on the board, which means that the board may be less likely to be able to act as a team on behalf of its constituency.

While board members are expected to bring their whole selves into good decision-making, they must try to minimize any singularly personal interest in any outcomes. So this is one set of problems at the board level. These kinds of concerns are getting taken very seriously right now. In fact, the Senate Finance Committee is considering whether or not it should require all nonprofit boards to have and submit to the IRS conflict of interest policies.

Another ethical issue is allowing organizational actors to underperform for any length of time—and it’s not just the employed relatives. The board and the CFO are supposed to be acting as responsible stewards of all of the funds they have raised. Allowing the organization to become mired in mediocrity does not honor the public trust.

So, I think you might want to do two things, and maybe three.

  1. Suggest to the board that it begin to work now on a conflict of interest policy to get ahead of the curve and be ready to find the name of someone who might be able to walk you through a discussion. In other words, don’t just photocopy someone else’s policy. Half of setting an ethical screen is in the dialogue it produces about how it would be used.
  2. Start a conversation at the board level about performance evaluation, not just of the employees but of the agency as a whole—including a self-evaluation of the board. Suggest that this be systematized so the board understands the standards being used.
  3. Have a quiet conversation with the executive director or board chair about your concerns, staying clear of attributing malicious motives.

And of course, before you do anything, examine your own part in creating or maintaining the situation so you can enter into solution-mongering in a humble way.

Dear NPQ Ethicist,

I work for a small but exciting nonprofit organization that is only a few years old. Over the course of the past couple of years, the organization has steadily added staff under the founder. I really admire this guy, but I am worried about the organization and ultimately our mission under his leadership. Because the work we do strikes a chord and is obviously badly needed, we have grown exponentially over the past few years, but we have not changed much in terms of how things are done. Our organization continues to be run as if it were a start-up.

The fallout from this situation varies from many small inefficiencies to major screw-ups. Because our founder is our lead on fundraising and he’s always running a mile a minute, sometimes communications don’t flow smoothly This, I am sorry to say, has led to an occasional reconstructive stretching or manipulation of the truth, specifically through reporting misinformation to funders and sometimes through the “narrow casting” of conflicting information to individual staff members. All of this remains, to date, outside the ken of the board.

I think some sort of intervention is necessary, but the only way this seems likely to happen is through middle management reporting to someone on the board. This feels slightly unethical to me and I am not sure they would listen or that they would know what to do. I have tried to discuss problems with our founder as they occur but he never sits still long enough to resolve anything. I don’t want to cause harm either by action or inaction. What do I do? How do I think this through?

Dear Confused,

I detect a case of founder syndrome—always a roller coaster ride of thrills and spills.

As messy and frustrating as the situation may be for you and your colleagues, there may not be so much an ethical as a developmental issue here. So, the guy runs a mile a minute and the organization isn’t systematically or uniformly run and the board either doesn’t know or doesn’t much care about small inefficiencies because the work is energetically moving forward. This sounds pretty normal for a young, founder-run organization. If left to run its course, the messiness will at some point cause public embarrassment, which will force the board to take corrective action. Unfortunately, it usually has to happen that way, but to oppositionally challenge a charismatic leader who has the board’s support could be unproductive.

Good for you for raising your worries with the founder, but don’t act powerless. You are also involved in setting the ethical environment. You may wish to help pull together middle managers to cooperatively do things like setting up information protocols that everyone uses—regular meetings and constant e-mail updates—that can lessen the problems with narrow casting of information. In other words, do whatever YOU can to take helpful responsibility for keeping things organized. This is one way we turn ourselves into leadership material.

On the far end of possibility here, if your fearless leader lies or withholds critical information from the board or the organization’s funders, then yes, there is an ethical issue and you should shine some sun on the situation, starting with the board. But, if he is just doing some spin doctoring, your accusations would seem silly to a disinterested observer. It is an unfortunate fact that until young (and even sometimes older) boards are forced to attention by (sometimes repeated) crises, they very often ignore preventive measures.

Woods Bowman is Associate Professor, Graduate Program in Public Services, DePaul University. Ruth McCambridge is editor in chief of the Nonprofit Quarterly.