Ethics in a Non-Profit Organization Term Paper

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Ethics for Non-Profits

Introduction century ago, corporate social responsibility was an idea whose time had not yet come, and companies were free to treat their employees as badly as they could get away with and cause nearly unregulated environmental damage. Profits were considered the only measure of how good a company was, and higher profits were often derived from unethical treatment of workers and resources.

Such an attitude today is no longer either practical nor acceptable. Increased government regulation (brought about in direct response to corporate irresponsibility) has limited everything from the safety conditions of the workplace to the ways that companies must restore any environmental damage that they inflict (

This is all to the good, for corporate social responsibility is as important to a society as individual responsibility is to a family. The rights of a corporation, like those of an individual, only extend to the point where harm is done to someone else. Like the doctor taking the Hippocratic oath, the business executive should have to promise that before anything else and certainly before considerations of profit, his or her company must first do no harm.

While such ideas are more and more commonly applied to for-profit corporations, however, they are all too rarely applied to non-profit organizations. This can lead to highly unethical behavior. This paper examines why a high standard of ethical behavior is just as important for non-profit corporations as it is for-profit corporations as the recent problems with the United States Olympic Committee demonstrated:

One of the most important (and cheering) considerations about organizational responsibility is that one can indeed both do well and do good, whether in terms of profits or in terms of the goals of a non-profit corporation. Ethics are both (of course) a moral responsibility but also a good business decision.

To take up the moral objections first, one can argue that corporate social responsibility must be practiced because it is the right thing to do. A business executive should never find himself or herself asking the question: "If I conduct my business in an unethical way, how much more money will I make?" Rather, each individual must determine how much gain is reasonable and, having decided this, match those expectations of financial gain with a business that can be carried out in a responsible and moral fashion ( is true rather one is raising money for a charity or trying to make a profit.

Some people will act in such a responsible fashion because of religious ideas, others out of a personal and coherent sense of ethics. But the point that must be emphasized here is that good people act in responsible ways, and the limits of responsibility do not end when one leaves one's home. One's conscience must be as vigilant at work as it is in any other arena of one's life.

Moreover, beyond these moral considerations, it is simply not true that corporate responsibility and profitability cannot be good partners for the simple reason that consumers are interested in supporting companies that act ethically. Organic farmers, for example, must charge more for their food. And yet many consumers are willing to buy organic food. The reason for this is partly because those consumers feel that such produce is better tasting or healthier. But it also stems from the fact that many consumers wish to support farmers who conduct their work in an environmentally responsible way. In effect, organic farmers are being directly rewarded by consumers with a reasonable profit-margin because they are able to provide a desired consumer good in an ethically responsible manner.

Higher Standard for Non-Profits

While both for-profit and not-for-profit corporations should act ethically at all times, the onus is actually greater on the non-profit by virtue both of its non-profit status and because of the kinds of work that non-profits do. The following guidelines laid out for non-profits in Maryland could certainly be applied across the country:

The success of Maryland's nonprofit organizations depends upon public confidence and broad public support. Maryland's nonprofits are supported by individuals, corporations and foundations through charitable contributions and volunteer effort; by government through contracts and grants; by consumers through purchases and fees; and by the general public through state and federal tax laws.

Nonprofit organizations must comply with applicable local, state, and federal laws. These Standards build on that foundation, and go a step further. Based on fundamental values - such as honesty, integrity, fairness, respect, trust, responsibility, and accountability - these Standards describe how nonprofits should act to be ethical and be accountable in their program operations, governance, human resources, financial management and fundraising (

It is important to note here the emphasis not only on obeying the law (a very minimal standard of ethical behavior) but also on meeting the expectations of the public's trust - something that for-profit businesses are in general less concerned with (although arguably it would be good for their businesses if they were so concerned).

Conflicts of Interest

One of the most important ethical considerations that often comes before non-profits is the question of conflicts of interest; this is certainly one of the issues that the U.S. Olympic committee ran afoul of. In part because many of those who serve on non-profit boards do so as volunteers, they tend to have other, often primary identities that may cause conflicts. For this reason, every non-profit organization should have a clear written policy on the importance of avoiding such conflicts such as the following sample statement of avoidance of such conflicts:

No member of the NFC Board of Directors, or any of its Committees, shall derive any personal profit or gain, directly or indirectly, by reason of his or her participation with the Nonprofit Financial Center. Each individual shall disclose to the Nonprofit Financial Center any personal interest which he or she may have in any matter pending before the NFC and shall refrain from participation in any decision on such matter.

Any member of the NFC Board, any Committee or Staff who is an officer, board member, a committee member or staff member of a borrower organization or a loan applicant agency shall identify his or her affiliation with such agency or agencies; further, in connection with any credit policy committee or board action specifically directed to that agency, he/she shall not participate in the decision affecting that agency and the decision must be made and/or ratified by the full board.

Any member of the NFC Board, any Committee, Staff of Institute Faculty shall refrain from obtaining any list of NFC clients for personal or private solicitation purposes at any time during the term of their affiliation (

USOC Chief Executive Lloyd Ward has received a substantial amount of censure for his conflicts of interest:

The USOC's ethics oversight committee two weeks earlier found Ward had committed two technical violations of the organization's conflict-of-interest rules when he directed a USOC employee to consider his brother's company's proposal for a lucrative contract to sell power generators at the 2003 Pan American Games. The committee declined to sanction Ward, however.

Ward lashed out at Patrick Rodgers, a former USOC compliance officer who has been vocal in saying Ward committed ethics violations (

But conflicts of interest are hardly the only ethical lapses that members of the U.S. Olympic Committee has been accused of. The entire selection process for the 2002 Winter Olympics was shot through with ethical (although not criminal) malfeasance:

Super Bowl trips, kitchen appliances, a violin and cash, cash and more cash changed hands during Salt Lake City's campaign to win the 2002 Winter Olympics, according to a report released Tuesday by an ethics committee.

Some of the most disturbing findings of the ethics report provide examples of disgusting and disguised transactions and phony contracts," Salt Lake Organizing Committee (SLOC) Chairman Robert Garff told a news conference.

Two top officials in the city's Olympic bid were accused of ethical, but not criminal, wrongdoing in an internal investigation of the biggest corruption scandal in the history of the Games (

Most of these problems could have been limited or possibly even prevented by a written code of ethics that was frequently discussed. There seems to have been little if any formal attention paid to the question of ethics during this selection process - despite the fact that the USOC does have a code of ethics that includes the following provisions:

Conduct all dealings with honesty and fairness.

Respect the rights of all employees to fair treatment and equal opportunity, free from discrimination or harassment of any type.

Know, understand and comply with the laws, regulations, and codes of conduct governing the conduct of USOC business - both domestic and foreign.

Ensure that all transactions are handled honestly and recorded accurately.

Protect information that belongs to the USOC, our donors, sponsors, suppliers and fellow workers.

Avoid conflicts of interest, both real and perceived.

Never use USOC assets or information for personal gain.

Recognize that even the appearance of misconduct or impropriety…[continue]

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