Ethical standards for nonprofit organizations and corporate responsibility

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 (www.ethics.ubc.ca).

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 (www.business-ethics.org).This 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 (http://www.mdnonprofit.org/ethics_initiative.htm).

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).

Leading from the Top

The easiest way to improve ethical performance in any organization is also the hardest, because it requires the leaders of that organization to act in a consistently ethical ways themselves. The culture of any organization is determined in large measure by the behavior of its leaders, who are after all those most responsible for creating the culture in which people work (Kaplan 2001).

A few examples can demonstrate how such a top-down modeling of ethics can work. The head of non-profit who brags about having cheated the IRS by using the non-profit as a front for political campaigning can hardly be surprised to find that his employees are padding their expense accounts. A company owner who knows that her products are defective should not be astonished when her sales force starts leaking organizational secrets - just as the boss who sexually harasses his secretary should not be surprised to find the clerical staff embezzling the petty cash.

Organizations in this sense are not unlike families. Just as children will give at least grudging respect to a parent who always acts as he or she expects others to, employees will respect and even emulate a boss who always and consistently acts in an ethical and non-hypocritical manner (Monks & Minow 2001).

Leaders of non-profits must ensure an overall atmosphere of fairness in their organizations. Beyond the importance of establishing a good moral climate through the actions of those at the top of the organization, non-profit leaders can take two other specific steps to ensure that there is a high ethical standard in their organization.

The first of these is that employees (if not volunteers) should be compensated fairly. An employee making a reasonable wage (as defined by the job category within the industry generally) is less likely to act unethically. This is in many ways a matter of common sense: People who are treated fairly tend to respond in kind. This sense of fairness must extend to considerations of gender and race: The non-profit that fails to give women health insurance "because their husbands have it" is risking not only law suits but unhappy, unproductive and even dishonest employees.

Secondly, channels must be maintained to allow those in the organization to report problems to the leaders in a way that guarantees the lack of retaliation. A worker who spots a safety problem or an environmental hazard caused by a company policy, for example, must be able to report the problem and know that it will be addressed without any retaliation being taken.

This will reassure the worker that the organization embraces an ethical climate that is receptive to fixing problems that could result in ethical dilemmas. But beyond this, such a mechanism will assure the worker that while other organizations might tolerate unethical behavior the company where he or she works has higher standards.

The ethical person is influenced in every decision that he or she makes by a system of personal values and ethics, no less so in the professional arena than in the personal one. The condition of being ethical requires a consistent approach to behavior both in and out of the workplace. The idea of ethics in the professional world is often discussed as if it were an isolated phenomenon, something that had to be invented independently. But of course the nature of ethical human behavior is a subject that has been discussed since our very earliest ancestors sat around their campfires.

Ethical debates allow us to address the fundamental questions of how we make - in very practical terms - the right decisions in our daily lives, what values are ultimately the most important and what standards we may fairly and reasonably use in judging the actions of ourselves and others. There are no special rules for acting ethically in business that do not apply in other arenas as well, for common elements of ethical behavior span different specific kinds of behavior.

Indeed, professional ethics is one of those things that you probably learned in kindergarten. No, your kindergarten teacher probably didn't call it that, but the fundamental elements of business ethics are the same as the fundamental ethics of any set of circumstances, and these are so basic that most of us learned them early on in childhood.

One should speak the truth, treat others with respect, keep your promises, work hard, only make demands upon others that you would be willing to make upon yourself and remember to ask yourself on a regular basis how much something will matter in 20 years. Making a dangerous product that hurts or even kills somebody will matter a great deal 20 years into the future. A small rise in profits will not. And so when one comes to the point of having to choose between different courses, it is useful to think about which pathway will lead one to the future that one personally would feel most comfortable with.