CHAPTER SEVEN
ETHICAL NONPROFIT MANAGEMENT
CORE VALUES AND KEY PRACTICES

Thomas H. Jeavons

Since the mid-1980s, scandals in the nonprofit sector and the corporate world have given rise to heightened concerns about ethics, accountability, and public trust for all types of organizations. Charitable organizations and those who run them have behaved badly on occasion before, but they have probably never received such intense public scrutiny as over the last quarter-century. Now, in an era of twenty-four-hour news networks, Internet news feeds, and social media, even small missteps can become major public relations nightmares. Moreover, the public's readiness to believe the worst about most institutions has been reinforced by the pervasive evidence of the greed and moral myopia of major corporations that contributed to the “great recession” and to the widespread economic chaos and human suffering it created.

High-profile ethical scandals involving nonprofits, and the damage they can cause, have been seen before. During the 1990s, following the United Way of America scandal, the public's faith in nonprofit institutions generally fell. Then, in the aftermath of efforts to make nonprofits more accountable, there was some rebound in public trust (Independent Sector, 2002). But since the beginning of the new century the frauds, abuses of power, failures of governance, and evasions of accountability that were so evident in cases like those of the American Red Cross, the Smithsonian, and the Catholic Church (to name just a few prominent examples) have generated reasons for public faith in nonprofits to erode again.

Since 1973 a significant decline in public confidence in many major institutions has been widespread (O'Neill, 2009, pp. 251–252). This represents a real problem for government and business, but even more so for nonprofits. Why more so for nonprofits? Because nonprofit organizations—at least public charities (the 501(c)(3)s)—are especially dependent on the public's trust and goodwill to gain the support they need for the work they do. These organizations are sometimes described as “values-expressive,” as being instrumental and critical to building “social capital” (a concept that centers on trust), and as being instruments of collective action for serving the public good (Lohmann, 1992; Payton & Moody, 2008; Putnam, 2000). If they are not organizations of integrity, organizations that are trustworthy, then they generally will not be able to function effectively. The logic of this is obvious. Why would people want to give their money or time to an organization if they have reason to doubt that organization is representing itself and the work it does honestly and is using the contributions it receives well for the purpose of fulfilling its stated mission?

The responsibility for assuring the ethical behavior of a nonprofit organization resides with both its managers and its board members (or trustees). The roles and responsibilities of governing boards are spoken to in Chapter Five of this volume. I would just remind us here—with emphasis—that boards are the ultimate fiduciary agents for nonprofits, so their attention to issues of integrity must be as consistent as those of any executive. That said, this chapter will focus primarily on the responsibilities of professional staff, the managers. The discussion here is about “professional ethics.”

Attention to professional ethics has followed an interesting trajectory over the last four decades. There was a notable surge of interest in these matters following the Watergate scandal in the mid-1970s, after it was observed that the majority of those involved were educated at some of the nation's most prestigious law schools. A similar surge of interest in ethics has risen in the aftermath of high-profile corporate scandals over the last several decades. The professional association of business colleges and schools even required more attention be paid to ethics in the curricula of their member institutions. Yet, the responses of commentators and institutional leaders and the changes in professional school curricula over the last thirty years have been inadequate to end the cycle of recurring scandals; and these responses often reflect two troubling assumptions about ethics and the professions.

The first assumption is that careful, skilled thinking about ethical matters is more the business of philosophers and academics than of practitioners. While persons “training for the professions” may be required to take courses in or complete assignments relating to ethical issues of their profession, many involved—especially the students—assume that these courses and assignments are of secondary importance. Why would they assume that? Because both practitioners and students can see (from observing their fields) that the skills one must master to build a “successful career” are the technical and practical skills of their profession; and that often an inability to think clearly about and act appropriately on the ethical issues has not created a major stumbling block to professional advancement.

The second problematic assumption is found among many who, even while they admit the importance of ethical questions and issues, believe these questions and issues may be dealt with as discrete concerns in professional practice, isolated from others. This perspective is evident in the tendency to have one course on ethics in a professional program or to have one or two sessions in courses on other subjects take up ethical issues, rather than trying to have the ethical implications of every aspect of professional practice dealt with wherever they might arise in a professional education.

I lift up these assumptions here because they are both, I believe, patently false. Moreover, both undermine the maintenance of appropriate ethical standards in the behavior, management, and operation of nonprofit organizations. (Indeed, this is true for organizations of any kind.)

The analysis that follows builds on two contrary assumptions. The first is that reflecting critically and actively on ethical issues is an obligation of every professional, including nonprofit managers. The capacity for and inclination to socially responsive, historically grounded, critical, ethical judgment should be one outcome of any sound professional education program, and one of the capacities of a “professional” as “reflective practitioner” (Schön, 1983, 1987). The second is that a concern for the ethical implications of one's decisions and actions is salient in every aspect of professional practice and—for the considerations of this volume—in relation to every facet of the life of nonprofit organizations.

Indeed, I will argue here, as the chapter title implies, that we are most likely to see consistently ethical behavior among nonprofit managers and organizations only where an emphasis on ethical values and behavior is deeply embedded in the cultures of these organizations. So building and reinforcing that kind of organizational culture becomes a primary responsibility for those desiring that ethical practice be a hallmark of all the functions, including management, of their organizations.

Chapter Overview

The argument I will make here is that ethical behavior in and by nonprofit organizations cannot be effectively assured simply by employing encouraging rhetoric about ethics, nor just by establishing specific rules for ethical behavior. This point can be readily demonstrated by examining the historical record and the common experience of most managers and organizational analysts. Anyone with significant experience in organizational life knows there is often a marked disparity between rhetoric and practice, between “espoused values” and “operative values,” in organizational behavior (Argyris & Schön, 1978). They also know that rules about ethics (and other matters) can be, and frequently are, followed “in the letter” while being totally ignored or violated “in the spirit.”

Thus, the claim argued here is that truly ethical behavior will be assured only by creating an organizational culture in which key ethical ideals and expectations are incorporated in the “core values” (Schein, 1985) of an organization and thus permeate its operations. Achieving this will almost certainly involve the use of appropriate rhetoric about values, and it may involve promulgating codes of ethics within the organization. More important, though, it must involve modeling of the core values in the behavior of key individuals in an organization and reinforcement of those values through the organization's structures and reward systems.

Additionally, I will argue that because of the unique historical, societal dimensions of their character and function, the expectations about what constitutes ethical behavior in and by nonprofit, public benefit charities differ from those placed on other organizations. Specifically, questions of trust and integrity go to the essence of the reason for the existence of these organizations and their ability to satisfy public expectations. The existence of most charitable nonprofit organizations, their capacity to garner resources—and so to survive and carry out their missions—depends on their moral standing and consistency (see Douglas, 1987; Hansmann, 1987; Jeavons, 1992; Ostrander and Schervish, 1990; Payton & Moody, 2008).

There is an implicit social contract supporting the presence and function of private, public benefit nonprofits in our society. Simply summarized, these organizations are given special standing and specific legal advantages over other private organizations with the understanding they will serve the public good. The public expects these organizations to be motivated by and adhere to such a commitment in their performance. The public also expects these organizations will honor a set of widely accepted moral and humanitarian values—deriving from the organizations' historical and philosophical roots—and that they will not act in a self-serving manner.

Accordingly, if the managers of public benefit nonprofits wish to ensure the ethical behavior of their organizations, staffs, and themselves, then they need to create and maintain organizational cultures that honor in practice (as fundamental) a set of “core values” that are in keeping with the historic, philosophical, moral, and religious roots of the voluntary sector, and that meet current public expectations. In this context, trust is the essential lifeblood of the nonprofit sector—trust that nonprofits will fulfill this implicit social contract. To ensure that this trust is sustained, I will argue, five core values must permeate these organizations, shaping their ethics. These values are integrity, openness, accountability, service, and charity (in the original sense of that term).

We begin by considering what ethics are and are not. We will look at a number of definitions of ethics, with a particular eye toward the origins, character, and purposes of ethical norms or standards. Then we need to examine more closely the kinds of ethical norms that are usually applied to nonprofit, public-benefit organizations in American culture, the factors that have shaped these norms, and the purposes they serve.

Having formed a well-grounded perspective on the norms or standards for ethical behavior in and by nonprofit organizations, we next need to ask how such behavior can be assured. What is the relationship between values and behavior? Assuming an organization does ascribe to or articulate the “right” values, how can one help ensure that those values are captured and reflected in all aspects of its operations, by all its members?

In essence, this is to ask about the integrity of an organization, about how to make certain that it is—and will continue to be—what it claims to be. Specifically, how can one make certain that there will be conformity between the values an organization claims to represent and the purposes it says it intends to serve on the one hand, and its actual operations on the other? Finally, this chapter concludes with some specific suggestions about how a “culture of integrity” can be created and sustained in nonprofit organizations. Assuming nonprofit organizations wish to act ethically, it is only by creating and sustaining such an organizational culture that this intention is likely to be fulfilled consistently. Let us begin, then, by examining the nature of “ethics” and “ethical behavior.”

What Are “Ethics”?

As a field of study, “ethics” refers to “the study of moral topics, including moral issues, moral responsibilities, and moral ideals of character.”* In a normative sense, “ethics” may be seen as referring to “justified moral standards,” which is to say, not just what people do believe about how they should act, but also what they should believe. As this chapter is directed more to practitioners of management and other “lay people” than to scholars, however, we need to think also about more common uses of the term ethics.

Webster's New World Dictionary of the American Language (2nd college ed. 1970) defines ethics as a “system or code of morals of a particular person, religion, group, profession; etc.” The Oxford English Dictionary (compact ed., 1971) notes that the word “ethics” comes from the Greek term “ethos,” meaning “custom, usage, manner or habit,” and goes on to offer the following definitions (for ethics): “the moral principles by which a person is guided” and “the rules of conduct recognized in certain associations or departments of human life.” The derivations of the term, as well as the differences we see in these common definitions, highlight two facets of the origins and purposes of ethics that are useful to examine.

One set of issues involves the derivations of and justifications for specific ethical systems and values. Exploring various types of ethical theories—duty ethics, utilitarianism, virtue ethics—can be a valuable exercise. However, given limitations of space, it is not helpful here, as it would divert us from our focus on applied ethics in nonprofit management. (Please see the Handbook's Internet resource website for useful resources and references on this topic.)

On the other hand, the definitions of ethics just examined also remind us that much of what we typically think about as ethical principles or judgments, especially when our concern is application and practice, do not derive from philosophical absolutes, but rather from reference points of social or community standards. To play with the words, one's ethics (as we typically use the term) may be as much a matter of “ethos”—what is expected or socially acceptable, what is customary—as a matter of indisputable moral vision. Of course, these two aspects of ethics are often intertwined. What a particular community views as ethically acceptable will often be determined by what its members believe some source of absolute moral authority (God, perhaps) requires.

Understanding these things about the origins and meaning of ethics helps us see that when we raise and examine questions about ethics—ethics generally, professional ethics, the ethics of nonprofit managers, or the ethics of the behavior of nonprofit organizations—there are two reference points we need always to bear in mind. One is a point of moral absolutes, and the other is community standards and expectations. For our purposes, when we think about the ethics of nonprofit organizations and their management, we must ask two kinds of questions: (1) What are we morally obligated to do and not do? (2) What does society require or expect of us? Moreover, ethical questions should be considered in that order, giving preference to moral obligations over customary ones.

Professional Ethics

One volume claims that ethics are “a set of rules that apply to human beings over the totality of their interrelationships with one another, and that take precedence over all other rules” (Gellerman, Frankel, and Ladenson, 1990, p. 41). If we accept this, then we need to ask, “How are such rules more specifically defined by and applied to particular spheres of professional activity, in contrast to the broader reach of our lives?” (For a wonderfully insightful exploration of the interplay between professional and personal ethics, see Martin, 2000.)

Some scholars claim that one of the elements that define a “profession” (as opposed to other kinds of work) is that every specific profession involves a commitment to publicly articulated goals and social and societal purposes for that profession's practice and to standards for and approaches to that practice that should be shared by all its practitioners. It is because they meet societal needs with special expertise, it is argued, that professions are given certain privileges—like self-regulation, control over standards for training and entry into practice, and (thus) control over their own markets and competition. These prerogatives are provided in exchange for the profession's commitment (implicit, at least) to meet public needs and serve the public good (see Bellah and Madsen, 2007; Flores, 1988; Larson, 1977; Hatch, 1988; and Martin, 2000). Interestingly, here we have another implicit social contract. A classic paradigm for this is the medical profession and physicians with their Hippocratic Oath and the other specific expectations about their obligations to society in the provision of medical care.

Following this line of reasoning, one commentator on “professional values” argues that in our culture “professionals are viewed as morally committed to pursuing the dominant value that defines the goals of their professional practice… They are expected to pursue such goals on a social as well as individual level… And they are expected to do so even when self-interest may have to be sacrificed in that pursuit” (Alan Goldman, 1986, cited in Gellerman, Frankel, Ladenson, 1990, p. 5).

It may not be immediately clear what “the dominant value” that defines the goals of the practice of management generally is or should be. Still, it can be argued that the dominant value that should define the practice of management of public benefit nonprofits is “a commitment to serve the greater good.” Such organizations are (or were) often created specifically to advance the common good, usually by providing services, and (as I will show) often in situations where the establishment of trust in the integrity and commitment to service of the agency is a paramount concern.

In sum, the claim here is that the ethical operation of nonprofit agencies and ethical nonprofit management require the articulation and internalization of standards for behavior and ways of being for those agencies and their managers that adequately reflect the sector's origins in the moral spheres of our culture and that meet the current, morally justifiable expectations of our society. Before moving on to look closely at those origins and expectations and the standards for behavior they necessitate, however, I want to comment briefly on how this perspective contrasts with some current views of the purposes of professional ethics, because those views are especially dangerous if they are adopted in the nonprofit world.

Misunderstanding Professional Ethics

One commonly articulated rationale for ethical behavior in professional practice is that it is simply “good for business.” This may be the case. It may well be possible to demonstrate that it is (generally) true that “honesty [and other ethical behavior] is the best policy.” Looking at some of the business practices that led to the economic crisis of 2008/2009, it is certainly clear that unethical behavior can have disastrous consequences for the common good. What is also clear, however, is that this utilitarian perspective does not provide an adequate underpinning for behaving ethically. Still, this is often the only, or at least the most prominent rationale or motivation given, for the development and practice of “sound business ethics.”

Consider, for example, a long-running advertisement for a prestigious business school's seminars on ethics that said the reasons for learning and, presumably, practicing “good business ethics” is to “build stable, profitable relationships, strengthen employee loyalty…and avoid litigation.” One would hope that all these results would ensue for the ethical organization. Still, we need to ask, “How well does a focus on these goals hold up as the rationale or motivation for behaving ethically?” What if lying about something that has recently occurred is more likely to help a firm avoid litigation than telling the truth? Is lying acceptable then? What if misusing funds to provide extra perquisites for employees is more effective in gaining their loyalty than using funds properly? What if there are cases in which “more stable, profitable relationships” can be better secured through bribery or deceit than through honest competition? The point here is that when commitments to or judgments about ethical behavior are based primarily on utilitarian cost/benefit calculations, they may be weak indeed.

It is easy to argue for the practical benefits of ethical behavior as the primary justification for adhering to ethical standards. But, as the examples just cited highlight, such a justification is easily undermined. Ironically, it is most easily undermined in just those situations when sound ethical choices may be most difficult to discern and most important to make.

One potential advantage of nonprofit, public-benefit organizations in this sphere is that they can—and should—root their judgments about commitments to ethical behavior in the moral traditions from which the nonprofit sector sprang. As one scholar reminds us: “Institutions that enunciate, transmit, and defend ethical values fall within the boundaries of nonprofit sector. Educational, religious, and advocacy organizations constitute a majority of [the] membership and have shaped the sector itself” (Mason, 1992a). Put more plainly, as a monograph on “Ethics and the Nation's Voluntary and Philanthropic Community” noted, “Those who presume to serve the public good assume a public trust” (Independent Sector, 1991, p. 1).

Understanding that ethical judgments must be based on firmer moral and social considerations lets us look more closely at the particular ethical values—and the character of the public trust—that can and should shape the ethical perspectives of nonprofit managers, whatever the practical advantages (or disadvantages) of ethical behavior may be.

Core Values for the Voluntary Sector

Many explanations have been offered for the origins and use of the nonprofit organizational form. Scholars differ as to which explanations are most valid. (For useful discussions of this question, see Columbo and Hall, 1995; Douglas, 1987; Hansmann, 1987; Hopkins, 1998; O'Neill, 2003; Salamon, 1999; Van Til, 1988.) One explanation that holds substantial explanatory power revolves around two issues or dynamics that economists and organizational theorists call “market failure” and “contract failure” (or an “agency problem”).

Too simply put, the market failure theory suggests that private nonprofits tend to arise to provide services where agencies of governments cannot or will not provide the service for some reason, and the nature of the service needed is such that for-profit businesses cannot make a sufficient return on their investment to be induced to offer it. Contract failure and agency theory suggest nonprofits are needed to provide services when those who want a service offered are not in a position to provide it themselves and it is also the case that those paying for the service are unable to judge the quality of that service because of the nature, location, or setting of the service to be provided. In such circumstances, it is argued, people create or use private nonprofit (rather than for-profit) organizations because they feel nonprofits will have less incentive to cheat either consumers or supporters. That is, they think this type of organization—acting as their agent—is less likely to skimp on the amounts or quality of services offered because its board and managers have less opportunity to enrich themselves by that behavior in this organizational structure.

Note it is assumed that in these cases the people paying for the services are often not the consumers of the services. Often they are donors. This being so, they prefer to work through an organization that, as an agent, can be expected to provide that service in the manner that they (the donors) would provide it themselves if they could. Consequently, they seek an agent they believe to be highly committed for moral reasons to providing that service for others. Crassly put, they want an agent who is involved “for the cause,” not “for the money.”

A quick analysis of both these situations tells us what is likely to be one of the most important and desirable ethical qualities of nonprofit organizations in the public's eyes. In these circumstances trust is a key consideration. That being so, we can project what operational and ethical values will need to be evident in organizations to earn and retain the public's trust. Among the most significant, as already noted, are integrity, openness, accountability, and service.

Also on that earlier list, though, is “charity” in the original sense of the term—from the Latin caritas. Obviously, there are some nonprofit organizations that would not be expected to be “charitable” as that word is often used—that is, “generous” or “eleemosynary.” Most people do not expect these to be characteristics of trade associations, for example. Still, the majority of the organizations that populate the nonprofit or voluntary sector are service providers dependent in some way on the philanthropic traditions and practices of our society. Indeed, the majority are religious or have religious roots (Jeavons, 2003). And all these are expected in that context to be basically “caring” organizations, willing to put the public good and the welfare of others above their own private interests.

It is important to understand how this last expectation presumes a moral quality ascribed to such organizations deriving from their historical and sociological functions in our society. The fact is that nonprofit philanthropic and service organizations occupy a distinctive place in American society because of their origins—largely in religious or other idealistic voluntary associations—and because they have traditionally been vehicles for preserving, transmitting, or promoting social values. Because of their historical development and their contemporary roles, these institutions carry much of the burden of mediating civic, moral, and spiritual values in the public realm and from one generation to the next (Curti, 1958; Parsons, 1960). Thus, they are objects of special public expectations that they will behave in morally honorable ways.

So there are ethical qualities that are essential in the character and behavior of public benefit nonprofits. These organizations are expected to—and should—demonstrate integrity, openness, accountability, service, and a caring demeanor. What is required of managers in this context is that they give continuing attention to assure that these ethical values are reflected in every aspect of these organizations. This requires that the managers model ethical qualities in their own behavior as well as articulate and foster them as ideals for others. Considering carefully the meaning of these values in organizational behavior should allow us to see better how managers can undertake these responsibilities and work toward creating a culture of integrity.

Ethical Management in Ethical Organizations

It will be useful now to consider the key ethical attributes of nonprofit managers and their organizations more fully. In this process we should undertake an analysis at two levels—the individual and the organizational—asking, for example: “What does it mean for a manager to do his or her work with integrity and for an organization to operate with integrity?”

I cannot, in this one section, make an exhaustive analysis nor offer numerous illustrations of how these ethical qualities would be evident in each of the many aspects of the operations of nonprofit organizations. Authors of other chapters in this volume who address other aspects of nonprofit management discuss questions, and may offer considerations, of how ethical issues may arise in different facets of the work of nonprofit organizations. Other literature on nonprofits offers other useful insights. We know, for instance, that nonprofits are not immune to financial fraud in various forms; but researchers have done some good work in determining the nature and scope of such fraud, and in suggesting strategies to reduce fraud (see Archambeault, Webber, and Greenlee, 2015; Greenlee, Fischer, Gordon, and Keating, 2007).

That noted, my intention is to offer a broader context within which to think further in ethical terms about the material presented in the other chapters of this Handbook (and in real life). Ideally, the relationship between this chapter, focused specifically on ethics, and those others, addressing other facets of nonprofit leadership, management, and accountability should set the ground for a dialogue about a wide range of ethical issues nonprofit managers face.

Integrity

It may be most useful to describe integrity as “honesty writ large.” That is, integrity has to do with conformity between appearance and reality, between intention and action, between promise and performance, in every aspect of a person's or organization's existence. If trust is essential to support the operation of charitable nonprofit organizations, and if being trustworthy is one of the most basic qualities the public looks for in them, then integrity in this sense becomes a fundamental ethical characteristic they must possess.

At the organizational level, integrity is most obviously demonstrated to be present or absent by comparing an organization's own literature—fundraising materials, reports, mission statements, and such—with its actual program priorities and performance. For instance, an organization that claims to exist to serve the poor, but regularly spends extensive resources on enlarging itself, enhancing its own image before the public, or attending to the comfort of its staff must be suspect. So, too, one wonders about educational institutions that say they are devoted to providing the best education possible to students, but spend more of their resources on things intended to improve their own status—image-enhancing athletics, high-profile research projects, or “star” faculty members—than on facilities and activities for teaching and learning.

This is not to say that staff in such organizations should not have reasonable salaries and benefits; that being in the public eye for fundraising purposes may not be valuable to support the work to be done; or that an organization might not be able to improve its service delivery by growing or its teaching by employing active researchers. However, careful examinations of budgets, allocations of staff time, and the application of other resources sometimes reveal that nonprofit organizations that were created to serve the public good are giving more attention to caring for and improving themselves than others. Moreover, the public is highly sensitive to these issues. If we need proof of this, we would do well to recall the huge controversies involving United Way of America in the early 1990s or recall the many uproars that have occurred over recent years regarding excessive compensation levels for CEOs of large universities, hospitals, and foundations—all 501(c)(3)s.

It is instructive, in fact, to briefly review some details the story of the United Way of America, because its scandal caused long-term and profound damage to almost all local United Ways and injured the credibility of charities more generally. In the spring of 1992 it was revealed that the head of the United Way of America was receiving a salary of almost $500,000, traveling about the world first-class, and setting up subsidiary organizations run by his friends and relatives. When millions of small donors to local United Ways found out that a portion of their gifts was going to support a lavish lifestyle for an executive of a charitable organization, many were outraged. Despite the massive efforts of local United Ways to explain that only a tiny portion of income went to the national organization, which was a legally separate entity, the giving to local United Ways (and to many community service agencies) fell significantly the next year, and in many cases took years to recover. Some would argue the declining influence of United Ways in many places, while having multiple causes, began its downward trend here.

This case illustrates with exceptional clarity how disparities between the ethical promise (implicit or explicit) and the real performance of one charitable organization may precipitate dramatic difficulties for the entire nonprofit sector. As one of the first economists to study the nonprofit sector observed: “Whenever any nonprofit is found to have abused its trusted position, the reputation of trustworthy nonprofits also suffers” (Weisbrod, 1988, p. 13). This observation of thirty years ago seems only to grow truer as media scrutiny of nonprofits intensifies.

Indeed, we have seen this anew in the last decade. From 2002 to 2008 the charitable sector and the public were treated to a long-running spectacle staged by the Senate Finance Committee chaired by Senator Charles Grassley. Under Grassley's leadership, the Committee launched one investigation after another—and broadcast one charge after another—about the alleged misuse and waste of funds by nonprofits. Targets of these charges included organizations as venerable as the American Red Cross. Seizing on a relatively small number of cases, some of which were admittedly egregious, the senator and Finance Committee staff were able to generate an extraordinary amount of bad publicity for charitable institutions as a whole. These investigations raised significant questions about nonprofits' operations that in many cases needed attention. But in a broader context, all the noise made by the Senate Finance Committee mostly served to make all nonprofits ethically suspect because of the bad behavior of a very small minority.

One example of the kind of behavior that raises such issues about integrity can be drawn from a smaller study of relief and development agencies (Jeavons, 1994). One of the agencies studied engaged in practices that were not illegal, but would certainly have caused questions in the minds of donors (and others), if they had become aware of them. At least two practices were ethically questionable.

First, this agency sometimes used what are called “representational” images in their fundraising materials. That is, brochures told stories about a family or person in need, often desperate need, and included pictures of their plight that were quite striking. However, sometimes these stories were actually composites of stories of a number of people in the impoverished area, put together for maximum effect, or the pictures were not of the persons or family mentioned at all, but rather were pictures the agency calculated most likely to “pull on donors' heart strings.” The needs were real, and the stories and pictures conveyed the needs quite effectively; but this approach lacked integrity because the stories and pictures were not factually true.

Some persons would argue that this is morally wrong because, simply enough, it is dishonest, regardless of the fact that it raises money for a good purpose. Others argued the ends justified the means, because the stories were essentially true. Yet, even persons within this organization admitted that if donors had become aware of this practice they might have been upset. The donors' expectations of high moral standards—in this case, higher standards of truthfulness—for such an organization would have been violated.

Second, this same agency often made general appeals with brochures featuring projects for which it could most easily raise money, with the brochures giving a strong impression (although not a specific promise) that the money raised would go to those particular projects. But in fact, those projects were fully funded from other sources, and the donations were used for other purposes. Again, this was done in a way that ensured there was no illegality, but neither was there clear integrity.

One is left to wonder, in such an organizational climate: What other ethical standards were allowed to slide? and How well were the funds that were raised being used? If one is inclined to think that these kinds of decisions are purely matters of strategic choice, one needs to see the contrast between this organization and other relief and development agencies.

Many other agencies studied had specific rules against using “representational images” and policies that require donors to be consulted before their gifts are used for projects other than the ones for which they were solicited. The managers in those agencies described their standards and policies as points of pride, as conscious choices made to uphold the ethical character of their organizations and their work. Those managers pointed out that it was vital to maintain the highest moral standards in all facets of their operations, lest the willingness to compromise at one point become the beginning of a lowering of standards more generally—the first step on the proverbial “slippery slope.”

This small example from long ago presaged similar more recent problems for a much more visible charity. Charges like these, but on a far larger scale, were raised about the Red Cross's fundraising in the aftermath on the terrorist attacks on the United States on September 11, 2001. While there may have been good, even compelling reasons that some of the millions of dollars of funds not needed in New York City should have been set aside for emergencies elsewhere, doing so without prior permission from—or at least explanations to—donors was not acceptable to the public. The fallout caused that organization great embarrassment.

These examples ask us to examine again the meaning of integrity at the individual level for managers and management. “Integrity” may have different meanings for different individuals, but in the context of professional ethics it must mean doing one's job as honestly and as fully in adherence to one's professed principles as possible. Careful observers of organizational behavior have noted that managers and leaders in organizations, or particular parts of organizations, can have a significant effect in setting behavioral standards, either as a matter of personal influence or because of their control of reward systems, or for both reasons.

The manager who wants her or his employees to deal honestly with others had better deal honestly with them, and, further, had better reward honesty and discourage any dishonesty. If the manager is willing to cut corners, tell “little” lies, or act in self-serving ways, it becomes more likely employees will see this as acceptable, at least in the work setting. A manager who wants the organization she or he oversees to be known for its integrity and to be trustworthy must begin by being completely trustworthy in her or his dealings with all those who are part of the organization and make it clear that similar behavior is expected of all those people.

Put more simply, integrity must be one of the hallmarks of nonprofit management. It is an ethical obligation, both as a matter of morality, because it is right, and as a matter of societal necessity, because the public expects nonprofit organizations to show integrity. Recent history shows that failing to uphold the highest standards for personal and organizational integrity can have enormous consequences for nonprofit managers and their agencies or institutions.

Openness

It would not be accurate to call the quality of openness a “moral” value, at least within the context of the most common value systems of American culture. So the claim here about openness as an ethical value is not based so much on moral absolutes—as may be the case for integrity—as on social values and expectations. In this context, we might think of openness as a “derivative virtue.” We might also note, however, that in businesses as well as nonprofits, efforts to make organizations more transparent to stakeholders are gaining ground as leaders recognize that being trustworthy is often critical to success in both spheres.

In any case, in the history of philanthropy in America, whenever an organization or individual tries to hide philanthropic endeavors from public view, the result—if they are discovered—has almost always been to raise profound skepticism about the motivation for and character of those endeavors. The public's attitude here has been: “If they are really doing good, why would they be reluctant (or embarrassed) to have us see what they are doing?”

This is especially true for organizations. It is possible to put forth a reasonable argument, even one based on religious grounds (see Matthew 6:2-4 of the Bible or the Mishneh Torah), for individuals “doing good works” anonymously or in secret. However, organizations operating in the public sphere, especially in areas of service or advocacy that can have an impact on public policy or community life, find it hard to argue convincingly that there is any value to secrecy about how they make their choices and do their work. Indeed, it may be crucial for these organizations to conduct their business in a way that is open to public scrutiny.

One compelling reason for this is that openness undergirds other ethical behavior. The organization that operates openly cannot afford to cut other ethical corners. Being “transparent”—something of a buzzword in governance discussions now—makes integrity mandatory, unless one wants to suffer serious criticism. For example, in the case of the relief and development agencies (earlier), it seems clear that the one that engaged in questionable tactics would not have been able to operate transparently and retain its donor base.

Another reason for openness is historical. There have long been critical questions raised about the roles philanthropic and service organizations play in shaping people's and communities' lives. (See, for instance, Griffin, 1957, or Nielsen, 1985.) One cause for this concern is that some organizations appear to have had ulterior motives, for example, intentions of “social control” or protection of the interests of the privileged, embedded in their work. It is clear that some of the impetus for legislation regulating the operation of foundations (in 1969) came from supposedly philanthropic entities being formed and using their tax-exempt status as a way to protect family fortunes from taxation while still controlling family businesses (Bremner, 1988). Here again, recent scandals in the conduct of some nonprofit organizations reinforce the case to be made for their being subject to public scrutiny.

In addition, those who are concerned about the continuing vitality of nonprofit organizations and who recognize that maintaining a climate of trust is essential to that vitality, argue that operating openly is one of the best ways to build trust. Organizations that wish to engage people's support and good faith can find no better way to do so than to do good works well, and then welcome inquiries and inspection by anyone interested in their methods.

A similar logic applies to those who lead these organizations, in terms of their leadership and management. In the effort to build the support and commitment of staff, volunteers, and donors, a manager's willingness to talk openly and honestly about rationales for programs, the reasons for and ways in which decisions are made, and approaches to problem solving can be invaluable. Additionally, many nonprofits (as voluntary associations) come out of a populist democratic tradition in American culture. So it can be argued that they really ought to be operated in such a democratic manner to represent and further that tradition—that this may be another significant part of their role and social obligation in this society, (For very helpful discussions of these issues, see Lohmann, 1992; O'Neill, 2003; or Van Til, 1988.)

Finally, this means that openness should be seen as a core ethical value for nonprofit organizations and their managers in the business of decision making, in matters of raising and allocating resources, and generally in the manner of their operation. Moreover, openness is a necessary prerequisite to accountability, which is the next core value we examine.

Accountability

Not only is it important for nonprofit public-benefit organizations to be open about the things they do, and how and why they do them, but it is important that they be ready to explain and generally be accountable for their choices. This is an extension of the implicit social contract of privilege and trust these organizations enjoy in our society. By accepting the privilege of tax-exemption and the right to solicit tax-deductible contributions, public-benefit nonprofits also accept an obligation to be ready to answer for their behavior and performance—not only to their membership, but also to the communities they serve and to the broader public as well, for they are using financial resources that would otherwise have gone into the public treasury.

Looked at in contractual terms, we see these organizations are granted the right to solicit tax-deductible contributions, or at least are granted tax-exempt status, on the assumption that they are serving the public good and will put their resources to work as effectively as possible on behalf of the causes or people they claim to serve. Indeed, the character and language of the legal discourse about these issues, employing terms like “public benefit” or “mutual benefit” organizations, confirms these assumptions (see Simon, 1987). From this implicit social contract derives a clear ethical obligation to perform according to promise, to be subject to evaluation, and be answerable for a failure to perform.

In fact, issues of nonprofits' accountability are very complicated, much more so than public discussions of these issues typically suggest. To really understand these issues for different nonprofits, one must ask multiple questions. “To whom is a nonprofit accountable?” is only the first; and the answer is likely to be “to multiple constituencies.” In addition, one should also ask, “For what aspects of their operations should they be accountable, by whom will they be held accountable, and in what manner?” Some would argue that, while all nonprofits should have some public accountability, these specifics of “to whom and how” are matters that should be thought about strategically and that need to be determined according to the stakeholders involved (Kearns, 1996).

In other words, all nonprofit organizations have an ethical responsibility to be accountable to their supporters, their members, and their donors; and the public-benefit organizations have a larger responsibility to be accountable to the broader public for the ways in which they undertake to fulfill their philanthropic purposes. Evidence of increasing public expectations in this regard can be found in the growth in recent years of “watchdog” groups like the Better Business Bureau's Wise Giving Alliance and Guidestar. Nonprofits themselves have manifested their willingness to be more accountable by forming mutual accountability networks in particular fields, like the Evangelical Council for Financial Accountability. In 2007 Independent Sector issued a report on Principles of Good Governance and Ethical Practice, which they encouraged all their members (and others) to see as an outline of the ideals and behaviors all nonprofits should pursue and for which they should be accountable. In addition, more states have enacted laws to mandate financial disclosure and regulate fundraising practices of nonprofits.

How does this obligation of accountability extend to nonprofit managers? In much the same way as the obligations of integrity and openness do. First, if this is a quality managers and leaders want to see others demonstrate in their organizations, then it is one the managers had better model in their own behavior. Then it becomes an expectation that they can articulate credibly to other staff, trustees, and volunteers.

Second, managers can establish this commitment most firmly by holding themselves accountable to their organization's board and working to build a board that will hold them properly accountable for their performance. Executives who view themselves as free agents and try to isolate their boards from full information about and active involvement in the work of the organization and boards that hire an executive, then fall into a passive, “rubber stamp” role in evaluation and governance have been key contributing factors to poor performance and ethical problems in a number of nonprofits. The most useful literature on the board and executive relationships has pointed out that a full and vital partnership between executives and managers is essential (Drucker, 1990; Herman and Heimovics, 1991; Middleton, 1987).

Ironically, the situation may require an executive to encourage (or even educate) a board to play a more active role in evaluating the executive's—and the organization's—performance. In this way, if the board is representative of, or at least in touch with, the needs and feelings of the larger community, then the executive is soliciting oversight and potentially helpful feedback from those the organization should serve. The executive is also modeling a quality she or he should hope to encourage in all staff—general accountability for performance and receptivity to constructive criticism.

Service

The grounds for the ethical obligation here are virtually identical with those for accountability. Nonprofit organizations, especially public-benefit organizations, exist and are granted specific privileges (as noted earlier) with the explicit understanding that they are committed in some way to serve the public good. Those that are classified as “mutual benefit” organizations, which include trade associations, fraternal organizations, and such, are not beholden in the same way to serve “the public” in the broadest sense, but they are still certainly expected to serve their membership. The point being that service, service to people or service to a cause, is the reason for being of all these organizations. (Note: Sometimes that “service” includes advocacy, speaking out about community needs and assets to others, as well as trying to meet those needs themselves.)

The social contract extended to these organizations assumes that they will devote themselves primarily to service. In accepting the privileges they have been granted, charitable organizations incur the ethical obligation to be service-oriented. Moreover, in accepting the support (membership dues, donations, volunteers' time) of people who sustain them, these organizations reinforce their ethical obligations.

The ethical obligation to service should be manifest in the conduct of managers in a number of ways, in those managers making practical and strategic choices that give precedence to fulfilling the mission of their organization over possibilities for advancing their own status and careers. One hopes that these two goals can go hand-in-hand. But there are situations in which executives can make a choice that yields a short-term gain for the organization and makes the executive look good—improving his or her chances for a better next job—even though that choice harms the organization in the long run.

Many people now make a career of work in the nonprofit sector, especially in the field of fundraising. We could not have a meaningful discussion, as we do in this book, of nonprofit management as a “profession” if people did not commit themselves to and build careers in this area. This creates the basis for our discussion of professional ethics. However, it also creates a context in which managers can easily work with more concern for their own advancement than for the people or cause their organization is supposed to serve—and that can be problematic.

This is not to say that managers are required to sacrifice themselves—their health, their basic financial security, or their personal well-being—for the benefit of their organization. Nonprofit organizations, especially cause-oriented ones, are notorious for exploiting their staff in the name of noble ideals (see Greene, 1991). But the undergirding values of the nonprofit sector are altruistic, or at least service-centered; while it is fine to be concerned for one's own career, it is never acceptable for managers to advance themselves at the expense of the people and causes they have promised to serve.

In addition, observation suggests that the willingness of managers and leaders to see themselves as “servants” of others may be crucial to focusing others in an organization on that organization's commitment to service. Here the notion of “servant leadership” (Greenleaf, 1977) takes on both profound significance and immediate salience.

Charity

The last, but certainly not least important ethical obligation of nonprofit, public-benefit organizations is to charity, in the original sense of the term. The word “charity” comes from the Latin caritas. This means more than giving to those in need. It originally was translated as “love”—the love of neighbor and committed concern for the welfare of others illustrated in the parable of the Good Samaritan. It meant caring, putting the welfare of others on a par with one's own. It meant being generous with one's own resources, not out of a sense of pity, but out of a sense of a relationship with and concern for others.

It can surely be argued that for nonprofit organizations an ethical obligation to “charity” in this sense derives from reciprocity. Many of these organizations depend on the generosity of their supporters for their existence and ought to display such generosity themselves. Furthermore, at least in the case of many public-benefit nonprofits, the motivation of most of their supporters rests in no small way on a belief that these organizations are committed to caring for others. As noted earlier, the basis of many of these organizations' support is the expectation that they will be vehicles for building a better world or a more caring and just society.

This expectation is manifest in an interesting range of phenomena. For instance, the preference of many clients and supporters of social service agencies for private nonprofit groups appears to be based on an assumption that they will provide services in a more personal, more caring way than a government agency would. In industries where potential employees—for example, teachers, nurses, or social workers—might work for either government or private organizations, the preference of some for private nonprofits is often explained in terms of their expectation (or experience) of these organizations as more caring work environments. This expectation is certainly confirmed by the public indignation that is often evident when an organization that is itself the beneficiary of charity turns around and acts in uncaring ways.

The way in which this expectation applies to the ethics of management seems obvious. An uncaring or mean-spirited manager can undermine the caring quality of an organization as fast as any negative influence imaginable. If one wants the participants in an organization to treat its clients (and one another) with love and respect, it is hardly likely that treating the participants coldly or unfairly will help that occur. Managers and leaders help set the tone of an organization's life—whether they intend to or not—and that tone is almost certainly going to be reflected in the way that organization and all of its staff interact at every level with various constituencies.

Finally, organizations of the nonprofit sector have been seen as having a special role in transmitting civic, social, and ethical values in our society from one generation to the next. If that is true, then we have yet another reason to be concerned that these organizations reflect the highest ideals for a caring society. It is clear that some managers do see their responsibilities in this light. Discussing the kind of “witness” his organization wants to make to all those who deal with it, the president of a Christian relief and development agency said, “We have a major challenge in living up to our commitment [to care for people]; not just for children eight thousand miles away, but also for the people at our elbow” (Jeavons, 1994, p. 265).

From Ideals to Operative Values

If we can agree, then, that these five concepts or ideals—integrity, openness, accountability, service, and charity—describe key ethical qualities and obligations of nonprofit organizations and their managers, we may ask how these ideals are translated into behavior.

At the individual level, this may be easy. If one assumes that people can choose what to value and choose to embody those values in their actions, then ethical behavior is primarily a matter of choice and will. If this is the case, then the managers of nonprofit organizations simply need to choose to act with integrity, to be open and accountable in their work, to make commitment to service and charity a cornerstone for their decision making and interactions with others. They need to do these things because they are the right things to do. They need to do these things because that is what the public that supports (and can withdraw its support) wants and because the failure to uphold these obligations can have very significant negative consequences. However, this still leaves the question of how ethical ideals become the operational values of an organization as a whole.

At this point, we need to turn to the work that has been done on “organizational culture.” In particular, I want to draw on the careful research and analysis reported by Edgar Schein in Organizational Culture and Leadership (1985).

Some early thinking about organizational culture tended to focus, sometimes shallowly, on “rites and rituals” of organizational life (see Deal and Kennedy, 1982; Peters and Waterman, 1982). Schein takes a different tack, arguing that an excessive focus on what he calls “the manifestations of culture” will obscure the fact that very similar rituals, conventions, or regular practices in various companies are undertaken for very different reasons. Thus, to understand organizational culture one must focus on the essential values these visible practices are meant to express. These values are “the substance of culture,” in Schein's view.

Indeed, Schein argues that some values represent the basic assumptions of a group of people, like the membership of an organization, about the way the world is and how they, as a group, can function most successfully in it. These “core values” will shape the organization's behavior, not only by dictating what are right or acceptable responses to different kinds of situations, but even more fundamentally by shaping the way those situations are perceived, by influencing what people see as important or unimportant.

Schein's views are reinforced by other scholars who contend that the most effective (and “unobtrusive”) controls on the behavior of individuals in organizations may be achieved by either selecting people who will come to the organization with certain (shared) basic understandings about organizational or professional goals and practices or by orienting them toward those understandings, goals, and practices once they arrive (Perrow, 1986).

Schein argues that leaders or managers can shape the direction, character, and operations of an organization most fundamentally and effectively by shaping the core values of the participants within it or by selecting new participants who share those values. Indeed, he claims “there is a possibility—underemphasized in leadership research—that the only things of real importance that leaders do is to create and manage culture” (1985, p. 2). The implications of this for people who are concerned about creating and maintaining organizations that behave ethically are obvious.

Managers' capacities to create a culture of integrity take root in the connection between the ethical behavior of those managers and the maintenance of the highest ethical standards of behavior of their nonprofit organizations. This is where ethical ideals come to be accepted as “givens” and where the expectation that these ideals will be honored permeates every employee's thinking. This can only occur when these ethical values are both articulated and modeled by those in positions of responsibility and leadership. In this way, leaders and managers can shape the core values of an organization as a whole and the individuals within it around ethical ideals.

One place where such a dynamic can most readily be observed is in some religious service organizations that maintain a strong commitment to honor very clear and sometimes constricting ethical ideals in their operations, while still competing successfully for donor support in a highly competitive market. (For a detailed description of such groups, see Jeavons, 1994.)

Creating and Maintaining a Culture of Integrity

Finally, we must see that clear, strong commitments to ethical ideals and behavior on the part of managers is a prerequisite to creating organizational cultures of integrity in nonprofits that will enable the organizations themselves to behave ethically. The importance of the example of leadership in this process cannot be overemphasized. As one commentator has observed, “CEOs…are ultimately accountable for [their] organization's ethical posture… No organization can rise above the ethical level of its manager” (Mason, 1992b, p. 30).

Clearly, a manager who tells others about the importance of behaving ethically while behaving otherwise him- or herself is likely to have little positive influence on the organization. In fact, such a manager is likely to have a destructive influence, generating cynicism about and indifference to ethical concerns throughout the organization. Ultimately a manager whose own behavior models the best values but who does not talk about their significance for the organization's life may still have a less positive influence than is needed.

Even when the management of an organization is consistent in both preaching and practicing desired values, more will probably be needed to create and sustain a culture of integrity. Organizational structures and reward systems must also support and encourage ethical behavior among all employees and volunteers. People's best intentions can be undermined or confused by organizational structures and processes that lead them to make choices that have negative ethical consequences.

One wonders, for instance, how often in nonprofit service agencies (of various types) reports of problems with programs or relationships to their clients are stifled or mistakes that could reveal ways to improve their service are never mentioned, because their staffs (and volunteers) are rewarded only for successes. As is true in many organizations that are hierarchically ordered, some nonprofits have a tendency to punish the bearers of bad news—and even reward the bearers of false news when it is good. Encouraging employees to be less than honest about policies and programs that are failing leaves an organization less able to perform its mission. The leadership and management of a nonprofit organization must put in place systems that reward participants for honesty in every form, even forms that lead to the revelation of difficulties and deficiencies.

Similarly, one has to wonder about organizations that continually emphasize short-term goals and focus solely on raw numbers (dollars raised) in evaluating development efforts, rather than asking questions about the quality of relationships with donors and other potentially positive effects of fundraising, such as its educational impact on constituencies they are trying to reach. Where narrower emphases and reward systems dominate, what is the impact on fundraisers' approaches to donors? Are they as honest and caring as they should be? What is the effect on individual and organizational reporting? Is the information about fundraising costs and results as complete and fully revealing as it should be? (For a fuller examination of these issues, see Jeavons and Basinger, 2000.)

Questions about the relationship between reward systems and structures and ethical behavior become even more complex when the behaviors at issue are not so simple or when more subtle matters are involved. For instance, what about a situation in which questions are being asked about whether a “progressive nonprofit organization” is exploiting its employees or whether it is being true to the values it claims to represent in the ways it treats them.

For example, I once worked with an organization that claimed that one of the principles to which it was committed was that it “values people…[and] does not permit the accomplishment of goals at the expense of people.” However, the organization had a structure for and approach to fundraising that emphasized continually increasing the number of dollars raised and reducing administrative costs without consideration for the effects of such goals and policies on the relationships among staff or between donors and staff. Furthermore, rewards in the organization—both raises and promotions—were distributed in a highly competitive system according to an assessment of performance based almost solely on quantitative measures. The outcome was that managers tended to push staff to achieve “more impressive” results (that is, raise more money) without regard to the impact that pressure might have on either the donors they worked with or the staff themselves. These seemed a direct contradiction to articulated values, and led to high staff turnover.

One could look as well at the famous United Way of America scandal, mentioned earlier. How did an organization that was formed specifically to serve and support local United Ways and to promote a philosophy of service, volunteering, and giving come to be an example of self-serving, empire-building management practices? In part, at least, this seems to have been a result of organizational structures that insulated the top management from the constituencies they were supposed to be serving, making them less aware of and accountable to the people the organization most needed to hear, local United Ways' donors and clients.

In addition, the staff leadership seemed to spend most of its time with, and came to pattern itself after, business leaders—in the effort to gain support and resources from them. However, in the process, the United Way of America's executive leadership came to think like for-profit corporate executives, and appear to have come to believe that organizational growth was an end worth pursuing in itself. The fact that particular strategies for attaining this end were undermining United Way's stated mission was overlooked. The result was a misuse of donated funds, a clear abuse of public trust, and some erosion of the very spirit of giving and volunteering the organization was created to promote.

The point is that organizational structures and processes and systems of rewards and disincentives must be put in place and consciously maintained to reinforce whatever rhetoric about ethical values an organization puts forth. Moreover, all this must be supported by the managers and leaders of the organization, demonstrating personal commitment to those ethical values by their own behavior. The creation and maintenance of an organizational culture of integrity—one where integrity, openness, accountability, service, and charity consistently predominate; one that will lead to consistently ethical behavior on the part of nonprofit organizations—cannot be achieved absent these elements in an organization's life.

Summary

In this chapter I have shown that ethical questions and issues must be primary concerns of all nonprofit managers and that these issues and questions are salient in all aspects of the operation of nonprofit organizations. It has been argued that the ethical values most important for nonprofit managers and organizations to honor center on the qualities of integrity, openness, accountability, service, and charity. We have seen how these particular ethical ideals are prescribed for nonprofit organizations by virtue of the distinctive history of the voluntary and nonprofit sector and the roles that these organizations play in American society. It is crucial that nonprofit organizations embody these ethical ideals in practice, both because ethical conduct and character is what moral duty requires and because the public expects this of nonprofit organizations that say they are serving the public good. Only in this way can nonprofits fulfill the implicit social contract that supports their existence in our society.

It is important to note the educational implications of this. The last three decades have seen the emergence of a number of programs around the country to educate people specifically for the work of managing nonprofit organizations. How much attention do these programs give to helping those people understand the special history and unique roles and expectations that should shape the way these organizations function and are managed? (Some would say not enough.) Those being educated to take on the responsibilities of management and leadership in nonprofit organizations must be taught sound approaches to, as well as the profound importance of, reflection on the ethical issues embedded in the various facets of the life of these organizations.

Managing an organization so that core ethical values are embodied in the organization's life requires more than rhetoric. It requires managers to demonstrate these values in their own conduct in their professional lives and service. It also requires that they create and maintain organizational structures and dynamics by which ethical conduct is rewarded and unethical conduct, in any manifestation, is discouraged. This has to involve an examination of all organizational systems and structures, from fundraising strategies to human resources policies to accounting systems, to ensure that those structures and systems do not generate pressures on personnel to ignore or violate the standards and assumptions for ethical behavior espoused in broader contexts. Other chapters in this Handbook offer more illustrations of how ethical questions might arise in specific facets of the work of nonprofit organizations and their managers.

The significance of these matters cannot be overemphasized. The lifeblood of the nonprofit sector is trust. Without trust on the part of donors, clients, and the larger public, nonprofit organizations will not be able to do the important work, to fulfill the crucial roles, which are theirs in our society. Nothing will erode this foundation of trust as quickly as new (or continuing) scandals involving unethical behavior by nonprofit organizations and their managers.

When faced with the temptation to cut an ethical corner, tell a little lie, not bother with full disclosure, or let the ends justify the means, it is essential the leadership and management of nonprofit organizations understand the implications of such actions and refuse to compromise on rigorous ethical standards. We have to remember that noble ends are never served by ignoble means. We have to understand that inevitably our “ethical chickens will come home to roost.”

Nonprofit, public-benefit organizations have special responsibilities to serve the public good in our society, to do the right thing for those in need and for important causes and those who care about them—because it is right. This represents the ethical and essential foundation of the nonprofit sector. Without this foundation intact, it is quite likely the whole structure of the sector, including its moral and social capital and the special privileges that support its operations, could slowly dissolve. Attention to sustaining the highest levels of ethical conduct must be a primary concern of every nonprofit manager.

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