July 29, 2010
Ethics in Action
Good Ethics Is Good Business
Early in my career, I was proud to get my first management job at one of the country’s oldest nonprofit organizations. The sense of pride I felt at the start was diminished in the long run by an admission from a leader I liked and admired.
Non-profits don’t have investors, per se, who expect a financial return, but their donors expect them to faithfully reckon where the money goes. I didn’t do that accounting myself, but I did oversee the annual report. One year, I noticed something that seemed a bit off.
We were stating that a high percentage of donations, about 80 percent, went directly to support our various programs, with fund raising and administration accounting for the rest. This was the ratio donors liked to see, but it didn’t gibe with conversations I’d had with our fund-raising staff. They had told me the ins and outs of how we raised money – we relied heavily on direct mail, followed by special events – and it cost more than 20 cents to raise a dollar with these approaches. So why were the fund-raising costs we were citing so low?
Then one day, I saw a report about a different charity – a fraud really – that had no programs at all but alleged that 90 percent of donations went to programs. This figure was finagled by inserting “The Seven Warning Signs of Cancer” into each fund-raising letter, then claiming that the inserts turned the mailings into “educational programs.” My organization couldn’t be doing anything like that, could we?
I put the question to one of our senior people and he shrugged. We were doing this on a smaller scale, he acknowledged. It was OK, under generally accepted accounting principles, to add some educational material to fundraising letters and claim a percentage of the mailing as a program expense. I could tell from his tone of voice that it wasn’t a practice he enjoyed, and he conceded that donors might find it misleading. But “everybody does it,” he insisted, “and if we didn’t do it as well, our numbers would look terrible by comparison.”
As I said, I liked this leader, and I could see he felt bad for treading on my innocence. But I found my mind going back to our conversation time and again, especially when I was asked to help articulate the nobility of our work. The revelation suggested we weren’t quite as noble as we pretended to be. In Fr. Spitzer’s terms, we were using Level 2 ethics in pursuit of Level 3 goals.
As Fr. Spitzer acknowledges, the temptation to do so is huge, and he felt it himself in his service as the president of Gonzaga. In his Journey to Excellence program, he says
Believe me, I’ve been tempted to look at different statistics, to skew them so I could get a competitive advantage over certain other universities. And I really wouldn’t have lied … I would have just skewed the truth. We are all tempted. We all want our organization to look better and be better. But we have to draw the line somewhere, and the line we draw has to follow our own principles and conscience.
Most ethical problems occur, Spitzer says, when leaders don’t even discuss where lines should be drawn: “When you have a community of people doing their best to figure out whether they're on one side or another [of a moral line], you're in a much better ethical space than when people aren’t asking the question. That’s the problem in organizations today. It’s not malice or greed. People are not asking questions.”
You can have a legitimate argument over the case I initially raised. Is it OK to use standard techniques to make your fund raising look more efficient than it is? It didn’t seem right to me, but that’s an opinion, not a fact.
But as Fr. Spitzer observes, the vital thing is to have such discussions. If you don’t, your organization’s moral compass will always tend to swing toward expediency. And it might not stop there.
"As leaders," he writes ...
... people are looking to see what sort of example you’re setting. Are you giving signals that fudging statistics is OK, or that it’s OK to cut corners, because other organizations are doing it? You know this message will not bode well, because people won’t only see that it’s fine to cut corners; they are going to think that anything goes. And that’s certainly what’s happened in a variety of recent cases. … Good ethics is good business.
– John Keenan, editor
If you have stories of your own you'd like to share or any comments or questions about this column, email john@spitzercenter.org
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Last changed: Jun 17 2009 at 11:37 AM