Advancing Philanthropy

Ethics, Fundraising, and Leadership: Keeping It Above Board

group of words that say principles, trust, honesty

There has been an increasing amount of scrutiny of nonprofit and public sector organizations for several years. This has spawned an outcry for greater board accountability. It’s prudent and necessary for boards to adopt policies which protect the organization as well as themselves.

After all, board members are fiduciary agents who are responsible for the resources of the organization. It is also the responsibility of the board, along with an organization’s CEO (or executive director or president) to uphold the ethical standards of the organization, which includes the actions and behaviors of the board and its individual members.

Ethical issues involving board members can take many forms. Some will be obvious, while others might be more subtle. Below are a few examples of questionable ethical behavior involving board members.

Where’s Leslie?

“Leslie” is a respected member of the community. She has chaired many fundraisers over the years and is thought to be a great asset to the organization. However, she has missed more than half of the scheduled board meetings with no explanation or submission of a board-approved proxy. Further, it is rumored that she has a problem with alcohol. Even though the CEO of the organization has spoken to Leslie to reaffirm her commitment to the board, and she has promised to do better, Leslie has shown no improvement. The board chair says he feels uncomfortable talking to her about it because he suspects it may be too personal.

Leslie should be addressed regarding her absences only. The board chair should not go into rumors or reasons. If the situation does not improve per the board attendance policy, Leslie should be sent a letter of her non-compliance of the policy and terminated from the board.

Excessive absenteeism should be covered in the organization’s bylaws that all board members agree to when they accept a seat. It’s always a good idea to reiterate the attendance policy through a new board member orientation or on a board member job description. The board must also decide on the parameters of the policy in areas such as a minimum attendance requirement, attendance by proxy, or participation by phone.

Ignorance Is Not a Valid Excuse

Board member “Richard” became romantically involved with a staff member outside the office. When a new CEO was hired, she conducted a training to introduce board to risk management issues. Part of the training involved conflicts of interest. The new CEO had no idea of Richard’s relationship but used a similar scenario as an example. Richard, who never thought there was anything improper about his relationship with the staff person, began to sweat and left the training with his stomach in knots. He wondered if the new CEO knew about the relationship and if he should confess or just keep the relationship quiet. Richard eventually decided to end the relationship and serve out his term.

Even though Richard ended the relationship he should have resigned from the board immediately. A relationship—even a past one—could come back to haunt the board and claims of sexual harassment would damage the image of the organization.

Making the Best Investment

“Steve” owns an investment firm. He is also in his first term on the board of directors. The board is unhappy with their current firm and decides to take bids for a new provider. Steve acknowledges that he would like to submit a proposal for the business and the board agrees to it, with the condition that he resign.

Steve did the right thing, as did the board. He made his intentions known, and the board’s instruction for him to resign eliminated any appearance of an unfair advantage and also eliminated any tension on the board if his firm is not chosen.

If there is a question as to whether a behavior is unethical or not, simply ask a few questions:

  1. Is the act honest?
  2. Could it harm the organization, staff, the board, or individual board members if not corrected?
  3. Is anyone receiving revenue, goods, or services that could be construed as payment and that has not been vetted and approved by the full board, not just the chair or a few members?

However, even when unethical behavior involving a board member is discovered, a further problem arises when the board takes no action or does not support the CEO when an action must be taken, such as “firing” a board member. These issues are typically addressed at the organizational level as the CEO sees the conflicts first and from all sides (e.g., staff, board and organizational brand). Sometimes the lack of board support—or even acknowledgement—can cause animosity between the offending board member and the CEO. Other times it could cause a rift between the CEO and other board members as they begin to take sides.

Regular discussions and training on best practices in ethical policies and procedures should be a part of the board’s service and responsibilities to ensure everyone is informed, aware, and remains in compliance.

Conflicts are inevitable, particularly if a board member is employed by a supporter or partner of the organization. This association should not necessarily be considered a negative, but it should be disclosed. For example, a board member with ties to a bank can remain on the board of the organization even if the organization has holdings with the same bank. However, in such cases the board member should disclose the professional relationship and abstain from any vote that could have a positive impact—or even the appearance of one—on him or the bank. Furthermore, any possible conflict should be disclosed as soon as the board member becomes aware of its existence.

Regular discussions and training on best practices in ethical policies and procedures should be a part of the board’s service and responsibilities to ensure everyone is informed, aware, and remains in compliance. This not only helps build a secure organization, but it provides transparency, which is important in building strong board-to-CEO relationships.


Sidebar: What’s the Difference?

We are surrounded by policies and procedures to guide us in almost any action or situation we could encounter in the workplace. They cover such areas as email and internet usage, attendance, working conditions, recruitment, harassment, and many, many more.

Three of the more common ones—especially in relation to ethics and board accountability—are bylaws, the code of ethics, and a conflict of interest policy. But what’s the difference between these documents?

Bylaws—Bylaws are the governing documents that regulate the operational standards of the organization, including how often the board meets, committee structure (if any), and attendance policies.

Code of Ethics—The code of ethics embodies the values of the organization. It also provides a guide for employees, board members, and other involved parties—such as volunteers—to follow. It may not control individual decisions, but it provides a base of acceptable norms according to the values of the organization. The code of ethics also provides an avenue to deal with the actions of those who fall out of compliance.

Conflict of Interest Policy—An organization’s conflict of interest policy provides guidelines for identifying and disclosing conflicts of interest and outlines the procedures to follow when managing a conflict or even situations that might have the appearance of a conflict. A conflict of interest occurs when a board member, volunteer, or staff member has a personal interest that conflicts with the interests of the organization, or in situations where someone has divided loyalties (also known as a “duality of interest”). A conflict of interest could result in an improper financial gain by an individual which could in turn lead to financial penalties and IRS violations for the organization.

It is the duty of all board members to be aware of organizational policies and to guard against anything that could threaten the organization.


Sidebar: Developing a Board Code of Ethics

hands holding a small green plant that is growingIf your organization does not currently have a  code of ethics, and you don’t know where or how to start putting one together, BoardSource (www.boardsource.org) offers tips to help develop various policies, including a code of ethics.

Here are a few:

  1. Define what ethical behavior means for your organization and clarify accepted professional standards.
  2. Separate staff and board issues. Board members and staff members often get confronted with different situations based on their role vis-à-vis the organization, its constituents, and the community at large.
  3. When discussing the code of ethics with staff and board members, it is often useful to provide examples of unacceptable behavior.
  4. As a way to stress the importance of the code of ethics, some organizations request a signature from board and staff members to indicate an understanding and acceptance of the standards.
  5. Once the code of ethics is established, it should be reviewed periodically by the staff and board for possible revision. In this way, the language of the code will continue to serve the expectations and needs of the organization.

In addition to these tips, organizations can use the AFP Code of Ethical Standards as an example when drafting their own. This will help assure them that their own version covers professional obligations, solicitation and use of philanthropic funds, presentation of information, and compensation.

 

Kimberly B. LewisKimberly B. Lewis is the president and CEO of Goodwill Industries of East Texas and the owner of Motivational Muse, LLC, providing executive coaching and nonprofit consulting services. She has more than 19 years of executive level nonprofit and business experience in scaling business ventures, forging profitable alliances, and developing ways to monetize social impact ventures. Kimberly holds a bachelor’s degree from the College of Charleston in Charleston, South Carolina and a master’s degree from Marshall University in Huntington, West Virginia. She is the author of two books, a historical novel entitled The Fourth Generation and A Seat At The Table or A Part of The Meal—Creating A Culture of Diversity Equity And Inclusion.

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15 Nov 2019 President's Perspective Blog
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