Sample Ethics Case—Fair, Equitable, and Transparent Compensation Practices: Compensation for a Job Well Done

Ethical Dilemma:

You are the Director of Development of a nonprofit organization dedicated to marine conservation. You and your team spent the last year working on a campaign to raise money for reforesting coral reefs. The campaign has ended and the numbers have been tallied. This campaign surpassed its fundraising goals by more than 50% making it the most successful campaign in the organization’s history. The Board of Directors learns of the results and thinks you and your team should be rewarded for the outstanding performance during the campaign. In Executive Session, the Board votes unanimously to give each team member a one-time bonus based on 1.3% of the amount raised by the campaign.

Who’s involved:

• Development of Director
• Board
• CEO

What are the possible ethical issues; who else might be impacted?

• If the bonus is allowed, what does it mean for other employees who are not in the Development Department? How will they be impacted?
• Will this create conflict or disharmony with the other employees not on the team?
• Will this lead to employees being motivated by personal gain/self-dealing over the organization’s mission?
• Will this compromise the integrity of the Board?
• Are there legal implications to consider if one area of the organization is given preferential treatment?

What are some possible considerations?

• What is the organization’s compensation policy? Does it include bonuses, merit pay, or percentage-based compensation? Is the HR department aware of the AFP Code?
• Has the CEO been made aware of the Board’s decision?
• If the public were to learn about the details of the team’s compensation, it could damage the reputation of the organization. Donor’s trust could also be broken.
• Seek legal counsel to ensure the organization is abiding by fair employment practices.

Related Ethics Standard:

Standard No. 23: Support fair and equitable compensation, which may include bonuses or merit pay in line with organizational practices but may never be based on a percentage of funds raised.

• In an effort to celebrate a great success, the board has triggered an action that may compromise the organization's brand.
• In accepting a position in a development office, proactively explore all compensation standards including whether there is a structure who address situations such as this, regardless of department.

Steps you can take and potential solutions:

• Review the organization’s compensation policy to ensure it does not conflict with the AFP Code. If there is no compensation policy, one needs to be created and implemented by HR.
• Is the CEO a member of AFP? If so, are they aware of the AFP Code? If not, inform the CEO that one-time bonuses based on a percentage of funds raised is a violation of the Code. Explain it could compromise the integrity of the Board and the organization as a whole.
• Suggest to the CEO that if the Board wishes to compensate the team, they be compensated with a flat rate bonus, rather than a percentage of the amount raised.
• Hold a meeting with the Development Team to straighten out any misunderstanding or miscommunication.
• If necessary, hold an organizational wide meeting to go over the compensation policy of the organization.
• Make sure you’ve documented everything.

What are the likely outcomes if nothing changes?

• If the team ends up being compensated in this way, and donors find out, there may be a perception that the organization and development team may be motivated by profit rather than mission. Donors’ trust could be compromised.
• The organization could suffer great reputational damage which could greatly affect fundraising numbers as well as the effectiveness of the organization.
• If the development staff are the only ones rewarded, will staff quit when they learn of the preferential treatment the Development team was given?
• Will the integrity of the Board suffer?
• Will the organization set itself up for potential lawsuits from staff?

What could have made the outcome(s) more ethical?

• Ensure that HR has a compensation policy in place that is aligned with the AFP Code.
• If it is the prevailing practice of the organization, the Development team may have received a one-time bonus that is not based on percentage of funds raised.
• Educate the Board on the best fundraising practices, including the AFP Code of Ethical Standards.