Sample Ethics Case—Fair, Equitable, and Transparent Compensation Practices: Everyone Benefits, Right?

Ethical Dilemma:

You are a relatively new Development Associate for an organization dedicated to providing services to low-income individuals and families. The organization is beginning its annual fund drive which you are working on and the Development Committee is having its first planning meeting. You are at the meeting along with the Director of Development and the Committee members which include a couple Board members. During a break, one of the Board members who is new to the Board and Committee approaches you with a recommendation to hire a telemarketing firm to help with the drive. The Board member owns several Michelin star restaurants in the area. She says this telemarketing firm is fantastic and all they are asking for would be their standard fee plus a small percentage of funds raised. The Board member would like to receive a finder’s fee for bringing the firm to the organization, and she’d love to comp you several dinners at one of her restaurants as a thank you.

Who’s involved:

• Development Associate
• The Board Member
• Director of Development

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

• The Development Associate has an obligation to bring the Board member’s suggestions to the Director of Development. If they do not and they move forward with hiring the telemarketing firm, they will be in violation of the AFP Code of Ethical Standards.
• How could this affect the Development Associate, the Board, and the organization as a whole?
• If the percentage based compensation is allowed, could this result in the telemarketing firm seeking funds for personal gain over and above the organization’s mission?
• By the Development Associate receiving special considerations when selecting the firm, could this compromise the integrity of the organization?
• If other Board members learn of the recommendations, could this compromise the integrity of the Board, if the recommendations are allowed, especially the recommendation that the Board member will receive a finder’s fee for bringing in the telemarketing firm?
• What if the Director of Development “endorses or approves” the idea and says so in the meeting in front of you and the Board.

What are some possible considerations?

• What is the organization’s development services policy when it comes to vendors? Does it include paying finder’s fees, commissions, or compensation based on the degree to which a service meets the stated goals such as the percentage of funds raised?
• Does the organization have an onboarding process for employees and does it include discussion of development policies such as gift solicitation and gift acceptance?
• Does the organization have an orientation and/or onboarding process for Board members and does it include discussion of development policies such as gift solicitation and gift acceptance?
• Does the organization have a Conflict of Interest policy for its Board members?
• Are the Board members aware of the AFP Code?
• If the Board were to learn about the behavior of the other Board member, could it harm the reputation of the Board as well as negatively affect the working relationships of the Board?
• If the public were to learn about the details behind the telemarketing firm’s selection, could it damage the reputation of the organization? Donors’ trust could also be broken.

Related Ethics Standards:

Standard No. 24: Decline receiving or paying finder’s fees, commissions, or compensation based on a percentage of funds raised.

• The Board member’s suggestions of paying compensation on a percentage of funds raised and being compensated with a finder’s fee for bringing in the telemarketing firm if allowed, is a violation of the Code, and could compromise the organization's brand.

Standard No. 25: Refrain from offering or accepting payments or special considerations for the purpose of influencing the selection of products or services.

• Any person receiving special considerations that influences the selection of the telemarketing firm could also compromise the organization’s brand.

Standard No. 9: Avoid activities that conflict with or may conflict with their fiduciary, ethical and legal obligations to their organization, clients or professions.

• Benefits transactions in any forms can raise questions about things such as favoritism and undue influence.

Standard No. 11: Decline personal benefits such as invitations or personal gifts that arise as a result of relationships with donors, prospects, volunteers, or clients.

• Accepting the offer of complimentary dinners is a personal gift which arose due to the professional relationship

Steps you can take and potential solutions:

• The Development Associate could thank the Board member for her suggestions. Can/should he/she/they raise the issue immediately for discussion? Be sure to document everything.
• Is the Director of Development a member of AFP? If so, they sign the AFP Code annually. If not, inform the Director of Development that compliance with the AFP Code means vendors cannot be compensated based on the amount of funds raised, that finder’s fees are not allowed, and that special considerations, such as complimentary meals, cannot be given either. Explain how these actions could compromise the integrity of the organization and its brand as a whole.
• The Director of Development can review the organization’s development services policy to ensure it does not conflict with the AFP Code. If there is no development services policy, one should be created and implemented.
• The Director of Development should also bring the AFP Code to the attention of CEO.
• The Director of Development should connect with the CEO to alert them about the conversation between the Development Associate and the Board member. It might be good to assume there was no ill intent by the Board member, since they are new.
  • The CEO should then reach out to the Board member delicately explaining Board policies.
• If the CEO likes the telemarketing firm, explain the firm could charge a fee for each call completed as the fee would be charged based on the work the firm proposes to do and not based on percentage of funds raised. This fee would not be a violation of the Code.
• The organization may want to make sure development services policies are part of the employee’s onboarding experience.
• The Director of Development could work with the CEO regarding educating the Board on the AFP Code and the hiring of vendors.
• Make sure those involved document everything that transpires.

What are the likely outcomes if nothing changes?

• The Board may put or appear to put their self-interests and profit motive ahead of the mission of the organization.
• The integrity and reputation of the Board could suffer. The effectiveness of the Board could be questioned.
• The organization could suffer great reputational and brand damage which could greatly affect fundraising numbers as well as the effectiveness of the organization.
• If someone learns about the Development Associate’s actions, they could file a complaint against them with AFP.

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

• Ensure that the organization has a development services policy in place that is aligned with the AFP Code.
• Ensure that the AFP Code is imbedded (as an appendix) in the Board packet under Development policies such as solicitation policies.
• Ensure that when Board members are oriented and onboarded, they are aware of development policies, which include the AFP Code and the development services policy.
• Ensure all Board and staff members read and sign the Conflict of Interest policy annually.
• Educate the Board on the best fundraising practices, including the AFP Code of Ethical Standards.
• Educate the Development team on the AFP Code and best practices for working with Boards of Directors.