Sample Ethics Case—Public Trust and Transparency: The Next Big Thing

Ethical Dilemma:

Economic factors are forcing the cost of donor acquisition ever higher and a new fundraising company bursts onto the scene. They are making grand promises as to the profitability of their new multi-channel fundraising technique, claiming a revolution in donor marketing.  The organization generates significant traction through its marketing efforts, describes the limited availability of access to the technique, and is quickly closing many contracts, often signed within two weeks. Scarcity seems to be a driving force in its ability to secure contracts and investment more quickly than would otherwise be the case.  The demand for a new selling technique to complement other, under-performing techniques is met. The technique out-performs expectations, and the clients are happy with the return on investment. Within a year of launching the service, the company notifies all existing clients that the existing contracts are cancelled. There is a grace period allowing renewal of the current contract with a 20% fee increase, payable upon the next billing cycle.  Renewal of lapsed contracts will be subject to a 25% fee increase.  

Who’s involved:

• Sales reps of the new company
• Purchasers of the service

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

• The scarcity of the service itself does not create an ethical dilemma. If there was no actual limited availability, and it was a marketing technique, the result may have been artificial pressure to sign contracts due to fear of losing access.
• Negative client reactions or a scandal may damage the company brand and presents risk to the company’s reputation.
• Did the company violate the contract terms? Do the contracts have a clear provision for contract cancellation and/or the re-negotiation of fees, and if so during what time frame?
• Did the subscribing organization do appropriate due diligence about the company?  Were contracts properly reviewed and were the contract terms consistent with local laws and regulations?

What are some possible considerations?

• If you are a client, review the contract to confirm the terms and conditions or termination.  
• Did the contract review and the signing process follow your organization’s purchasing policy and procedure?
• Has the termination of the contract and renewal “options” violated any laws or regulations?

Related Ethics Standards:

Standard 2: Comply with all applicable local, regional, and national laws and regulations.

• Violating contract law(s) is not only unethical, but also illegal.

Standard 5: Establish the purpose and scope of work at the beginning of any contractual relationship.

• The scope of work should include the terms and conditions of the initial and continued engagement between the company and client. 

Steps you can take and potential solutions:

Steps to take to continue the relationship: 

• If the company is justifying cancellation and/or price increases citing contract language potentially confusing to clients, or the contract is silent or ambiguous on cancellation language or fee increases, take appropriate steps to try to work with the company to honor its promises.
• If contract laws have been violated, consider taking legal action.
• Maintain documentation of your interactions with all parties, to clarify and record your actions and intentions.

Internal Assessment:

• Do you have an internal contract review and purchasing policy?
• Did the “scarcity” message cause you to shorten the due diligence process?  
• Maintain documentation of your interactions with all parties, to clarify and record your actions and intentions.

What are the likely outcomes if nothing changes?

• Early clients are likely to become very disillusioned or angry.  The resulting actions may range from non-renewal to class-action lawsuits for contract violations.
• Organizations may recommit to reexamine internal processes for contract review and purchasing procedures.
• Organizations that have no written procedure for contract review and purchasing procedures may develop policies and procedures where none existed.
• The company’s successful launch damages the brand in the long run.
• If the company is an AFP business member, it would be subject to the ethics inquiry, as well as possible sanctions.

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

• Organizational operations policies clearly outline the contract review process and are properly followed.  
• The company markets a “charter subscriber” discounted fee program to a limited number of clients – as an incentive – without implying scarcity.  
• If a “charter subscriber” discounted fee program is offered, the preferential fee would be offered for a limited time with transparent language explaining the conversion timeline and rate increase.