Ethics are Important in Nonprofits

Ethics are extremely important in nonprofit organizations and for many different reasons. The challenges facing nonprofits today is greater than ever before. This is true with financial, operational and organizational issues. Ethical dilemmas face nonprofits in all three of these areas.

Recently, the United Way of Charlotte was placed under the microscope when the board’s executive committee, unbeknownst to many of the other board members, took nearly $1 million of donor funds and placed it in the retirement account of the CEO. Their explanation was that it was to make up for past commitments. The outcome of this dilemma was not pretty. The chairman of the board and several trustees resigned. The public relations fall out to the United Way of Charlotte was devastating. Their financial campaign was significantly down from the previous year, and the CEO was forced to resign and has since sued the United Way for wrongful termination.

Could this all have been avoided? Yes. First of all, there should be full disclosure among all board members. A commitment of this nature was the first mistake made by the board of trustees. You don’t want to promise things that you will have to pay for later, particularly if it involves a lump sum of nearly $1 million. If a commitment was made to the CEO then an equitable plan should be devised that is fair to the donors, fair to the CEO and protective of the reputation of the United Way.

Trustees are as responsible as staff for the health and well-being of a nonprofit. There should be a code of ethics, conflict of interest statements signed by every board member and other checks and balances in place to protect the integrity of the organization. In addition, the board should appoint a committee to monitor the board’s performance and behavior.

Every nonprofit is beholding to the public trust. When they accept a donation or grant from an individual or group, they have a fiduciary responsibility to protect these funds and use it for its mission and purpose. When one nonprofit falters then it has a very negative impact on other nonprofit organizations in that community. It is without question that nonprofit are, and should be, held to a higher standard. It is the role of the board and staff to insure that protective measures are put in place and certain standards are met continuously. Anything less is a recipe for problems which need to be avoided at all costs.


Tom Keith is the president of the Sisters of Charity Foundation of South Carolina