Social Sector Ethics

• Should a nonprofit organization take money from someone recently involved in a fraud?
• At what point is a social sector organization doing enough for diversity – of staff, of board membership, of programs?
• Should a nonprofit take a grant which requires programming beyond its mission?

These are just a few of the ethical questions that can arise for the service organizations, philanthropies, educational institutions, and other groups that make up the social sector.

On May 19, the Markkula Center for Applied Ethics launched a new program offering training for organizations that want to learn about best practices and ethical approaches to the challenges that face the social sector. Called Standards for Excellence, the program builds on a curriculum developed by Maryland Nonprofits; the Center is a replication partner for the group. Representatives of 18 organizations attended the training, with support from the Silicon Valley Community Foundation. Attendees were CEO/EDs and board members of their organizations.

Kirk Hanson, Center executive director, set the context for the two-day clinic by introducing the Center’s Framework for Ethical Decision Making. Considering such classic ethical approaches as rights, fairness, and the common good, Hanson said, allows organizations to clarify their values and determine which policies are right for them. Policies are important, he argued, but when an organization encounters unexpected problems, values are key to working out the best decision.

The training covers six different standards, each with an ethical component:

• Mission, Strategy, and Evaluation
• Leadership: Board, Staff, and Volunteers
• Legal Compliance and Ethics
• Finance and Operations
• Resource Development
• Public Awareness, Engagement, and Advocacy

Center Director of Leadership Ethics Ann Skeet kicked off the discussion of standards with a look at mission, which she said is an underutilized tool in nonprofit governance. She suggested that organizations could turn their mission statement into a question, helping to address issues such as effectiveness, mission creep, what to fundraise for, and whether to accept a donation. “In tougher moments,” she said, “use the mission as a way of prioritizing decisions about what to curtail.”

The mission should also be used in assessment and evaluation, according to Naomi Nakano-Matsumoto, assistant director of Social Sector Ethics at the Center.  Assessment, she said, involves determining the needs of the community; evaluation looks at how the organization is meeting those needs

The legal aspects of mission were addressed by Joan Harrington, lecturer at the SCU School of Law and an expert in nonprofit law. Harrington said an organization’s mission must reflect the stated purpose of the group on the Form 1023 submitted to the IRS when applying for nonprofit status.  The organization’s board has a duty of obedience to the mission, and the organization’s description of its activities in solicitations must match what it actually does.

The group reconvened June 9, when they discussed ethical aspects of finance and operations, leadership, public awareness, and other issues. Nakano-Matsumoto led the group in an exploration of diversity, equity, and inclusion. The topic, she said, goes beyond ethnicity to encompass culture, gender, sexual orientation, faith, age, education, socioeconomic group, and physical, cognitive, and emotional abilities.

The importance of the Standards program was addressed by Amy Coates-Madsen, director of the Standards for Excellence Institute at Maryland Nonprofits. When nonprofits engage in illegal or unethical behavior, they harm the entire social sector, she commented. “When we see nonprofit scandals in the news, it hurts,” she said. “Public trust takes a hit for all similar organizations.”

Standards for Excellence is the centerpiece of the Center’s program in Social Sector Ethics, which has been germinating for the past several years. Another element is an annual event on fundraising ethics co-sponsored with the Association of Fundraising Professionals Silicon Valley and Heritage Bank. This year’s program on August 15 focuses on “Ethical Dilemmas for Nonprofits: Walking the Fine Line.” Silicon Valley Business Journal is the media sponsor. For more information, contact Naomi Nakano-Matsumoto.