Ethical Decision Making

Posted by Heidi Forland-Fetty | Mar 25, 2021 | 0 Comments

 The Grandma Standard

Growing up, my family had a standard we used to help us make good choices:

“If you wouldn't want to tell Grandma about it, don't do it.”

Ethical decision making is an essential aspect of every successful nonprofit. Too often in the news, we hear about ethical violations that have destroyed companies from within. There are more moral meltdowns and massive lawsuits based on inappropriate activities every day. The last thing you, as a nonprofit leader, want is to have negative press all over the internet about ethical issues in your organization. Ethics can be complicated to navigate. The good news is that by having an ethical management plan, you can help avoid ethical failures in your place of work.

For this blog post, the discussion will be focused on nonprofits but much of the content applies to business entities as well.

Code of Ethics

A written code of ethics that contains company policies and procedures is vital for nonprofits. Clearly outlining company expectations and beliefs can help prevent problems in the future. Your code of ethics should emphasize the key values your company wants to uphold such as honesty, respect, confidentiality, and professionalism. So too, a code of conduct, which can be part of or separate from your code of ethics, is highly beneficial. A code of conduct should have things like a zero-tolerance policy for illegal activities, discrimination, and sexual harassment. In addition to written codes, professional training for personnel and volunteers may not be required by the law but could be beneficial for your organization to improve competency. Deciding how you want to convey the importance of moral awareness, intent, and action may take some effort, but it will be well worth your while. Make sure that all current and future employees know that high moral character is part of the company culture. Moreover, it is crucial that your corporate purpose statement aligns with your mission and guiding principles.

Leadership

Leadership and structural organization of your business matters. Therefore, if there are seemingly unfair power dynamics in an organization, there is more temptation to violate the rules. People may be willing to fudge the numbers or fabricate clients if they think it will help them get ahead. You can combat this by emphasizing teamwork, leading by example, using open and honest communication, and creating a safe space for others to tell you about problems or concerns. Incorporation of the golden rule or even better, the platinum rule can guide moral thought processes about how to treat peers, subordinates, and consumers of your goods and/or services. Do not let your own cognitive bias or moral blinders hinder your organization's mission. Good role models in leadership can make or break a workplace.

More on effective leadership in a future blog post.

Board governance

Similar to how a leader can make or break an organization, so too can bad board governance. You should thoughtfully select board members based on a variety of factors including their availability to help, expertise in the field, and commitment to the organization. While it may be easiest to just ask friends and family, it may not be the wisest decision. The IRS grants tax-exempt status to diverse boards. A variety of talents, skills, and personalities in a board helps to generate innovative ideas and create progress. A board with open ears to feedback and open hearts to change can have a huge impact on the world. Your board is your team, and you should be able to trust them. Nevertheless, internal controls should be implemented to prevent abuses of power. Furthermore, keeping a detailed record of meeting minutes and having job descriptions for board members explained in your Bylaws can eliminate confusion.

Conflict of interest policy

An indispensable text that upholds high ethical standards is a conflict of interest policy. This document is so important to the operation of a nonprofit that when applying to be a 501(c)(3) organization, the IRS requires a copy. Conflict of interest policies aid in IRS Compliance and prevents excess benefit. Conflict of interest policies should apply to board members, employees, and volunteers of the organization.

Cybersecurity

In this blog post, we are just going to scratch the surface of this topic. Keep an eye out for our future blog post on nonprofits in the digital age.

Cybersecurity and data management are more prevalent aspects of ethics today than ever before. With many operations moving online, the risk of having private information leaked has greatly increased. Most people's everyday interactions are now on the internet due to Covid-19: communications, client meetings, employee interviews, document creation, shopping, and even banking. It is imperative to have robust cybersecurity to protect your organization, your employees, and your donors. Also, save yourself a future headache use a sophisticated password or two-factor identification system for logging into accounts. While it might be inconvenient and take longer to access your content, it also makes it significantly harder for hackers to access your content. Thus, please make the smart choice for your organization and do not use your dog's name for every password. Further, protecting your information by having a data retention policy is super beneficial to your company. Still, if you are storing data in a cloud, make sure that the cloud is a safe database to use. When using extensions, apps, and plug-ins look into what cookies are being stored and what information is being tracked. Make sure your whole organization knows what online actions and social media posts are and are not permitted. Another thing you can do that communicates competency and professionalism is to add terms and conditions policies on your nonprofit's website. Our firm can draft these kinds of documents for you and customize them to your unique business needs.

Finances

There is great depth to nonprofit finances, so we are just going to hit some highlights for now.

Good financials are a must not only for your organization, but for relations with your donors, customers, the public, and the IRS. First, board members almost always serve as volunteers, but executives or other employees who are on the board may be paid a reasonable/fair market compensation. Likewise, it is important to keep in mind that compensation can be more than just money. Second, having an outside accountant or bookkeeper manage your finances will relieve stress on your organization. A CPA is different from a treasurer and their skills may vary greatly. Third, transparency in finances has been a topic of conversation a lot recently. Donors of charities want to know where their money is going and who is it helping. When philanthropies do not publicly disclose annual financial information, not only do they lose rapport with potential donors, but they may violate IRS regulations. Last but not least, when you receive a donation to your nonprofit, you generally must provide the donor with a receipt or gift acknowledgment with specific information about your organization and the donation listed.

Why it matters

Ethics, while complex, are indispensable when it comes to nonprofits. Providing clear ethical guidelines to those within your organization will enhance your relationship with those outside your organization. Additional research on ethical decision making and strategic planning for moral maintenance can assist in your nonprofit's success. In sum, if you do not want to be on the nightly news for something bad your organization did, use the ‘Grandma Standard' to improve your ethical decisions.

Scholarly Journal Articles on Ethics:

Decision-Making in Nonprofit Organizations -Springer

Ethics in Fundraising – Wiley Online Library

About the Author

Heidi Forland-Fetty

Hi, I am Heidi Forland-Fetty. I am the head paralegal for Mission Counsel. I joined Terry in June 2020 and am excited to help expand the firm. I have strong interests in nonprofit, contract, business, real estate, and intellectual property law. CONTACT US My Story Growing up in the Greate...

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