Experts share their thoughts on ethics in the nonprofit boardroom
A commitment to ethics is the underpinning of every healthy nonprofit and mission-driven organization, but ethics are not something you can passively achieve. To ensure your organization reaps the benefits of ethical conduct — from the board to each front-line staffer and volunteer — you must actively work to embed ethics into your culture.
So, what does ethical behavior at a mission-driven organization look like, and how do boards achieve it as a goal? We talked to experts from diverse backgrounds to see what they had to say.
Understand the value of ethics to accountability and transparency
“Always ask yourself: Would this decision pass the ‘pub test?’ Would the average person find it fair and reasonable? If the answer is no, or if you’d be uncomfortable seeing the decision on the front page of a newspaper, it’s a clear signal to reassess your approach. Transparency in decision-making builds trust, both within the organization and with external stakeholders.” Belinda Loke, Board Director, QEC and Kids Hope Australia, and Founder and Principal Lawyer, Legalexa
“A commitment to ethics holds board members accountable for their actions, ensuring they work in the best interest of the organization and its stakeholders. Ethical practices also promote transparency, which is key to attracting donors, volunteers and board members.” Maya Tussing, Fairlight Advisors
“Board members must model ethical behavior in all interactions. This leadership sets the tone for the entire organization, promoting a culture of integrity and accountability.” Patrick Downes, Lionheart Consulting
Embracing a culture of ethics has great value to the mission-driven organization, strengthening relationships with all stakeholders. When beginning or renewing a conversation on ethics at the board level or organization-wide, ensure everyone understands the “why” behind these efforts.
“A commitment to ethics holds board members accountable for their actions, ensuring they work in the best interest of the organization and its stakeholders. Ethical practices also promote transparency, which is key to attracting donors, volunteers and board members.” Maya Tussing, Fairlight Advisors
Be prepared for ethical challenges and decision-making
“Ethical conduct must be part of a board member’s job description. I would recommend a commitment to ethical behavior be woven into the expectations of the board. The job description should also include a statement of the legal duties of the board — the duties of care, loyalty and obedience.” Elizabeth Thompson, Executive Assistant to the President & Corporate Secretary and Corporate Compliance Officer, Presbyterian SeniorCare Network
“Ethics in the boardroom sets the tone for the entire organization, fostering a culture where ethical conduct becomes the norm, ensuring long-term success and trustworthiness. The risks of neglecting ethics are significant, ranging from legal penalties and financial loss to irreparable damage to an organization’s reputation.” Belinda Loke, Board Director, QEC and Kids Hope Australia, and Founder and Principal Lawyer, Legalexa
“Provide ongoing training for board members on ethical issues relevant to the nonprofit sector. This keeps ethics top of mind and ensures the board is prepared to handle ethical dilemmas as they arise.” Patrick Downes, Lionheart Consulting
The board must lead by example. Require board development and offer documentation defining ethics, its value at the organization and expectations for board members. Board development should be ongoing throughout the board member’s lifecycle. To make training more efficient, publish materials in your nonprofit’s board management software for easy, centralized access.
Understand the cost of ethical lapses
“Too often, boards do not deal with ethics until something happens that compromises the integrity of the organization. Nonprofit organizations must lead with this focus instead of waiting for a problem to occur. Just as we make strategic plans critical to the work, a board must discuss and document ethical practices and non-negotiables before the emergence of a crisis. Prevention and being cautious can be easier than addressing the issue when passions are high and reputations are at stake.” Froswa’ Booker-Drew, Ph.D., President, Soulstice Consultancy
“If conflicts of interest are being ignored, you’re signaling to the staff that rules don’t apply. This can lead to staff morale issues and even a PR problem for the organization. I served on a nonprofit board several years ago where a board member skirted the conflicts of interest policy by having a spouse perform paid consulting work for the organization. There was no open bid process for the work, and the contract was never brought before the board for review.
“Later, several staff members commented on the project’s lack of open bidding and transparency, especially when they were being held to a different standard. Unfortunately, I only learned of the project after the board member termed off the board and had to work to repair both the reputation of the board among staff as well as to reinforce the policies among all board members.” Katharine Earhart, Fairlight Advisors
“The role of the board is to be the caretaker on behalf of the public. This role must be beyond reproach and not only behave with the utmost ethics but also show that there is active ethical oversight. This is a most critical element to gain public and stakeholder trust. When this is eroded, organizations can end up collapsing and memories are long when there are problems.” Julie Castro Adams, How Women Lead
The best time to address ethics at your organization is before a lapse or incident. If your organization does not yet have the documentation and training in place to ensure everyone understands their ethical responsibility, it is time to get to work. Add a discussion on ethics and goals to the next board agenda.
Prioritize creating and promoting a clear code of ethics
“I received a call recently from a CEO of a charity who was looking for advice on a dilemma that her board was grappling with. A board member had questioned whether it was right for the charity to accept a modest donation from a company connected with the tobacco industry. The board was unsure about how to respond, and the CEO was concerned that a decision to decline the donation could be extended to decline donations from one of their biggest corporate donors, an alcohol company. My advice to the CEO was that the board needs to be guided by its ethical values when making the decision regarding soliciting and accepting donations. A problem for the CEO was that the board did not have a formal code of ethics in place.” Diarmaid Ó Corrbuí, CEO, Carmichael
A nonprofit dedicated to establishing an ethical foundation will adopt a code of ethics that outlines the organization’s values and expected behaviors for board members. Board members should be consistently reminded of their duty of care, which means they make decisions with the organization’s best interests in mind and prioritize the nonprofit’s goals over personal gain.” Maya Tussing, Fairlight Advisors
Diarmaid Ó Corrbuí, CEO, Carmichael: “A first step for the board, if they do not have one already, is to develop a code of ethics and then tease out and discuss how the ethical principles apply in practice for their organization. A code of ethics should be formed around five fundamental ethical principles that should inform the board when faced with ethical dilemmas
- Integrity. Be straightforward and honest in all business relationships, ensuring that appropriate systems are in place to help guarantee that all decisions are robust, defensible, free from conflict of interest and comply with relevant laws, regulations and codes of governance.
- Beneficiaries first. Put the interests of their beneficiaries and the causes they work for at the heart of everything the nonprofit does.
- Objectivity. Don’t permit bias, conflicts of interest or undue influence of others override judgements and decisions of the board, which should always be taken in the best interests of the organization and its social purpose.
- Openness and accountability. Create a culture and space where donors and supporters, as well as the wider public, can see and understand how the board works, how it deals with problems when they arise and how funds are spent.
- Right to be safe. Every person who volunteers with, works for or comes into contact with the nonprofit should be treated with dignity and respect and feel that they are in an inclusive culture and a safe and supportive environment.”
The value of a code of ethics cannot be understated. It is one of the key steps to create an ethical organizational culture. By beginning with this framework in place, board members and staff can achieve a shared understanding of expectations to guide quality decision-making and actions.
Adopt an annual disclosure
Elizabeth Thompson, Executive Assistant to the President & Corporate Secretary and Corporate Compliance Officer, Presbyterian SeniorCare Network: “The organization should have written policies on code of ethics and conflict of interest and have all board members sign a disclosure statement annually. The disclosure statement would serve two purposes:
- To indicate agreement to the code of ethics to demonstrate behavior and decision-making consistent with the organization’s commitment to the highest standards of ethical business conduct, and
- To offer an opportunity to disclose any conflicts of interest.”
An annual disclosure requirement, hand-in-hand with a published code of conduct, will serve to protect your organization from intentional and unintentional ethical lapses. The annual disclosures can be managed through your board management solution’s polling feature.
Read our other expert-led articles:
- Experts share tips for mission-driven organizations on DE&I
- Experts share tips on AI and governance
- Experts share insights on board engagement
Using your board management software to support an ethical organization
A board management solution like BoardEffect can support efforts to build a strong ethical culture at your mission-driven organization. The board can use the automated workflows to write, revise and approve policies, including codes of conduct. Documents and training related to ethics can be stored in the searchable, accessible document library. And BoardEffect can be used to produce annual questionnaires related to possible board conflicts of interest.
Wherever your board is in the development of an ethical culture, taking action today is critical. Maya Tussing of Fairlight Advisors says, “Maintaining an ethical culture is important to avoid legal or financial challenges down the road. Ethical lapses start small and inconsequential and may be initially brushed aside. But when they become normalized, unethical behavior can become harder to control.”
Your organization can build trust and strengthen stakeholder relations with a strong commitment to ethics. BoardEffect offers a series of tools and features that can support building an ethical culture through training and communication across the organization. Let us know how we at Diligent can help you on this path.
