Ethical Dilemmas and Nonprofit Boards of Directors

Ethical_DilemnaNearly every day, the boards of directors and the professional staff of nonprofit organizations face difficult dilemmas, and it is important to be prepared to deal with them in a professional and ethical manner. I would like to explore a few of the more difficult ethical issues that arise on a regular basis and demand a response from both the volunteer and professional leadership.

Ethical dilemmas may arise during the process of appointing new board members. Bringing together talented, skillful, and knowledgeable volunteers is a key mission in building a strong board. At the same time it is important to identify potential board members who have the capability of providing financial support to the organization. Occasionally someone capable of giving a sizable contribution will express an interest in the organization. It is every nonprofit’s dream to have a potential donor step forward who also wants to be part of the agency’s board.

However, sometimes this is a mixed blessing. What happens if this person who could assist the organization in balancing its budget is also someone who has been subject to criminal investigation and there have been allegations about the person’s honesty? In today’s environment most board members and professional leaders would pass on that potential board member, not wanting the agency to be tainted by his or her reputation. They would sacrifice the financial support to maintain the ethical values of the organization.

Yet some nonprofit leaders would invite that person to sit on their board, arguing that there are only “allegations” against the potential board member. There is no reason to judge someone who has been the subject of an investigation and convict him before there has been a trial. Turning away a donor at this point would be seen as the nonprofit taken a stand that is not necessary or warranted. Viewing the potential board member from this perspectives leads many to take the risk and invite the person to join the board of directors.

Requiring the financial affairs of potential contributors to be ethical seems to be a clear, generally accepted principle. However, other situations lie more in the gray zone. For example, what approach does a nonprofit take when the potential contributor has a perfectly clean reputation, but his or her personality is not suited to working within the structure of a nonprofit organization? Is the professional and volunteer leadership willing to turn that person away and give up the chance of receiving a sizable financial contribution?

Accepting someone on the board who may not be suited to a decision-making process that takes time and takes into consideration everyone’s opinion could present some serious challenges. When the volunteer’s personality is not compatible with the personalities and processes employed by the organization, then it is difficult to build a strong board that shares in and facilitates the agency’s accomplishments and the process used to reach its goals.

Inviting a board member with personality issues to become involved in the governance of an agency may be opening a Pandora’s Box. Once the new board member starts serving on the board and becomes involved in the committees and general meetings, the present board members will have to struggle with his or her personality and may find it destructive to the process of building and strengthening the organization. When decisions are made for the sake of the funds involved, then the organization is compromising on its basic values.

Another issue that often arises is when board members request some form of remuneration when they provide professional services to the organization. One of the important criteria that organizations look for when recruiting board members is their expertise, and the expectation is that they will be willing to provide that expertise for free. Yet some board members might be willing to consider providing professional services at a lower rate, but are not prepared to waive their fees.

Earlier in my career I was director of a nonprofit organization, and just as I began my “honeymoon” period – the first six months of my tenure – I discovered that one of the most active and supportive board members was an accountant who was also handling the agency’s financial reporting and annual audit. I saw this as a clear conflict of interest, and in a very sensitive way I raised the issue with the president of the agency. The issue was then reviewed by the executive board and then discussed with the accountant. Of course I was quite thankful when he decided to give up the agency’s business and another accountant was engaged in a professional capacity.

One of the hallmarks of committed board members is their willingness to be generous with their time. It is not uncommon for lawyers, accountants, and investment brokers, among other professionals, to share their knowledge to further the organization. However, the line between being a committed volunteer and someone who seeks compensation for his or her efforts is what distinguishes the voluntary agency from a business. When board members benefit financially from the nonprofit then they can no longer be a volunteer assisting the organization in positioning itself to serve the community. There is a built-in conflict between their altruistic desire to strengthen the organization and their interest in receiving remuneration for their services.

These are a few of the ethical dilemmas that are confronted regularly by the leadership of nonprofits. Not only is it important to be aware of these issues but nonprofit boards should also have the opportunity to study Jewish texts on ethics, as well as, guidelines for avoiding conflicts of interest. This will enable board of directors to deal with the concerns in a way that builds on the collective wisdom of the members, rather than the proprietary self-interest of individual members of the board.

Stephen G. Donshik, D.S.W., is a lecturer at Hebrew University’s International Nonprofit Management and Leadership Program and has a consulting firm focused on strengthening nonprofit organizations and their leadership for tomorrow. Stephen is a regular contributor to eJewish Philanthropy.