Ethical Leadership for Nonprofits

Printer-friendly version

Did you know that honesty is the quality most often cited around the world as the #1 most important characteristic for leadership? (Source: The Leadership Challenge, by James Kouzes and Barry Posner.)

The significance of ethical leadership is of course not limited to the charitable nonprofit sector, but we think nonprofit leaders have a special obligation to demonstrate their commitment to values such as accountability, compassion, honesty, service to others, transparency, and respect. (A little sense of humor goes a long way too!) Ethical leadership is an important way for charitable nonprofits to maintain the public’s trust.

The connection between public/trust

Nonprofit organizations are “public benefit” corporations; the purpose of their existence is to benefit the public. (See IRS explanation of "exemption requirements.") The mission of a charitable nonprofit expresses the particular way that the organization will fulfill its public benefit purpose. Fittingly, board members are often referred to as “trustees,” which reinforces the concept that the assets of a nonprofit are entrusted to the board members, who have a legal and fiduciary duty to ensure that the nonprofit uses its assets to advance its public benefit mission.

It is one thing to exist for the benefit of the public; it is another to earn the public’s trust, which requires ethical leadership and responsible - and responsive - practices. Donors will give to organizations they trust. Earning trust requires using contributions wisely, but also demonstrating a commitment to ethical conduct. Volunteers will invest their time in causes when they trust that the nonprofit is acting ethically. And clients and consumers will return to a nonprofit for services, and recommend that nonprofit to others, when the nonprofit has shown it is accountable for its actions, transparent in its financial dealings, and responsive when concerns come to the nonprofit's attention.

Practice Pointers

Charitable nonprofits can demonstrate ethical leadership with these practices:

  • Acknowledge donors and contributions in a timely fashion: All donors expect a ‘thank you’ note for their gifts, large or small. While there are legal requirements governing what, when, and how a nonprofit should thank donors, the “substantiation rules” still leave a great deal of discretion in the nonprofit’s hands. Thanking donors in a timely fashion and providing them with substantiation needed to satisfy their own tax filing requirements is not only legally mandated, but ethically appropriate. IRS Publication 1771 explains the substantiation rules in more detail and with practical examples.
  • Be cybersecure: Your organization's donors and beneficiaries of services may be entrusting personal information to the organization. If so, they expect the nonprofit to maintain that information in confidence and take steps to secure personal information from cyberhacking. Learn about ways to protect your nonprofit's data.
  • Define your nonprofit's values - post them on the website and discuss them at a team meeting whenever a new teammate is hired. Make sure that everyone (board members included) understands the requirement that charitable nonprofits be operated at all times and in all ways for "public benefit," and that the activities of the organization may NOT "inure to the benefit" of private individuals.
  • Adopt a code of ethics/code of conduct - Many state associations of nonprofits promote ethical principles through Principles and Practices or Standards for Excellence ® tailored for nonprofits in their states, that any nonprofit can adopt to ensure that its fundraising practices are ethical and legal in the state(s) where the nonprofit operates.
  • Adopt a conflict of interest policy
  • Conduct an ethics audit
  • Conduct a legal audit to make sure that your nonprofit’s house is in order from a nonprofit corporation law perspective, and to be aware of and follow special state or federal legal requirements that affect the nonprofit’s unique programs and services.
  • Adopt the Association for Fundraising Professionals' "Donor Bill of Rights" to raise awareness and define guidelines for staff and volunteers so that donors are treated respectfully.
  • Provide attribution when using material/intellectual property created by others; and ask for permission before using!
  • Establish internal complaint procedures (such as through a "whistleblower" policy) that encourage individuals to come forward with concerns, and prohibit retaliation.
  • Photograph responsibly, and only use photos of people with their permission.
  • Respect confidentiality - Nonprofits often engage with clients and consumers in ways that touch on confidential matters. All nonprofits should consider whether adopting a confidentiality policy is appropriate.
  • Follow environmentally sustainable practices to demonstrate respect for the planet.
  • In times of crisis be transparent and respond in a timely manner.
  • Be transparent in all financial operations and charitable solicitations.

Resources

Find Your State Association of Nonprofits

Find Your State Association of Nonprofits

Connect with local resources and expertise

Find

Connect With Us

1. Sign up for updates

Stay up-to-date with the latest nonprofit resources and trends by subscribing to our free e-newsletters.

2. Follow us on social media