Ethical Conduct in the Nonprofit Sector

Even though the nonprofit sector is sometimes referred to as the ‘ethical sector’ it is curious that the sector does not have ethical standards, with the exception of the professional fundraising association. Ethical conduct has become a major topic of discussion and a required focus in many management programs across the country. Nonprofit service and philanthropic organizations are uniquely perceived by the general public as being more focused on mission-driven core values than their for-profit counterparts. As Rushworth Kidder suggests, the missions of nonprofit organizations are “seen to create and sustain the moral and ethical standards of our culture,” which places an added responsibility on the shoulders of nonprofit leaders.

Leading ethically is not simply a matter of intending to do “good” or adhering to the letter of the law.   Having a morally sound purpose does not guarantee that the organization will necessarily conduct business in an ethical manner. Instilling confidence in clients, funders, and staff requires creating an ethical infrastructure and setting the tone for a corporate culture that expects and rewards ethical behavior. This must come from the top (Executive Staff and Board Members). You do not want to paralyze your organization by getting stuck in ethical analysis but you do want to raise questions as appropriate and set an example for your organization. There area many ways to address ethics issues within your organization. Here are just a few suggestions:

  1. First determine your organization’s values – they shape your approach to how you handle ethical issues.
  2. Do terms like honesty, justice, compassion, dignity, diversity, tolerance, respect for law, respect for the environment, etc. mean the same thing to all stakeholders in your organization?
  3. Understand the difference between imposed regulations (laws) and self-regulation (ethics). Read about ethics, attend an ethics seminar, or host a half-day ethics workshop for your organization.
  4. Perform an ethics audit. This is an opportunity to evaluate your organization in terms of ethical practices from the top down. Such an audit should include both organizational questions as well as individual self-evaluations. We highly recommend that organizations hire outside consulting expertise to guide them through this process.
  5. Based on the outcome of the audit, design and have board members sign, an organizational Code of Ethics. There are many excellent examples of how to structure a code of ethics.
  6. Review your by-laws periodically to make sure you have sections on board compensation, conflicts of interest, financial self-dealing etc.
  7. If you organization is going to raise much corporate sponsorship dollars it is important for your organization to pass a Gift Acceptance Policy.  This policy will act as a screen determining what money you will take and under what conditions.
  8. At the very least, before ethical issues catch you unaware, address:
  • A conflict of interest policy for board and staff—covering outside employment, employment of friends and relations, relations with vendors, investments, etc.
  • A confidentiality policy
  • An anti-discrimination policy
  • A compensation policy
  • Responsibilities of board, staff & volunteers
  • Responsibilities to staff, volunteers, clients, etc.


Rich Tips subscriber David Zemel has this tip: “ It might be worth looking at the new ethical performance standards ( Statement of Values and Code of Ethics for Nonprofit and Philanthropic Organizations ) that INDEPENDENT SECTOR recently released. You can get a copy on their web page at . They’re good and I suspect they’ll get a lot of play. You might want to direct your readers to that resource as well.”