What is ethics? Ethics is a discipline that deals with what is good and bad and with moral duty and obligation. It encompasses the principles and rules governing the standards of conduct of an individual or group, such as a community or a profession. Sometimes referred to as moral philosophy , it is the study of the general nature of morals and of the specific moral choices to be made by a person or group. Ethics is not only the “code [s] of conduct actually adopted by a group of people… [but also] the activity of appraising and perhaps revising these codes” (Jones et al. 1977, pp. 1–2).

Ethics, therefore, is not a static concept. It is a process of negotiation and interaction between individuals and their consciences, their gods, their impulses, their intentions, and their communities. All these relationships play a role in forming our personal and communal ethics, but the order in which they are prioritized varies across different ethical approaches . We see evidence of this when we study the evolution of ethics and ethical theories over time. The emphasis on man’s relationship with God evident in the writings of Thomas Aquinas and other medieval thinkers defines ethics in terms of the divine command , whereas Utilitarianism prioritizes interactions between members of groups or communities.

Why Should We Care? What is your personal view of ethics? You may feel very strongly that “right” and “wrong” are black and white concepts, and that you can recognize unethical behavior in others and even in yourself when you see it. But what happens when you step into a position of leadership, and your decisions begin to impact not only yourself but also others who depend on you? Would you feel prepared to defend your actions and your personal views on right and wrong to the public? These questions are difficult to answer but important to contemplate for anyone hoping to pursue a career in nonprofit management and leadership.

But you might also be thinking: Isn’t ethical behavior important in all other domains of our lives? Whether you work for a for-profit or the government, shouldn’t these organizations also instill ethical behaviors? Why, then, should we care about ethics specifically in the nonprofit context?

We chose to write this book for students and practitioners interested in the nonprofit world for several reasons. First, and foremost, just because an organization is a nonprofit, meaning that it cannot distribute its surplus to any individual and that it has a charitable mission , does not prevent it from performing unethical and corrupt behaviors. Nonprofit organizations frequently come under intense public scrutiny because of their tax-exempt status and socially driven missions . These social missions often sound good on the surface, but their impact is difficult to measure in practice. Issues can arise when the public demands that nonprofits hold themselves accountable to their missions and when organizations have not done an adequate job of documenting or justifying their decisions and actions. These issues intensify as the number and size of donations to specific organizations increase. Similarly, larger and older nonprofit organizations , with deeper roots in their communities or greater geographic scopes, are more likely to come under fire for mismanagement or questionable ethics. As we outline later in this chapter, numerous scandals take place in small and large nonprofits across the country each year, as the public demands greater accountability .

Second, despite the scandals , nonprofits are regarded by the general public as more trustworthy than their for-profit or public-sector counterparts. Although you may find it unfair, the reality is that nonprofits are typically held to a higher ethical standard than either for-profit or governmental organizations . On the one hand, this expectation is unrealistic and even damaging to the organization’s ability to satisfy its goals and purposes, especially when the public demands nonprofits abide by certain practices without a full understanding of the day-to-day operations and needs of the organization and its constituents. Some of these practices include capping executive salaries or using a certain proportion of donated funds for programmatic expenses. As authors like Doug White (2010) have noted, these realities are facts of life for nonprofit organizations and their leadership, whether they like it or not. On the other hand, the centrality of the public trust in the functioning and success of nonprofit organizations and the sector at large is one of the elements that makes them distinct from their for-profit and public-sector counterparts, and consequently, gives them unique advantages, opportunities, and positions in the fabric of civil society and social life.

As such, students of the nonprofit sector and current practitioners alike must consider the role that systematic, ethical decision-making plays in the establishment and maintenance of the public’s trust in their organization. The public, as well as donors , boards of directors , volunteers , employees , and clients , must continue to value the organization’s goods and services , as well as its contributions to society at large. They must buy into the work of the organization and the social good it represents. Their buy-in is demonstrated both directly through donations of money and time and indirectly through the opportunity cost of foregone tax revenues. Their trust, once damaged, is difficult to repair, and can have long-lasting and far-reaching effects on the nonprofit’s reputation and ability to carry out its work. Thus, it is even more imperative to keep up this reputation since nonprofits rely on public goodwill , and many of their resources come from voluntary donations of time and money.

Third, since 501(c)(3) charitable nonprofits , which are the focus of this book, are organized for the benefit of the public and often cater to a vulnerable population, unethical behavior robs those most in need of opportunities to get the goods and services they cannot afford. As we will see in the scandals described below and in the example cases provided in this volume, unethical decisions that lead to mismanagement in nonprofit organizations impact a variety of stakeholder groups, and can have particularly detrimental effects on the organization’s clients , those who are the direct recipients of the goods and services provided. In the case of health and human service organizations , for example, unethical decision-making can expose already vulnerable groups to even worse conditions. In the USA , as the government contracts with more and more nonprofits to provide social services to the public, the stakes around making the right decisions on behalf of clients , who cannot access what they need easily from another source or sector, increase. Likewise, in the realm of international aid and relief nonprofits , unethical decision-making can lead to catastrophic consequences.

Fourth, as nonprofits often have no single measurable bottom line and have multiple stakeholders , when a decision needs to be made in which one stakeholder (or one bottom line ) is privileged over another, it is not always clear which needs should be prioritized, and why. We elaborate on these issues more in Chapter 2. While we cannot provide a universal, “one size fits all” formula for prioritizing these competing interests and resolving the tensions that often arise, we can suggest approaches for thinking about these questions systematically, which will allow you to gain confide...