Winter 2004

Commentary:
A Call to Enforce Principles and Practices

by Emmett D. Carson

Introduction

Every day seems to bring a new story in the media questioning the integrity of foundations or other nonprofit organizations. The breadth and frequency of media coverage should convince all but the most obstinate observer that the nonprofit sector should expect even more coverage critical of our sector. In this new environment, our most important responsibility must be to ensure the public's ongoing trust in the charitable enterprise. Any foundation or nonprofit organization that violates the public's trust puts the work of all of us in jeopardy. Failure to act quickly and decisively will further erode the public's trust in us and make additional legislation to regulate our sector, such as the proposed Charitable Giving Act (H.R. 7), warranted and inevitable.

National and state foundation membership organizations have an essential role to play in establishing and enforcing new, more encompassing, ethical standards. The Minnesota Council on Foundations was one of the pioneers in establishing standards of conduct at a time when mandatory adoption of the standards by members was considered forward thinking - even controversial. Today, however, statements of principles and practices by membership associations that lack a credible enforcement mechanism no longer meet the public's expectations for greater accountability nor should they satisfy our own expectations of accountability for our field. MCF has the opportunity to lead again nationally by establishing an effective process for sanctioning members who violate its principles. To do so, MCF will require the full support and engagement of its membership.

How Did We Get Here, and Where Do We Go?

Public expectations of accountability and transparency are justifiably higher than ever before. Our sector must learn from the public and legislative response to the business excesses like those of Enron, WorldCom and Tyco that led to the Sarbanes-Oxley legislation and other regulations. It is not enough to say that the nonprofit sector is engaged in doing good if the public believes we are not operating in good faith.

The exuberance of the 1990s, coupled with the widespread acceptance of the need for the nonprofit sector to adopt for-profit business practices, helped to create a new culture in some nonprofit organizations where individual excess was the legitimate reward for organizational success. As nonprofit organizations adopted practices that were standard for the business community, we began to forget — and to value — what it means to be a nonprofit organization, although the public's expectations of us never changed.

The nonprofit sector's challenge now is to help develop a new public vision of what our sector is and what can and should be expected of it. We must re-educate the public, and perhaps ourselves, about what it means to be a nonprofit organization in the 21st century. What are reasonable salaries and benefits necessary to attract and retain a capable and talented staff to manage complex operations? How should we rely on volunteers, including trustees? Under what conditions should trustees be compensated and how should such compensation be determined? Our national and state membership organizations must help to shape acceptable public responses to these difficult questions through enforceable standards of accountability.

The public's expectations for accountability and transparency require that our sector be at the forefront of promoting standards and insisting that those who violate those standards be held to full account. Sanctioning those who violate established principles and practices would have several benefits. It would confirm to the public that unethical behavior is not an accepted industry norm. It would establish a record of both best practices and practices to be avoided. Further, the demise of the code of silence that currently protects individuals and institutions from professional and public repudiation would be a powerful incentive for boards and staffs of nonprofit organizations to ensure that their actions are consistent with established best practices and public sensibilities.

It is also important that we demonstrate the value-added of a robust and active nonprofit sector in improving the lives of people. Imagine for a brief moment that the same energy and steadfastness that foundations used to question various provisions of the Charitable Giving Act was used to focus the nation's attention on the lack of medical insurance for poor families or on the desperate need for affordable housing in cities across the nation? What might Minnesota grantmakers accomplish if we were more actively engaged in helping the public understand the full impact of the state budget cuts on Minnesotans' quality of life, especially those who are poor? By channeling our collective influence on the big issues of the day, we can fulfill the role of the nonprofit sector within a democratic society, potentially transform the lives of people and, perhaps, in the process, re-establish our sector's bond of trust with the American people.

© Copyright 2003 Minnesota Council on Foundations
Reproduction in any form without the written permission of the publisher is prohibited.

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