Just because an organization is labeled, “nonprofit” does not mean that it does not earn a profit. In reality, the opposite is usually true. Of the United States’ 30 largest nonprofits, 19 had a 2021 revenue that topped one billion dollars. Even small nonprofits can generate hundreds of thousands of dollars in revenue. However, individuals who aspire to venture down the road of nonprofit leadership should be cognizant that this level of cash flow can eventually lead to temptation, conflicts of interest and even fraud.
However, nonprofit leaders should expect to have their ethical principles tested at some point in their careers. Dealing with fundraising, volunteers and community funds requires that nonprofits operate using ethical strategies and have the proper moral standing to make the right decisions.
One of the best ways to prepare yourself for the responsibilities of ethical, nonprofit work is by first earning a Master of Public Administration (MPA) degree. Barry University’s MPA program, in particular, specializes in nonprofit administration, which provides a fundamental background in ethics on which you can build your career.
The following are three ethical principles of nonprofit leadership to be aware of:
1. Act With Transparency and Integrity
According to The Leadership Challenge by James Kouzes and Barry Posner, honesty is the quality most frequently cited as the No. 1 characteristic necessary for leadership. While this is true for leaders at any large organization, nonprofit leaders are held to a much higher standard. This is because the public expects nonprofit leaders to behave with compassion and respect given their charitable nature, much more so than CEOs or political figures.
Within a nonprofit, it is up to the board members and trustees to set the tone from the top of the organization down. Whether they know it or not, high-ranking members set the standard for what is or isn’t acceptable within the organization. Likewise, volunteers subconsciously look to their leaders for guidance on how to behave.
Additionally, the behavior of a nonprofit leader is under constant scrutiny from the general public. One wrong decision is enough for the public to lose faith in their character. At a major corporation, this might not be the end of the world as long as it doesn’t impact sales or investor confidence. But at a nonprofit, losing just one major donor can be a devastating blow. These are factors that a nonprofit leader must consider when faced with difficult moral decisions.
One of the best ways to handle these difficult decisions is to establish a set of rules that can help guide you and your organization’s decision-making by creating a code of ethics for your nonprofit.
2. Adopt a Code of Ethics
The National Council of Nonprofits recommends that nonprofits establish a set of guiding principles, such as a code of ethics. Practically all public organizations in the U.S. have one, which means your nonprofit should also have one. You can refer to these principles as a code of ethics, a statement of values, a code of conduct or something similar.
Your code of ethics should set the standard for your nonprofit’s operations. It should guide the organization’s decision-making at every level of leadership. Additionally, it can help employees, volunteers and board members know what behavior is acceptable. In some cases, it may help to have two different codes of conduct: one for leaders/trustees and another for volunteers.
On top of that, a good code of conduct can help attract employees, board members and donors. For the most part, talented individuals have strong principles. They will want to see that your organization does, too, before associating themselves with it.
While a code of ethics is highly recommended, it’s not legally required. However, there are plenty of elements that are. As a nonprofit leader, you’ll need to ensure that you run your organization within the legal requirements.
3. Learn How to Navigate Governmental Oversights
Moral decision-making isn’t just about preserving your donor base and sleeping soundly at night. Acting ethically is also very much a legal issue.
Since nonprofits are exempt from paying federal income tax, the Internal Revenue Service prohibits them from operating in the interests of private shareholders or individuals. In other words, nonprofits are not legally allowed to create value for their creators. Any attempt to do so could be considered fraud, just one of the many examples of legislated ethical standards that nonprofit leaders navigate.
For individuals hoping to start down the path of nonprofit leadership, this legal perspective could present a roadblock.
The complex governmental legislature is not something an individual typically learns in their free time. It almost always requires formal education, so receiving an advanced degree such as an MPA specializing in nonprofit administration can be an advantage. Barry University’s program offers a specific course titled Values and Ethics in Administration. This course examines the classic moral philosophies that establish the basis for ethical practices in the world today. Students can complete the entire program online in as little as 14 months.