February 19, 2004 | Read Time: 3 minutes
Independent Sector, a coalition of charities and foundations, has issued its first official model code of ethics for nonprofit groups to follow, the initial step in what the organization’s president said would be a comprehensive effort to deal with ethical controversies in the nonprofit world.
The code states that, while “adherence to the law is the minimum standard of expected behavior,” nonprofit groups “must do more. . . than simply obey the law.” The code calls on groups to “go beyond legal requirements and make sure that what we do is matched by what the public understands about what we do.”
The new document was written both to update an earlier publication, which discussed the importance of ethical behavior for nonprofit groups, and to respond to controversies in the nonprofit and commercial worlds, said Diana Aviv, president of Independent Sector, which represents 650 national charities and foundations. “It came in the wake of the 9/11 charity concerns of the public about the way in which funds were promised to be used and were not necessarily used in that way, and also the corporate scandals that had begun to unfold,” Ms. Aviv said. “There was a general sense that we need to make sure our sector has codes of ethics and basic statements of standards.”
Conflicts of Interest
The model code suggests that Independent Sector’s members and all other nonprofit groups enact their own ethics statements, saying such statements should include a policy ensuring that even the appearance of a conflict of interest between the organization and its managers or board members is avoided or at least fully disclosed. Other sections call for organizations to spend “a reasonable percentage” of their annual budgets on programs that carry out their mission, to compensate their staff members adequately, to provide comprehensive and timely information to the public, and to “respect the rights of donors” — meaning in part that donors should be assured that their gifts will be used for the purposes for which they were given.
Ms. Aviv acknowledged that simply adopting an ethics code would not prevent an organization from behaving unethically. “For an ethics code to be effective, an organization needs to go through the process of adopting it, of having staff at all levels talk about it, of having the board members go through a similar process, and having a chief executive officer who acts in ways that reflect the code. If the organization doesn’t have a culture of ethical practice, codes have little meaning.”
Independent Sector plans to provide guidance on specific ethical concerns, she added. “In some instances, there may be arguments on both sides of an issue, and even the analysis of those issues would be helpful. So this is just the beginning.”
Among the topics likely to be examined in the future, Ms. Aviv said, are board compensation and loans to executives. In addition, she said Independent Sector wants to focus on concerns Congress has raised about donations of products and services, such as real estate and cars. Some congressional investigators have questioned whether donors inflate the value of such gifts on their tax forms and are looking at ways charities can more accurately assess what the gifts are worth.
Independent Sector’s “Statement of Values and Code of Ethics for Nonprofit and Philanthropic Organizations” is available free on the group’s Web site, http://independentsector.org, or by calling (202) 467-6100.
