The real ethical problem in fundraising.

June 15, 2017

 

 

 

In the second part of his blog, Tom Brady says the failure of fundraising ethics is that not that our ethical theories are broken, but that we have forgotten to use them.

 

In the first part of this blog, I argued why I thought Rogare’s new theory of fundraising ethics is flawed – because professional fundraisers never operate in a vacuum – and that the existing ethical theories were adequate. The gap in how our ethics are applied may be a problem with fundraisers not adhering to existing standards.

 

A large part of the white paper’s argument is that rights balancing ethics forces fundraisers to consider that they owe a duty to the beneficiary to raise money for them. When placed alongside the right of donors or potential donors not to be subjected to undue pressure, it creates a dilemma.

 

The white paper quotes the International Statement of Ethical Principles in Fundraising clause “Fundraisers are strictly answerable to all stakeholders including donors, beneficiaries, and employers”.

 

 

At face value it appears to put beneficiaries’ needs at the same level as the others, but the purpose of this clause is to ensure fundraisers protect dignity and privacy - not find funds.

 

Thus we have a mismatch.

 

Somebody within a charity must have a financial duty to the beneficiary to raise money for them but it is not the professional fundraiser.

 

Charitable organisations exist because good people see a need and respond to it. When they require more resources, they ask for help. That help may be money, but it is given with the understanding that it will buy or hire resources (or be passed on as grants).

 

These organisations are vital for our society to function, but none of them has a moral right to exist. That right only extends to the needs they meet on behalf of those who support them. However, by acting for their beneficiaries’ welfare, they take on a duty to the beneficiary to raise money to meet their needs.

 

Charities meet needs with the specific actions of specific staff. If the organisation is big enough, people who are experts at delivery are paid to conduct the work. Those people have a duty to represent the needs of the beneficiary to the charity’s leadership and to deliver the support.

 

When donors give money, it is an open moral contract not fulfilled until the promised work is done. This contract is between the donor and the charity’s leadership, who therefore have the fundraising duty to the beneficiary. If the charity employs a fundraising expert, it does not delegate this duty to them. You cannot delegate accountability.

 

Professional in-house fundraisers are paid to be agents of the relationship on which the donor-leadership contract is based. They represent the organisation to the donor and the donor to the organisation. They guide the process but can no more be part of the relationship than a marriage counsellor can be part of a marriage. 

 

When a fundraiser leaves a role, the donor stays with the organisation, not leaves with the fundraiser.

 

The biggest misunderstanding is that the professional fundraiser should be the primarily solicitor of donations. How solicitation is conducted will be according to the values of the organisation and the community to which it belongs. Professional fundraisers are bound by rules regarding not subjecting potential donors to undue pressure, so often they are the wrong people to solicit.

 

By employing someone to solicit, you create a conflict of interest. One of our universal ethical standards is that percentage-based compensation is not allowed. There are examples of fundraisers who have acted ethically and beyond reproach while being paid a percentage commission, but all of our professional bodies agree that their members will not do it. It is tied in with the conflict of interest inherent in rewarding fundraisers commercially.

 

Charities that employ fundraisers do so because they need more money than they could get without them. That money is charitable, that is, given without an expectation of personal reward. However a fundraiser is paid according to performance. Therefore, someone paid to fundraise could be put in a position where there is a financial incentive to undermine how the donor feels about the charity.

 

This is the basis of the remuneration rules in our professional ethical standards. These rules can put fundraisers in conflict with their employers. A charity’s desire to serve its beneficiaries can outweigh protecting a fundraiser’s career, so clear professional codes serve to protect fundraisers.  

 

There are different kinds of fundraisers.

 

The person who asks for money should be the person most appropriate to how the donor sees their relationship with the organisation. It may be the ceo or another staff member, a member of the board or a volunteer. These asks are not constrained by the professional ethical standards of fundraising, but are conducted according to the values and ethics of the organisation and existing relationships, (which is why volunteer solicitors are sometimes more effective.)

 

The duty to solicit remains with the charity’s leadership, but they should heed the advice of their paid expert in such matters. The professional fundraiser may sometimes be the right person to make an ask, but will usually facilitate the others’ asking – for instance through direct mail or appeals – and ensues the integrity of the whole effort.

 

A professional fundraiser should be thought of as a resource for helping boards and management bring donors into their organisations and keep them there – rather than an income stream. Boards and ceos should expect their fundraisers to commit to and promote the ethical framework surrounding this role.

 

A third-party paid solicitor is different again. Usually the solicitors are part of a commercial organisation based on profit maximisation. The motivating factors in commercial behaviour are incompatible with those in charitable behaviour, so a commercial organisation should only be engaged within a commercial framework. To do otherwise creates the risk of permitting actions that might cause unalterable damage to donor trust.

 

We must be very careful how we compensate anybody we charge with soliciting from donors. It is not enough to say that they are not paid a percentage. We must be satisfied that their compensation cannot put them in conflict with the charitable purpose – even if it means imposing more rules than usual. According to the AFP standard on compensation:

 

“There is an inherent conflict of interest between charities founded without intent of profit or private benefit, and employees whose compensation and primary motivation are based on personal financial gain.”

 

Any compensation that has the potential to put personal gain over charitable purpose should be avoided. In order to compete, profit-making organisations must do anything they can ‘within the rules’. Grey areas do not work. Ethical standards for commercial operators must be much more prescriptive than for others.

 

Furthermore, although a charity can assume its employees will be aligned or sympathetic to its values, it can’t about employees of a commercial organisation. A third-party is less likely to be aware of the in-house culture.

 

The white paper makes no distinction between any of the different types of fundraiser. It groups them all as professional fundraisers and has created the argument for a standardised ethics model, flexible enough for all.

 

Only paid fundraisers need the standards but we cannot have one set of ethical standards for in-house and third-party. If we do so we run the risk of watering down the standards that charities have to protect their donor relationships in order to meet the commercial needs of the third-parties.

 

The vast majority of public attacks on the fundraising practice have been around donor acquisition. Practices that have become commonplace in our sector have created a public perception that charities do not care for their donors. A professional fundraiser should never employ such practices without advising their governance and/or management of the potential impact on the donor relationship. Yet it has happened.

The government regulator’s response is to subject the practice to more prescriptive rules, which is the classic response to poor commercial ethical behaviour. The non-profit sector claims that it is different, yet it is being tarred with the same brush for not acting like it.

 

I believe the ethical gap is that we have tried to control commercial fundraisers using ethical standards designed to give in-house professional fundraisers the flexibility they need to manage relationships. We have not treated them differently.

 

This century there has been a staggering growth in the number of commercial third-party acquisition providers, yet the ethical standards have remained largely unchanged. Whenever a dynamic is changed, the rules must be tested, otherwise we have no way of measuring their relevance. This hasn’t happened.

 

We are also experiencing pressure from boards who are grappling with hybrid governance – that is, balancing the competing needs of charitable, public and commercial governance. When board members more used to a commercial environment are faced with conflicts, they are less likely to listen to a fundraiser telling them what they can’t do for ethical reasons. They will ask to see the rules – especially if there is precedence for what they want.  

 

The ethical grey area about what is permissible has shifted towards financial expedience. The cautionary voice has been muted. In some cases, the conduct of the commercial operators has set a new acceptable standard – based primarily on results. It is no wonder that there has been an increase in complaints.

 

Can fundraising leaders really say that we have not let self-interest influence our decisions? We have to act more like a profession but will not be viewed as one if we will not enforce our own ethical standards. A true profession supports its members when their professional codes of conduct are questioned by their employers. A real profession has a voice that is respected.

 

All of this is much clearer with an international perspective. The Americans especially have done a great deal of work on the conflict between commercial and charitable behaviour. The immediate need of the profession is not more knowledge on how to fundraise – there is plenty of that – but in understanding the charitable financial environment and its conflicts.

 

To ‘get our ethical house in order’ we need fundraising leaders and our professional associations to re-engage with current standards and have the courage to defend them to ceos and boards in the sector. We need a revision of codes of conduct to include clear standards for those activities the public have grown to hate. And we need to use our teeth to hold professional fundraisers accountable. What we do not need is for our ethical goalposts to be shifted.

 

Tom Brady is a strategic fundraising consultant who has worked with boards and high net worth donors in the UK, Australia and New Zealand. He is unashamedly a third-party provider.

 

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