Ethics in the Nonprofit Sector
Ethics in the Nonprofit Sector
Nataly Schwartz
Nonprofit and Association Organizations and Issues
University of Maryland University College
Jennifer J. Wood
March 30, 2011
“When governmental and nonprofit organizations are good, they are very good. And good they must be, because we entrust them with society’s most important functions- educating our minds, uplifting our souls, and protecting our health and safety…But when governmental and nonprofit organizations are bad, they are horrid” This is the argument put forth by Regina E. Herzlinger in her 1996 article from the Harvard Business Review. Herzlinger, and many others, are troubled by the ethical issues faced by the nonprofit sector and the decrease in public trust. The recent economic collapse, brought about in part by dishonest corporate behavior, has raised the issue of business ethics in general to the forefront. Nonprofit organizations tend to be held to a higher standard. “Public persona often attaches an untarnished, ethically centered structure to the nonprofit sector” (Smith, McTier & Pope, 2009). This perception is based on the role that nonprofits play in our society, often filling gaps left by government agencies to care for our most needy. But the unique role of these organizations in our society creates some unique ethical challenges, which can be complicated by the high standard to which they are held. These organizations face ethical dilemmas which are unique to the nonprofit sector and therefore must utilize unique methods to resolve these issues.
There are a number of key ways in which nonprofits differ from profit driven companies, which impact an organization’s ethical framework. One such factor is the “absence of the manager-stockholder or agent-principal paradigm, typical of for-profit businesses and due to their humanistic image” (Bhandari, 2010). When analyzed using agency theory, nonprofits lack a clearly defined principal/owner, decreasing overall
Nataly Schwartz
Nonprofit and Association Organizations and Issues
University of Maryland University College
Jennifer J. Wood
March 30, 2011
“When governmental and nonprofit organizations are good, they are very good. And good they must be, because we entrust them with society’s most important functions- educating our minds, uplifting our souls, and protecting our health and safety…But when governmental and nonprofit organizations are bad, they are horrid” This is the argument put forth by Regina E. Herzlinger in her 1996 article from the Harvard Business Review. Herzlinger, and many others, are troubled by the ethical issues faced by the nonprofit sector and the decrease in public trust. The recent economic collapse, brought about in part by dishonest corporate behavior, has raised the issue of business ethics in general to the forefront. Nonprofit organizations tend to be held to a higher standard. “Public persona often attaches an untarnished, ethically centered structure to the nonprofit sector” (Smith, McTier & Pope, 2009). This perception is based on the role that nonprofits play in our society, often filling gaps left by government agencies to care for our most needy. But the unique role of these organizations in our society creates some unique ethical challenges, which can be complicated by the high standard to which they are held. These organizations face ethical dilemmas which are unique to the nonprofit sector and therefore must utilize unique methods to resolve these issues.
There are a number of key ways in which nonprofits differ from profit driven companies, which impact an organization’s ethical framework. One such factor is the “absence of the manager-stockholder or agent-principal paradigm, typical of for-profit businesses and due to their humanistic image” (Bhandari, 2010). When analyzed using agency theory, nonprofits lack a clearly defined principal/owner, decreasing overall
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