Archive for ‘Ethics’

December 19, 2014

Is Spelman College Unethical?

Spelman College has announced that it is suspending an endowed professorship in humanities that was funded by Bill and Camille Cosby. Spelman issued this one-paragraph statement:

December 14, 2014 — The William and Camille Olivia Hanks Cosby Endowed Professorship was established to bring positive attention and accomplished visiting scholars to Spelman College in order to enhance our intellectual, cultural and creative life; however, the current context prevents us from continuing to meet these objectives fully. Consequently, we will suspend the program until such time that the original goals can again be met.”

The Cosby family donated $20 million to Spelman in 1988. In 1996, Spelman opened the Camille Olivia Hanks Cosby EdD Academic Center. At that time, “an endowed professorship named for Drs. Cosby was also established to support visiting scholars in the fine arts, humanities and social sciences as well as Spelman College’s Museum of Fine Art,” according to a November 25 written statement by Beverly Daniel Tatum, Spelman’s president.

The November statement also explained:

The academic center and endowed professorship were funded through a philanthropic commitment from the Cosby family made more than 25 years ago, and at this time there are no discussions regarding changes to the terms of the gift.”

Just 19 days later, Spelman reversed its position and suspended the professorship. When contacted, several Spelman officials refused to comment. A representative for Cosby also declined to comment.

Bill Cosby by remolacha.net via Flickr

Bill Cosby

For the past several weeks, Bill Cosby has been the target of a large number of sexual assault allegations. However, no criminal charges have been filed against Cosby. Spelman knew this in November. It’s unclear why the College abruptly suspended the endowed professorship now. While additional allegations have been made in the intervening weeks, Cosby still has not been charged with a crime.

To paraphrase Tyler Perry, if Cosby did commit the sexual assaults, it’s a terrible situation. If Cosby did not commit the sexual assaults, it’s a terrible situation. I won’t comment on the Cosby situation beyond that. However, I do want to explore the Spelman news because it has broader implications for all nonprofit institutions.

Nonprofit organizations are ethically required to use a donor’s contribution in the way in which the donor intended. The applicable portions of the Donor Bill of Rights “declares that all donors have these rights”:

IV. To be assured their gifts will be used for the purposes for which they were given….

V. To receive appropriate acknowledgement and recognition….

VI. To be assured that information about their donations is handled with respect and with confidentiality to the extent provided by law.”

The relevant passages from the Association of Fundraising Professionals Code of Ethical Principles state:

December 12, 2014

Is the American Red Cross Hurting Your Fundraising Efforts?

The American Red Cross regularly touts how responsible it is with donors’ money. ‘We’re very proud of the fact that 91 cents of every dollar that’s donated goes to our services,’ Red Cross CEO Gail McGovern said in a speech in Baltimore last year. ‘That’s world class, obviously.’

“McGovern has often repeated that figure, which has also appeared on the charity’s website.

“The problem with that number: It isn’t true.”

That stunning revelation was made in a recently released investigative report by ProPublica and NPR.

National Red Cross HQ by NCinDC via Flickr

American Red Cross National Headquarters

The Red Cross is a great organization. My wife and I have been donors. I even did a blog post highlighting the effective stewardship practices at the Red Cross and encouraging readers to support the organization. The American Red Cross does not have to “serially mislead” the public.

Yet, that’s exactly what it has been doing according to the reporters. While the organization has told the public that 91 cents of every donated dollar goes to services, its fundraising cost to raise a dollar has been 17 cents on average. And that does not include organization overhead expenses. Clearly, the Red Cross has not been as efficient as its leader has claimed.

When reporters contacted Red Cross officials for more information, those officials were uncooperative. However, the organization did change the claim on its “website to another formulation it frequently uses: that 91 cents of every dollar the charity ‘spends’ goes to humanitarian services. But that too is misleading to donors,” states the investigative report.

Sadly, this is not the first time that the Red Cross has been accused by the media of misleading the public.

As a Red Cross supporter and a fundraising professional, I’m alarmed and disappointed by the behavior of the Red Cross. Misleading the public, either through lies or the clever manipulation of language, is unnecessary, unethical, and unacceptable.

Such inappropriate behavior erodes public trust, which makes fundraising more difficult. Perhaps this is one reason that the Red Cross has had trouble consistently raising more money. In 2009-10, the Red Cross raised $1.1 billion. In 2012-13, the Red Cross again raised $1.1 billion.

In a study that examined the relationship between trust and philanthropy, researchers Adrian Sargeant and Stephen Lee found, “there would appear to be a relationship between trust and a propensity to donate.” In addition, “there is some indication here that a relationship does exist between trust and amount donated, comparatively little increases in the former having a marked impact on the latter.”

February 23, 2014

Honoring Donor Intent: When it Works, When it Doesn’t

Donor-centered fundraising is smart fundraising. Part of being donor centric involves always honoring the donor’s intent.

The Association of Fundraising Professionals’ Code of Ethical Principles states:

[Fundraising professionals] recognize their responsibility to ensure that needed resources are vigorously and ethically sought and that the intent of the donor is honestly fulfilled.”

Honoring donor intent is essential for at least two reasons:

  1. It’s the right thing to do.
  2. It’s a fundamental way to earn and deserve trust. Without trust, fundraising would be virtually impossible.

To honor donor intent, you must first ensure that the contribution is received according to the donor’s specifications. This is particularly important for planned gifts when the donor is no longer around to make sure everything goes according to plan. The charity becomes the voice of the donor.

The next part of honoring donor intent requires that the organization use the gift for the purpose specified by the donor.

Unfortunately, honoring donor intent is not always an easy thing to do. Sometimes, it works the right way while other times it morphs into something ugly.

Let’s look at two examples.

The Pennsbury Scholarship Foundation learned of the passing of an elderly woman in the community. I first shared her story in my book, Donor-Centered Planned Gift Marketing. A member of the all-volunteer organization’s board knew the woman and knew the Foundation was in her will.

The woman’s attorney produced a copy of the will which included a nearly $1 million bequest for the Foundation and nearly nothing for her two estranged children. However, the children produced another version of the will where the charitable provision was whited-out, literally.

The attorney for the children approached the Foundation to negotiate a settlement agreement. The Foundation, under the advice of legal counsel, held firm and asked that the matter proceed to court as soon as possible.

The attorney for the children initiated a series of delaying tactics hoping that the Foundation would eventually negotiate rather than have the matter drag out. Under the advice of legal counsel, the Foundation held firm.

About one year later, surprisingly quickly given the circumstances, the court upheld the clean version of the will, and the Foundation received the full bequest.

In the Foundation’s case, the donor’s interest was in alignment with the charity’s. The Foundation was right to defend the donor’s wishes. By defending the donor’s interest, the Foundation ultimately benefited. More importantly, young people in the community will benefit for years to come as the Foundation provides scholarships that would not otherwise be possible to award.

Sadly, there are times when protecting the interests of the donor cross a line. In those cases, the organization goes from being donor centric to being self-centered, even greedy. This might be the case with the University of Texas.

Warhol's Farrah Fawcett portrait on exhibit at the UT Blanton Museum.

Warhol’s Farrah Fawcett portrait on exhibit at the UT Blanton Museum.

The University received a bequest from Farrah Fawcett. The Seventies icon left “all” her artwork to the University where she had studied art prior to the successful launch of her acting career. The collection included at least one portrait of Fawcett by famed artist Andy Warhol.

However, the Fawcett story is complicated. Warhol actually did two, almost identical pieces. According to Ryan O’Neal, the actor and on-again-off-again boyfriend of Fawcett, Warhol gave one portrait to Fawcett and the other to him.

December 27, 2013

Top Ten Posts of 2013, and Other Reflections

As 2013 draws to a close, I thought it would be interesting to look back briefly before we march into the New Year.

Happy New Year!

Happy New Year!

For starters, let’s look at which of my posts have been the top ten most read in the past year:

1. Can a Nonprofit Return a Donor’s Gift?

2. 6 Ways to Raise More Money without New Donors!

3. 5 Words or Phrases that Can Cause Donors to Cringe

4. 5 Things Never to Do in Your Phone Fundraising Calls

5. 5 Tips for Giving Donors What They Really Want

6. How NOT to Run a Capital Campaign

7. Prospect Research v. Invasion of Privacy

8. 7 Magical Words to Earn Respect, Trust, and Appreciation

9. Do You Make Any of These Mistakes When Speaking with Donors?

10. Do Not Let This Happen to Your Organization

I invite you to read any posts you might have missed by clicking on the title above. If you’ve read them all, thank you for being a committed reader.

I’m honored to know that I have readers from around the world. (I love the Internet!) While I appreciate all of my readers, I thought it would be interesting to look, beyond the United States, to see my top ten countries for readership:

1. Canada

2. United Kingdom

3. Australia

4. India

5. Netherlands

6. Philippines

7. France

8. Germany

9. New Zealand

10. Italy

Overall, Michael Rosen Says…, has seen a 20 percent increase in readership in 2013 compared with 2012. I thank everyone who made that possible by dropping by to read my posts. I especially want to thank those who have subscribed.

When you subscribe for free in the column at the right, you’ll receive email notices of new posts, including “Special Reports” which are not otherwise widely publicized. Beginning in 2014, subscribers will also receive exclusive bonus content and a limited number of subscriber-only special offers directly from me. So, if you’re not already a subscriber, sign-up now.

Just as I value all of my readers, I also greatly appreciate those who take the time to “Like” my posts, share my posts, Tweet my posts, re-blog my posts, and comment on my posts. In particular, I want to recognize the following people who have commented most often in 2013:

November 15, 2013

Prospect Research v. Invasion of Privacy

Edward Snowden became a worldwide “celebrity” when he leaked classified information about the US National Security Agency’s spying programs.

In the process, Snowden’s revelations have fueled discussions around the globe about privacy and access to information.

The Economist recently published a chart by the Boston Consulting Group that looks at how people around the world feel about the privacy of different types of information:

Privacy - The Economist 1113  

As you can see from the above chart, people around the world, particularly in the West, value their privacy. For example, the vast majority of Americans consider financial data and information about children to be “moderately or very private.”

That might explain why alumni from New York’s prestigious Dalton School were upset when volunteer solicitors were given information about the children of fundraising prospects. Specifically, solicitors were told about the children of prospects who had applied for admission to the School but who were rejected.

An alumna who had previously donated to the School described the situation to The New York Times as “horrible.” That’s the last thing you want someone to feel about your development program. It’s the last thing you want someone to say about your organization to a reporter.

The head of Dalton issued a public apology and a promise to do better.

It’s easy to understand the tension that exists between nonprofit organizations and their donor prospects. Organizations want to gather as much useful information as possible, and they want their professional and volunteer solicitors to know a great deal about the people they will approach in order to maximize success. However, this posture is often at odds with prospects who want and expect what they consider their personal information to remain private.

Charities face two issues when it comes to prospect research and privacy:

October 30, 2013

Special Report: Two New Books Acknowledge Rosen

[Publisher’s Note: “Special Reports” are posted from time-to-time as a benefit for subscribers and frequent visitors to this blog. “Special Reports” are not widely promoted. To be notified of all new posts, including “Special Reports,” please take a moment to subscribe in the right-hand column.]

 

We’re honored to report that two new scholarly books have acknowledged the assistance and helpful insights of Michael J. Rosen, CFRE.

American Charitable Bequest Demographics (1992-2012), by Russell James, JD, PhD of Texas Tech University, provideRussell James Books an extensive review of the changing nature of American charitable estate planning. The book presents over 50 charts and graphs in simple, visual fashion with each page containing one graph or chart, comments on the importance of the information, and details about the methodology behind the data.

With James’ book, you’ll learn about the estate planning trends that affect planned giving; you’ll discover how different demographic factors (i.e.: age, race, gender, family status, etc.) affect charitable estate planning; you’ll see the impact of giving and volunteering on charitable estate planning. You’ll also gain many other useful insights.

You can purchase a paperback version of James’ book at The Nonprofit Bookstore (powered by Amazon), Alternatively, thanks to the kindness of Russell James, readers of Michael Rosen Says…may download a FREE copy of the e-book version here, for a limited time.

September 13, 2013

$250 Million Gift to a Nonprofit is Withdrawn … Sort of

The news headlines were stunning:

Centre College Loses $250-Million Gift — Chronicle of Higher Education 

Centre College Loses $250 Million Gift After “Market Event” — Bloomberg 

Kentucky College Loses $250 Million Gift from Charitable Trust — Reuters 

There’s only one problem with the headlines: There never was a $250 million “gift” to Centre College!

Here are four lessons you can learn from this amazing public relations fiasco:

1. Do NOT mislead the public.

Perhaps the news media can be forgiven for getting the story wrong. After all, Centre College proudly announced on July 30, 2013: “Centre College receives historic gift to establish Brockman Scholars Program.” The official announcement began:

Centre College has received a gift of $250 million in the form of stock in Universal Computer Systems Holding, Inc. (Reynolds and Reynolds) from the A. Eugene Brockman Charitable Trust to establish the Brockman Scholars Program in Leadership and Entrepreneurship.”

Unfortunately, as recent events have demonstrated, the announcement was not just premature it was not true. The fact is that Centre College did not receive a $250 million gift. Peter Lattman, writing for Deal Book/ New York Times, quoted Centre College President John Roush as saying:

In retrospect, we might have put a big asterisk on this thing, but no one had any inkling that this would come about.”

The historic gift was a contingent pledge based on a complex recapitalization deal Centre College - Old Centregoing through. Regrettably, the financial deal blew up and, therefore, the gift never materialized, according to the College.

If the College had simply delayed announcing the gift until it actually materialized, it could have avoided enormous embarrassment. Alternatively, if the College had simply characterized the $250 million as a “pledge” or “potential gift” rather than a “gift,” it still could have avoided significant embarrassment.

2. Recognize the difference between a “pledge” and a “gift.”

Centre College had a contingent pledge for a $250 million gift. They never had the gift. It’s not a gift until you have the cash, stock, property, or irrevocable gift agreement in-hand.

Because the College never had a $250 million gift, it did not lose $250 million. That’s about the best that can be said of this situation. This is really just a case of a nonprofit organization publicly counting its chickens before they hatched. Don’t make the same mistake.

August 9, 2013

Philanthropy at Gunpoint?

In a recent op-ed piece in The Chronicle of Philanthropy, Mark Rosenman writes, “… few people in the nonprofit world seem aware of a new legislative proposal that could add $35-billion a year or more to [charity] programs perhaps including their own organizations.”

Rosenman is referring to a new tax proposal by Sen. Tom Harkin (D-IA) and Rep. Peter DeFazio (D-OR) that would impose a financial-transaction tax modeled on one adopted by the European Parliament and soon to be implemented by 11 of its member nations in order to slow flash-trading.

The Harkin-DeFazio plan, called the “Wall Street Speculators Sales Tax,” “has drawn the support of over 40 national nonprofit organizations and labor unions but has not caught the imagination of local and regional charities or the major coalitions that represent nonprofit groups,” according to Rosenman.

While I encourage you to read Rosenman’s op-ed article as well as the comments, many made by me in a tense exchange with Rosenman, I’ll share with you here what’s wrong with Rosenman’s support of the new tax plan:

1. The Wall Street Speculators Sales Tax will NOT benefit the nonprofit sector as it currently stands. Harkin and DeFazio introduced the tax plan to generate revenue to reduce the deficit. Right now, there is no reason to believe that even one cent would flow through to the community benefit sector. Rosenman initially misleads his readers on this critical point and does not provide clarification until the comment section.

2. Even if Congress could be persuaded to give the new revenue to the nonprofit sector, it raises a number of questions. Who would decide which charities should receive the money? On what basis should those decisions be made? Given that so many large charities employ lobbyists, would the new government spending go to those with political influence or those with vital programs that produce desired outcomes?

3. More government funding is not necessarily a solution to our problems. The federal government is already spending an enormous amount on the nonprofit sector. Government spending on nonprofits has grown from $100 billion a year in 1962 to an astounding $3.6 trillion in 2012, according to a report in The Wall Street Journal by James Piereson, a Senior Fellow at the Manhattan Institute and President of the William E. Simon Foundation.

If a 36-fold increase in government spending on the charity sector since 1962 has not produced the desired result, will an additional $35 billion do the trick? At what point will government be spending enough on the charity sector?

The charity sector’s enormous appetite for government money (really taxpayer money) has created an interesting dynamic. Piereson points out that many of the charities that receive the most government funding turn around and lobby the government for even more money and for higher taxes! This kind of dynamic is created when nonprofit organizations start being funded like and acting like government agencies rather than charities.

The nonprofit sector’s reliance on government funding is dangerous. It encourages institutional laziness, a loss of independence, a lack of public responsiveness and, perhaps, aligning mission with government objectives rather than constituent needs.

Marvin Olasky observed in his book The Tragedy of American Compassion, greater government involvement in and funding of the social services sector historically has led to a pullback of private support for such organizations.

I’ve served on the boards of social service agencies, most recently for an organization helping children.

Piggy Bank by Images_of_Money via FlickrThe social service agency received virtually all of its funding from the government in the form of grants and contracts. At that time, the agency was meeting just a quarter to a third of the need in the community. But, to its credit, the agency eventually set the goal of meeting the needs of 100 percent of the community. The organization recognized that it would never be able to achieve this goal if it continued to be so dependent on government funding. Therefore, the agency launched a major, sustainable push for private funding.

An interesting thing happened. As private funding grew, the organization’s service capacity also grew. With a strong, compelling case for support, the agency has now raised the necessary resources to meet the needs of everyone in its community! While government funding is still important, the organization has achieved a healthier more sustainable funding balance that allows it to serve far more people and serve them better.

Richard Freedlund, on the greatergoodfundraising blog, states, “The problem is, if your budget is so dependent on government funding and not donors, you really do not fit the definition of a charity.”

4. The proposed tax would affect more than the wealthy. Rosenman stated that the new tax would primarily impact wealthy and institutional investors. However, that’s like a tuna fisherman saying his nets primarily catch tuna, and we should not worry about the dolphins also caught in the nets. The fact is institutional investors represent mom and pop investors and pension funds for working Americans. The majority of people in the US own securities.

Rosenman says the tax really won’t add up to much money for these small investors, so I shouldn’t worry about them. But, I had another idea. I asked my 86-year-old mother what she thought about the new tax idea.

Before I tell you what my mom said, let me just mention that for a huge chunk of her life, she was poor. I’m talking coal-stove heat, no bathroom plumbing poor. Together, she and my dad worked hard to put food on the table and a roof over our heads. As a result of a strong work ethic and a commitment to saving, she now has a modest nest egg, some of which she invests in mutual funds.

Here’s what my mom said about the new investor-tax proposal with Rosenman’s suggested modification for charities:

August 2, 2013

“Charitable-Industrial Complex” Huh?

[Publisher’s Note: For a list of the “Top 40 Most Effective Fundraising Consultants,” checkout the Special Report here.]

 

I grew up poor. Let me be clear. We were not welfare poor, but we were food-stamp poor.

Because of my upbringing, one of the things I now enjoy in life is reading articles that beautifully demonstrate rich, liberal guilt. One such article recently appeared in The New York Times: “The Charitable-Industrial Complex” by Peter Buffett, son of multi-billionaire Warren Buffett.

In his op-ed article, Peter describes what he sees as the problems of “Philanthropic Colonialism” and the “Charitable-Industrial Complex.” It could have been amusing if it was not so irresponsible and potentially dangerous. It could have even been a worthwhile piece if it had demonstrated any serious intellectual thought. I encourage you to read it.

George E. Wolf, a consultant, called my attention to the Buffett op-ed piece when he started a discussion in the Philanthropy Network Group on LinkedIn. I thank him for starting the conversation and inspiring this blog post.

Guilt Washing Station-NY TimesIn case you don’t believe me about the article containing a big dose of rich, liberal guilt, consider the graphic that accompanied the piece, which I’m presenting here (left).

Peter Buffett has a very comfortable life thanks to his capitalist father. Now, after reaping the enormous benefits of his father’s hard work and, I suspect, his father’s good name and connections, Peter complains about the ugly side of capitalism. While he states he’s not opposed to the capitalist system, he spends a great deal of time in his article complaining about the very system that has given him his comfortable life. 

Sadly, he does little to propose an alternative. The only exception is a rather vague suggestion that we pursue “humanism,” though he fails to define the term or provide any examples of humanism in action.

Peter is entitled to his opinions. He’s also entitled to be philanthropic, or not, in whatever way he chooses.

However, as an intellectual exercise, his article is sorely lacking.

For example, he asserts that there is a growing “charitable-industrial complex.” To support his claim, he looks at the $316 billion in philanthropic support contributed in the USA in 2012 and the growth rate of 25 percent in the number of American nonprofit organizations between 2001 and 2011. So what?

July 6, 2013

WARNING: Do Not Stick Your Head in the Sand!

I’ve warned the nonprofit sector.

Over the years, I’ve warned the nonprofit sector many times.

Most recently, I provided a warning last month in my post “Special Report: America’s 50 Worst Charities Named”:

As a profession, we must do more to self-regulate. If we do not, we can expect others to fill the vacuum. The [“50 Worst Charities”] investigative report is one example of how those outside the nonprofit arena are filling that vacuum. It’s only a matter of time before government regulators become even more engaged.”

Well, sticking one’s head in the sand did not work. Declaring that most community benefit organizations efficiently do good did not work. Instead, just as Head in Sand by tropical.pete via FlickrI predicted, government has stepped into the void. Due to the nonprofit sector’s failure to self-regulate or to lead the way with government officials, politicians are taking action to further regulate charities.

Oregon has become the first state in the nation to “eliminate state and local tax subsidies for charities that spend more than 70 percent of donations on management and fundraising, rather than programs and services, over a three-year period,” according to a report in The Statesman Journal. This might be a model law that other states soon consider.

Recently, the good leaders at GuideStar, Charity Navigator, and the BBB Wise Giving Alliance penned a Letter to the Donors of America. In the open letter, the authors stated:

We write to correct a misconception about what matters when deciding which charity to support.

The percent of charity expenses that go to administrative and fundraising costs—commonly referred to as ‘overhead’—is a poor measure of a charity’s performance.”

Reading the opening paragraphs of the letter, one might be led to believe that overhead costs should not factor into our giving decisions. However, the authors are quick to point out:

That is not to say that overhead has no role in ensuring charity accountability. At the extremes the overhead ratio can offer insight: it can be a valid data point for rooting out fraud and poor financial management.”

In Oregon, state legislators were clearly motivated to act by the behavior of charities at the extreme.

The Statesman Journal reports:

The Oregon Department of Justice has already identified the top 20 ‘worst of the worst.’

They include charities such as Michigan-based Law Enforcement Education Program, which spent just 2.7 percent of its funds on programs over the past three years; California-based Shiloh International Ministries, which spent 3.2 percent on programs; and Florida-based American Medical Research Organization, which spent just 4.2 percent on programs.”

As a result of the Oregon law, donors to the disqualified charities will no longer be able to take a state tax deduction for their contributions. Also, the disqualified charities will no longer be exempt from property taxes.

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