Essential ethical considerations for giving and receiving major gifts
In our first webinar, With Big Gifts Come Great Responsibility, special guest Marc Tassé led an honest discussion about the ethical dilemmas that can come up when it comes to giving and receiving major gifts.
When funds are urgently needed, it can be hard to think about turning down a gift. In the wake of COVID-19, competition is stiffer than ever and there’s less government funding out there, which means there‘s more pressure on everyone to fundraise.
But accepting or giving a major gift can have ripple effects on your reputation, good and bad. What do organizations and funders need to be thinking about when a significant contribution or gift is on the table?
Marc Tassé is a forensic accountant by training. He spent the first 15 years of his career investigating corruption, money laundering and terrorist financing. Today, he teaches at the University of Ottawa’s Tefler School of Management and lectures around the world on governance and ethics.
Here are the key takeaways from our webinar with Marc (and if you want to check out the full webinar, it’s here.)
Takeaway #1: Your reputation is everything.
Marc advises: “Don’t give to or accept money from any person or organization that you don’t want to share the front page of the newspaper with.”
Research shows that it can take up to 80 weeks to recover from reputational damage.
For social profits: Make sure you know who your donors/investors/supporters are and are clear on their intentions.
For donors/investors: Get to know the organization you are giving to. Who is on the board? Is the organization equipped to accept and steward a major gift?
Social profit donors/investors should seek to understand if there’s a board approved strategy in place that clearly prioritizes how the investment will support the organization in fulfilling its goals.
Takeaway #2: Be aware of your vulnerability. Don’t let the situation or your emotions get in the way of sound decision-making.
Marc points out that you can be vulnerable both when you are under stress (i.e., when you’re under pressure to raise money) and also when you’re really happy (i.e., when there’s a great donation on the table). In either of those mindsets, you might miss red flags.
Organizations can be particularly vulnerable when they have specific fundraising targets to meet. Does being hyper focused on meeting a target drive the right behaviours?
No matter the situation, you always have to be ready to do your due diligence and vet your donors.
“Your focus should always be on protecting the image and reputation of your organization – not a dollar figure,” Marc says.
Takeaway #3: Bad actors give to charities for all kinds of reasons.
Marc pointed out that Pablo Escobar invested generously in charitable causes, by building schools, housing for the urban poor and in other ways. He was also, of course, a drug lord and the leader of the Medellin cartel.
Bad actors make donations for many reasons—to clean up their reputation, divert attention from what they’re up to, for tax credits, to launder money, for influence on an organization or a cause, or because they genuinely care about their communities. Regardless, accepting their gift will impact your reputation and put the organization at risk.
Make sure vetting donors is part of your process (see Takeaway #4).
Takeaway #4: Always do your enhanced due diligence (especially if a major gift is on the table).
Vetting your funders or the organizations you want to give to should be more than a Google search (though a Google search is a good starting place.) In your vetting process, you want to look for any media coverage and also:
If your organization is vetting individual donors, look into what organizations they are affiliated with.
If your team is vetting corporate supporters, ask: Who is the beneficial owner? What are the organization’s values? Are there any notorious board members? Do board member affiliations reflect the values of the corporate supporter? Is the company owned by another company? Check the business registry.
You should also be ready to have transparent and (potentially) uncomfortable conversations. Ask potential donors if they have a criminal record or if they are under litigation. If the person or organization doesn’t want to go there, it’s probably a red flag.
Takeaway #5: Make sure you’re aware of any ulterior motives.
Is a donor looking for more than simply supporting your mission? Do they want a place on an advisory board or a spot at the management table? Do they want to be involved in daily operations?
Be proactive in having upfront conversations about a donor’s expectations. If the person is seeking influence, it can be perceived as a conflict of interest, causing reputational damage or even contravening Canadian tax laws. The Canada Revenue Agency defines a gift as: “a voluntary transfer of property without consideration.” Without consideration means the gift is given without expecting anything in return (1). Be sure your organization clearly understands the intention of the gift, and that any expectations associated with it are in compliance with Canadian tax laws.
Takeaway #6: A donation should support your vision and mission—not change it.
Plain and simple: a donor should be giving because they believe in what you’re doing, not because they want to change your course.
Takeaway #7: It’s always better to be proactive than to have to backtrack.
Have policies and processes in place that prompt clear, transparent conversations before you accept a gift. For starters, a Gift Acceptance and Recognition Policy and a Gift Agreement are musts. You may want to establish a Financial Audit and Risk Management committee on your board that also has a due diligence.
It is not easy to say no to a gift, but it’s much harder to undo reputational damage.
“Being ethical is doing the right thing when no one’s watching,” says Marc. “Sometimes you may not be the most popular person in the room, but you will be the most ethical person in the room and people will recognize you for that.”
- Gifting and Receipting, The Basics, Charity Central. Full article here.