Paper 2 The Ethical Pro’s and Woe’s of Nonprofit Organizations

The Ethical Pro’s and Woe’s of Nonprofit Organizations

By: Alexandra Campolong

Nonprofit organizations have become a major part of community-building and regeneration on both the local and national level. Over the last decade, there has been a general increase in the importance of nonprofit organizations as providers of social, health, and educational benefits in the economy in countries such as North America, Europe, and the Asia-Pacific.[1] Nonprofits are now viewed as part of the transitional stage from industrial to post-industrial societies and the connector of several countries to one unified global community. Despite the positive references, there have been a number of nonprofit organizations who appear to be beneficial and forthcoming from a distance, but who have been found guilty of abusing their reputation. The following discussion of nonprofit organizations will analyze two examples of this which range from the most notable and trustworthy to the biggest failure of corporate social responsibility.  Are nonprofit organizations really able to be classified as honest and ethical? The company known as Do Something would provide a lengthy list of accomplishments which would argue in favor of nonprofits adhering to ethical responsibilities.

The organization called Do Something was co-founded in 1993 by Andrew Shue and Michael Sanchez with the goal of encouraging young people to become active citizens and leaders while also making community involvement fun. They imagined the younger generation tackling community problems and becoming active movers for social change. Do Something is built on a culture of volunteerism and activism through social change among young teens and it is one of the largest organizations in the U.S that helps young people contribute to causes they care about. The web-based organization has over 300,000 members and reaches over 11 million teens through their use of media, marketing, and pop culture. They received a 4 star Charity rating from Charity Navigator while only 9% of U.S charities actually get 4 stars, and in their 2011 “Give a Spit” campaign, 15,000 new donors were registered to help save the lives of Leukemia patients.[2] Do Something also helps to provide scholarships and education to those in need, and supports many causes like homelessness, human rights, Veterans and poverty. Not only does this company aim at giving back, but it is also considered one of the best nonprofit companies to work for.

Figure 1- Staples for Students Campaign from website. Campaign designed to provide students with back to school supplies

How exactly does Do Something work? The goal of the company is to use the power of the internet and modern culture to help young people change the world. The aim is to inspire, support, and celebrate young people who have an idea, a vision of a better world, and who quit the lazy lifestyle and actually get to work to make their ideas a reality. The organization has a “no car needed” mentality which states that anyone who wants to get involved should be able to do so regardless of his or her financial situation. On their organization web site, young people from all over the world come together to exchange ideas, inspire one another, and make changes happen. Young people can simply post information online or on message boards about a cause that they are particularly interested in, and find others who are looking to get involved in the social action. Do Something also prides itself on being one of the only organizations that puts money directly into the hands of young people despite many similar organizations who claim to do so but don’t.

An interesting comparison can be made between the Nike slogan “Just Do It” motivation and the slogan that Do Something has cleverly come up with. Although Nike seems to adhere to the objectives in their mission statement claiming to bring inspiration and innovation to every athlete in the world, the company has made headlines regarding their less than ethical performance with manufacturing companies overseas. It seems that “Just Do It” should be changed to “Just Don’t Do It,” or at least refrain from claiming that the company will do something if they have no intentions to do so. Could Do Something be working under a similar mentality where the company is claiming to Do Something, but really isn’t? Despite the extensive research looking for false accountability of the company, no negative articles were found that could harm the admirable reputation of this particular nonprofit organization.

Even with this particular “good” example of a nonprofit organization, there have been increasing criticisms regarding their efficiencies and accountability. The criticisms of nonprofits can be categorized into two schools of thought. One is directed at efficiencies, usually at the organizational and structural level, while the second centers on value, usually emphasizing the role of the nonprofit sector and how this role is played out at the practical level. [3] Although all charities exhibit a valuable mission while attempting to accomplish this mission, the mere statement of a charitable purpose does not create an accountable organization. A nonprofit which becomes a victim of personal greed, inefficiencies, and failure to support the subjects of their mission statement cannot be considered an ethically responsible organization any more than a for-profit organization.

An organization must adhere to their mission and provide real-life evidence of their success in creating some kind of social or economical change. A 2006 Harris Poll found that only one in 10 Americans strongly believed that charities are honest and ethical in their use of donated funds while A 2008 Brookings Institution survey found that 70 percent see charitable organizations as wasting a great deal of money. [4] How exactly can a charitable organization engage in unethical conduct? Employees who feel excessive pressure to generate revenue for donation or minimize expenses may become involved in unethical conduct. In addition, employees’ perceptions of unfairness in reward systems, as well as leaders’ lack of commitment to ethical standards, increase the likelihood of unethical behavior. [5] The organization known as The Disabled Veterans National Foundation can relate to these kinds of activities.

The Disabled Veterans National Foundation claims to offer services to veterans with disabilities such as PTSD, brain injuries and battling homelessness. Although the nonprofit claims to be donating all of its funding to these underserved veterans, it appears to have been concentrating its efforts on paying for fundraising services and doling out cheap giveaways. [6] Quadriga Art LLC helps the organization with its fundraising efforts and has been reaping the benefits of the funding meant to be given to veterans in need. The company known as Charity Watch gave The Disabled Veterans National Foundation an “F” rating and a further investigation into the potential abuses of tax-exempt nonprofit statuses has become a top priority for U.S Senators Max Baucus and Richard Burr. According to tax records, DVNF raised tens of millions of dollars over a two year period, yet reports indicate very little of the money went to directly help disabled veterans. [7] Its’ questionable balance of fundraising and donating has not gone unnoticed and their 501(c3) status deeming the foundation nonexempt will most likely be pulled.

Figure 2- Disabled Veterans Foundation donation claims. Found on

Given the example of an extremely unethical nonprofit organization, Milton Friedman would address these types of organizations as being a complete and utter failure of business regardless of their ethical or non-ethical activities. Friedman views the primary responsibility of a business as increasing profits. “The businessmen believe that they are defending free enterprise when they declaim that business is not concerned merely with profit but also with promoting desirable social ends; that business has a social conscience and takes seriously its responsibilities for providing employment, eliminating discrimination, and avoiding pollution. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of free society these past decades.” [8] It is to my understanding that Friedman would look at The Disabled Veterans Foundation and see it as a true representation of the failures of nonprofit organizations. Even Do Something, which far exceeds the expectations of any charitable organization, would be subject to criticism if analyzed by Friedman. In his book Capitalism and Freedom, he openly discusses the single social responsibility of business, which is to use its resources and engage in activities purely designed to increase profits as long as it adheres to open and free competition without deception or fraud.

While it does seem that a nonprofit charitable organization should be the poster for ethical behavior and trustworthiness, it seems that a catchy mission statement is not enough to ensure social responsibility. The organizations that are able to adhere to their mission and successfully bring about social or economic change are admirable examples of a truly “good” business despite criticisms. Those that fail to do so however, are no better than the management failures at Enron and Lehman Brothers. There is no denying that fact that reputable non-profit organizations do exist, but the point this essay is meant to convey is that there is much more occurring in these organizations than meets the eye. We have criticized companies throughout the semester for unethical behavior as a means to increase profits, but even when profits are not the main source of motivation, unethical behavior can exist in practically any business environment. The fact of the matter is, as future business men and women who will soon graduate and enter this world of deception and dishonesty, we must all remember the examples we have learned from business government and society thus far in our college careers. Only time will tell which type of impact we will have in the business world; one that is admired or one that is discussed as a failure of ethical responsibility.














Works Cited

Anheier, Helmut K. Nonprofit Organizations: Theory, Management, Policy. London: Routledge, 2005. Print.

“Awesome-Things.” Do Something. N.p., n.d. Web. 05 Nov. 2012. <;.

Baucus, Max. “The United States Senate Committee on Finance.” : Newsroom. The United States Senate Committee, 12 May 2012. Web. 05 Nov. 2012. <;.

Friedman, Milton. “The Social Responsibility of Business is to Increase Profits.” The New York Times Magazine. 1970 Print.

Goldberg, Eleanor. “Charity Fraud: Disabled Veterans National Foundation Squanders Millions On Marketing Services.” The Huffington Post., 08 May 2012. Web. 05 Nov. 2012. <;.

Peeler, Heather. “Perspectives.” FNC. Foundation News and Commentary, June 2004. Web. 05 Nov. 2012. <;.

Rhode, Deborah L. “Stanford Social Innovation Review : Informing and Inspiring Leaders of Social Change.” Ethics and Nonprofits. Stanford Social Innovation Review, 2009. Web. 05 Nov. 2012. <;.

[1] Helmut K. Anheiser, Nonprofit Organizations: Theory, Management, Policy. London: Routledge, (2005.)

[2] “Awesome-Things.”Do Web Statistics. (05 Nov. 2012.)

[3] Heather Peeler. “Perspectives.” FNC. Foundation News and Commentary, (June 2004.)

[4] Deborah L. Rhode. “Stanford Social Innovation Review : Informing and Inspiring Leaders of Social Change.” Ethics and Nonprofits. Stanford Social Innovation Review, (2009.)

[5] Deborah L. Rhode. “Stanford Social Innovation Review : Informing and Inspiring Leaders of Social Change.” Ethics and Nonprofits. Stanford Social Innovation Review, (2009.)

[6] Eleanor Goldberg. “Charity Fraud: Disabled Veterans National Foundation Squanders Millions On Marketing Services.” The Huffington Post. (08 May 2012.)

[7] Baucus, Max. “The United States Senate Committee on Finance.” : Newsroom. The United States Senate Committee, (12 May 2012.)

[8] Milton Friedman. The Social Responsibility of Business is to Increase its Profits. The New York Times Magazine. (September 17, 1970)


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