What happens when John Doe, donor extraordinaire, provides you’re organization with a much needed donation? In appreciation, you name a building after them, you expand your services with their donation and life for your organization suddenly seems brighter. Fast forward and one day you open the morning paper and see John Doe, donor extraordinaire, confessing to a scenario that is unethical. And not just any unethical event, but confessing to an embarrassing scenario for which your nonprofit’s sole purpose is to prevent. A firestorm erupts with your stakeholders. What do you do? Paul Dunn explores that question with his article “Strategic Responses by a Nonprofit When a Donor becomes Tainted”.
This writer will be examining this article in comparison to other current articles of a similar nature and of the timeliness of the material. This writer will be addressing the two primary points of Dunn’s article; First, the subject matter of donors and stakeholders, and second, the strategic responses as outlined by Dunn for an organization that has been accepted and later determined the monies received to be of a tainted quality.
Researchers agree that donors are the fuel that runs a nonprofit. A major giver to a nonprofit organization represents another class of donor. A donation from a major giver could substantially affect the bottom line of a nonprofit organization. Thus, potential major givers are treated and courted differently than the average donor with the expectation of receiving a gift of significance (Knowles 2009; Wolf, 1999).
Dunn recognizes that as a result of this unique relation when a major donor draws public scrutiny for an ethical lapse, the result can have a trickledown effect on the organization(s) association with the donor. Dunn explores the relationship between a major donor who has been seen as unethical and their gift. Does this gift create an ethical dilemma for the organization and what action does that organization have to do rectify the “tainted money” experience? Dunn does not seek to define where the socially acceptable and unacceptable boundaries are in his article. Insightfully, he argues that it is for the recipient of the donation to determine, based on their interaction with their stakeholders (Dunn, 2010).
Dunn defines stakeholders as those groups of individuals who will have some influence into an organization. Stakeholders can be the recipients of the nonprofit services, they are the board, they are the volunteers and they can be the community at large. A socially responsible board will listen to its stakeholders and consider the impact of its decisions upon its stakeholders (Dunn, 2010; Savage, 2004). What happens when stakeholders are at odds over a donor’s donation and the question of the donor’s acceptability? Again, Dunn does not seek to infer what the correct behavior for the organization is; instead he focuses on the organizations possible reactions to pressures that are brought about as a result of stakeholder objections to the experience of “tainted money” having been received by the organization (Dunn, 2010).
Dunn’s research presents a dilemma that he acknowledges. While there exist many organizations that would return a tainted gift, there also exist many that would retain a tainted gift. The argument among these organizations is a simple argument. “Tainted money” coming in can be made clean going out, which was the philosophy that Mother Theresa had adopted (Dunn, 2010). So, as stewards of the public trusts, it is the organization’s responsibility to ensure that the funds of the tainted source are applied to good use. As Ms. Simmons of Brown University was quoted of saying “It’s a na¯ve approach to say that there is clean money” (Pulley, 2003).
Current research and response to the “tainted money” issue is mixed. There is argument to support returning the tainted funds to the donor and there are arguments for keeping the tainted funds. It is even argued that those organizations that return the funds are behaving from a mission perspective rather than a strategic perspective (Morris, 2008). Guidestar, a nonprofit research organization, has surveyed members on this matter, and found only 39% of respondents would not accept funds from controversial sources (Morris, 2008). Since, no specific litmus test exists to determine at what point, or for which impropriety should a donation be returned, there is no correct response to this dilemma according to Dunn (Dunn, 2010).
This is the quandary that Mr. Dunn finds within this subject matter. If some organizations are keeping “tainted money”, with the idea that the money can be made clean, then who is to say that organizations that return the money are doing the right thing? Therefore without passing judgment on the organization for its behavior, Dunn has described three possible courses of actions based on the research of other institutions that have experienced similar problems.
Dunn’s three recommended responses to this tainted donor scenario comprise are described as; acquiescence, compromise, and defiance. Acquiescence entails the simple idea of returning the money and removing all acknowledgment of the gift on behalf of the donor. Compromise, is the simple response of removing recognition of the donor, however, keeping their donation. Defiance is the process where the donor’s recognition and the gift are kept whole (Dunn, 2010).
This peer reviewed article was found in the Nonprofit and Voluntary Sector Quarterly. At first reading, this article seemed to be non-consequential. However, upon further reading and research, it became exceedingly enlightening and timely when one thinks of the recent economic calamity in the United States and the extent of the misdeeds by individuals of high net worth. This article, along with the others are filled with recent examples, which illustrate how frequently and how significant a problem that this becomes in America.
A nonprofit truly does face a conundrum when faced with a tainted major donor. Often these donations are of very large amounts of money and public scrutiny is very heavy. If an organization retains the donation, then does it risk sending the wrong message to its stakeholders? Furthermore, does the organization violate the principles identified of the core values of integrity, openness, accountability and service that a nonprofit and its board members represent? (Renz, 2010)
With a lack of guidance from either the government or the industry, nonprofits are left to grapple with this issue on their own. There is no “morally” right way or wrong way to deal with returning a gift of “tainted money”. Arguments and convincing illustrations exist on both sides of the paradox of what to do with tainted money. Dunn and the other researchers cite multiple examples of recent donor unethical behavior and nonprofits that have chosen to return their gifts on moral grounds (Dunn, 2010; Morris, 2008; Pulley, 2003). However, there exists many organizations and arguments for organizations choosing not to return their gifts of tainted money (Morris, 2008, Pulley, 2003). So, with compelling arguments on both sides of the issue, there is no simple answer to this dilemma, only courses of action as outlined by Dunn (Dunn, 2010).
Building on research of recent events, Dunn does not apply any empirical evidence to support his arguments, although Dunn does outline methods for doing so in future research and encourages such by future researchers (Dunn, 2010). However, does the lack of empirical evidence make this article less valuable? The answer is an unequivocal no. The more the article was read, the timelier and more appreciated the material became.
For the manager of nonprofit, this is a valuable article. It outlines the three acceptable responses should an organization find itself having accepted tainted money. The article does not spell out which action that a nonprofit should take, as that would be for the manager to decide with his stakeholders. However, the article does provide a foundation for the manager to make an informed decision based on current practices and to present this decision to his stakeholders knowing whatever decision that they take, there is an argument for that position.
Dunn, Paul. (2010). Strategic responses by a nonprofit when a donor becomes tainted. Nonprofit
and Voluntary Sector Quarterly, 39, 102-123. DOI: 10.1177/0899764008326770.
Knowles, Patrica and Gomes, Roger, (2009) Building relationships with major gift donors: A major gift decision making relationship-building model. Journal of Nonprofit & Public Sector Marketing. 21: 4, 384-406. DOI: 10.1080/10495140802662580.
Morris, Donald. (2008) Tainted money and charity: Do 501(c)(3)s have a right to refuse a gift?
Nonprofit and Voluntary Sector Quarterly, 38:743-756. DOI: 10.1177/0899764008324319.
Pulley, J.L. (2003). Tainted Gifts. Chronicle of Higher Education, 49(17).
Renz, David O., (2010) Ethical Nonprofit Management. In The Jossey-Bass Handbook of Nonprofit Leadership and Management. San Francisco, CA: John Wiley and Sons.
Savage, Grant T., Dunkin, Jeri W., Ford David M. (2004). Responding to a crises: A stakeholder analysis of community health organizations. Journal of Health and Human Services Administration, March.
Wolf, Thomas (1999). Managing a nonprofit organization in the twenty-first century. New York, NY: Simon and Schuster Inc.