kv Blogs
7 August 2017

How Poor Ethics Can Cost Charities

It’s understandable that some charities feel pressure to cut corners, but it’s time the philanthropic community made a greater commitment to ethical due diligence. There have been a number of cases in recent years of charities behaving unscrupulously, from corruption to exploiting the elderly. Of course many charities continue to maintain spotless records, and we shouldn’t forget the good work that charitable foundations do. But it’s important that we remember that charities have wider ethical obligations beyond their specific remits – no matter how good your cause is, there’s no excuse for unprincipled fundraising efforts. That’s why the Tej Kohli Foundation maintains careful and consistent ethical standards – but there’s still more for the broader charitable community to do. Here’s why charities need to pay more attention to their due diligence processes.

How Have Charities Gone Wrong?

Leaving aside individual cases of corruption, the real challenge facing charities appear to be unscrupulous fundraising practices. 2016 saw UK MPs condemn a number of prominent British charities for ‘exploitative and unethical fundraising methods’, as it emerged a number of prominent philanthropic organisations had unfairly pressurised older people into donating, stretching some beyond their means. One elderly woman even took her own life after being ‘overwhelmed’ by repeated appeals for donations.

Now, another scandal has broken, with many high-profile charities being fined for wealth-screening their donors – identifying those with higher net worth to better focus their fundraising efforts. These practices broke rules on data protection, as charities shared and analysed personal information from millions of their donors in ways which were against the law. Charities appear to have been moved to break the law to better find the resources they need to continue their undoubtedly worthy work. The question remains, is ‘for the greater good’ a valid excuse in this situation?

Why Ethical Due Diligence is Essential

It goes without saying that charities ought to be obey the law. There’s no excuse for inappropriately using our personal information or harassing potential donors, no matter how good the cause. But charities also need to bear in mind that stepping outside the rules can have serious financial consequences, too. Those that were fined for breaking data protection regulations had to pay out significant amounts, with the highest charged £18,000. Earlier fines have cost charities as much as £25,000. It seems unlikely that these organisations made enough through their unscrupulous practices to justify the sums they had to pay back – and while regulators were lenient in this case, not wanting to punish charities too harshly, we can’t assume that fines won’t grow if there isn’t serious change. If we want to make a difference, we have to do it right – and it doesn’t make fiscal sense to start breaking the rules for our own ends.

While we might sympathise with those charities who only wanted to help as many people as possible, indulging in unethical practices is a fool’s errand – we won’t raise as much in the long run while we continue to tolerate these methods. The charitable community has to take a hard look at its own standards to be sure it’s following the rules.