Ethics of Incentives LO1436
Tue, 30 May 95 16:43:43 EST

I spent the weekend with fundraisers who work for non-profit
organizations. They were upset to learn that an executive received a big
bonus, according to provisions in her contract. She supervises
fundraisers but didn't raise funds herself.

Apparently bonuses in non-profits, especially bonuses connected with
fundraising, violate ethical guidelines. This was news to me and I asked
for the reason. The first answer was that a donor is sending money to the
organization, not to the individual, hence the individual has no claim to
part of the receipts. I pointed out that this reasoning would also apply
to a salesman selling the goods of his organization. Does that mean that
the salesman's bonus is unethical? The second answer was, "This just
isn't done -- donors might not like it -- it doesn't pass the smell test."
Is the prohibition, therefore, merely a social convention?

The third answer was a story which illuminated the issue for me. The
fundraiser says to the donor, "Please, if you give more this year, it will
put me over the top on my quota." The donor answers, "Yes dearie, you've
been so nice to me and I want things to work out for you."

While a salesman and buyer could have the same conversation, the benefits
flow differently. Assuming that the goods sold to the buyer are
acceptable and competitive, helping the salesman achieve a bonus involves
no loss to the buyer. In the case of the donor, who receives no goods,
attention shifts to the value of the gift. A bonus reduces the value of
the gift, whereas a salesman's bonus doesn't reduce the value of goods
received. It would be unethical for the fundraising organization to
decrement the value of a gift and divert a portion to purposes other than
the organization's cause, especially if the decrement increases as the
size of the gift rises. Since all staff in non-profit organizations
depend on these gifts, regardless of whether they are fundraisers, there
are no bonuses. Perhaps it is also personally unethical for the
fundraiser to ask people to support the cause with a gift when the motive
for the request may be other than the one stated or implied, which is
shared interest in the cause.

Three details make this argument murky. a) Salaries are raised, sometimes
quite high, based on fundraising success, and that's not questioned. b)
This particular non-profit hires profit-making phone banks that compensate
their operators strictly on the basis of receipts, and that's not
questioned. The phone callers sometimes do this year after year and
develop personal relationships. c) Many non-profits sell goods and
services. This particular organization has a publishing venture. The
non-profit status says only that they will not RETAIN earnings, not that
they will run completely on the basis of gifts.

I was interested to discover that bonuses raise ethical questions. It
also interests me that a 'conflicts of interest' are easily spotted but
not easily explained.

Kent Myers