On Wednesday, you heard from Dr. Leslie Lenkowsky, professor emeritus of public affairs and philanthropic studies, discuss the issues with John Schnatter, the former CEO and board chairman of Papa John’s Pizza. You may have made a personal decision about whether or not you would accept or return the donation. Now, learn how another ethics expert approaches decision-making about tainted money.
Dr. Gene Tempel, professor of philanthropic studies and founding dean emeritus, shared his thoughts with me about how nonprofit organizations can proactively decide how to handle situations with tainted money.
He first explained that institutions need to have gift acceptance policies and procedures in place before a tainted money issue arises.
“Tainted money situations are complicated,” Dr. Tempel said. “Organizations that are not adequately prepared for these issues when they occur are caught off-guard and unprepared to carefully decide how to handle the money.
“For example, if a donor commits a naming gift, an organization needs to have a policy in place for accepting gifts and a clause in the gift agreement that explains in detail the situations when the name might be removed.”
Dr. Tempel suggested implementing and training an ethics committee to handle these situations. “If there is an ethics committee in place, no organization will have to make a decision by just one or two people (the executive director and director of development, for example),” he said.
With that committee, the organization should then assess the situation.
“The first consideration is whether the individual who is donating or has donated the money committed an illegal act,” Dr. Tempel said. “If so, the money is automatically tainted and should be refused or returned.
“In the John Schnatter situation, he did not break the law. In this case, it’s a values conflict. His values are in opposition to the values of the institutions (e.g. University of Louisville, Purdue University, city of Jeffersonville, etc.) he donated money to. By using the word he did, he assaulted institutional integrity and the values these organizations have.”
In addition to identifying their own values and whether the donated money violates those values, Dr. Tempel advises organizations to consider the totality of the organization and the effects of accepting the money on its reputation.
“In this situation, Purdue University, for example, may have the reputation to bear the brunt of the public relations assault that could occur if they accept they money,” he said. “They may believe that since the money is being put to use for a good cause, that is the most important aspect in this case and they can and should continue to use it.”
He also suggested ways Schnatter might “make amends” with organizations that do decide to keep the money.
“He can offer to take his name off of the facility and/or donate money that can go to help groups he offended, such as scholarships for minority students, support groups, offering sensitivity trainings, etc.,” Dr. Tempel said.
While some organizations have already made a decision about Schnatter’s donations, others, such as Purdue University, have not. Whatever decision Purdue University specifically chooses, Dr. Tempel stressed that its message to its stakeholders and constituents is vital.
“If the organization doesn’t keep the money because it cannot be associated with Schnatter’s values, then it is clean and no one can fault them for following their values,” he said.
“However, if an organization does decide to keep the donation, the ethics committee and leadership need to explain to its constituents why they kept it and what good it is doing. There needs to be a carefully crafted communication plan in place, no matter what the final decision is.”
Regardless of the respective decisions made by organizations who received donations from Schnatter, Dr. Tempel believes that they will emerge stronger in the long run.
“After carefully communicating the reasoning behind their decision-making, organizations need to actively listen for feedback among their constituents,” he said. “If they receive criticism, they may need to reconsider and modify the current policies in place. As (former law professor and attorney who founded the nonprofit Joseph and Edna Josephson Institute of Ethics) Michael Josephson said, organizations need to monitor and modify policies and actions, depending on reactions and consequences of their stakeholders and constituents.
“If they’re able to do that, they’ll emerge stronger in the long run and able to provide robust reasons for the actions they undertook.”