The Center for Ethics, Governance, & Accountability

I just read a very excellent piece in Newsweek Magazine (“Cross of Gold” by Fareed Zakaria, published April 23, 2010, page 24). You can view it online. There are themes in his piece that have provoked my further thought – and my desire to comment – along with my ongoing desire to adapt all things useful to the non-profit sector that I want to support and serve.

The article is actually about Goldman Sachs. But, what I love about a well-written article is the opportunity to delve into deeper themes that can be applied to any subject. So, while Zakaria writes about issues in the banking sector (and Wall Street), I will write about the non-profit sector (on Main Street).

Here is what he says in his article:

There's so much anger and resentment toward banks these days—some of it quite justified—that anything resembling a defense of them is bound to make people angry. But the rage surrounding the Goldman case can cloud our perspective and distort public policy. We're going through a familiar part of America's boom-and-bust cycle. Having been mesmerized during the go-go years, having unduly lionized and feted industries, firms, and people as they rode the wave, we now want to throw these people to the wolves. We need to step back for a moment and try to understand what happened and learn the right lessons.

Let's be clear: all the facts are not publicly available, and evidence may be presented in court that documents specific misrepresentations and false claims, proving Goldman Sachs's guilt. But much of the public debate has struck me as guided more by emotion than careful analysis. Even if some Wall Street practices strike many people as dodgy, even unethical, that's not the same as illegal. I want financial reform, but I also want our system of government to be characterized by fair play and equal justice—even for people making $10 million bonuses.

Well, there is plenty of substance in his article to apply in our non-profit circles!

There appears to be plenty of resentment within and toward the non-profit sector these days. People are tired of program snafus at national umbrella non-profits and behind-closed-doors insider dealing from the board room. Mainstream media has covered a number of these high-profile cases and they are, indeed, disgusting and unacceptable. Just as with the banking industry,  the non-profit sector gets casts in a negative light. So, yes, I agree: there is plenty of “anger and resentment” and “some of it quite justified.” Where we need to use caution – in all issues (not just banking or non-profit analysis) – is in the avoidance of painting ALL of anything with the same brush. Are there a lot of problems in the non-profit sector? Yes. Does it affect all non-profits? No.

The specific point in the article that captured my attention and urged me to capture my own thoughts was, “…the rage surrounding the…case can cloud our perspective and distort public policy.” Very excellent point. The same thing is happening in Congress right now with the non-profit sector. Mishaps are being noticed and legislation and regulation is being discussed. Through our services to assist non-profit organizations, The Center for Ethics, Governance, and Accountability (CEGA) continues to urge proactivity in doing the ‘right things’ and creating distance between the ‘good non-profits’ and those with problems. Organizations like ACORN, for example, can indeed “cloud our perspective” and the resulting federal regulation (as I have long predicted) – if it ultimately becomes Sarbanes-Oxley applied to the non-profit sector – could lead us to “distort public policy” to the point that small non-profits are no longer able to serve the community purpose for which they were created due to regulations brought about by non-profits that will continue to thrive despite any manner of regulation.

But, the problems are real. And, the issues really should be addressed. While we do not think of the non-profit sector in terms of cycles of “boom or bust,” the truth is that in challenging economic times, it is more likely for non-profit errors in policy or judgement to surface due to the relative mood of the public. When times are good (what Zakaria calls riding the wave), people can skip along without too much fuss; when times are tough, public sentiment tends to be more critical (throwing people to the wolves). It seems reasonable that no matter what the subject matter, too “much of the public debate…(is)…guided more by emotion than careful analysis.” This particular theme deserves to be highlighted regardless of the issue: we very much need careful analysis (followed by decisive action) by people who are able to be more thoughtful and less emotional.

I was recently in a conversation where I was saying something similar to Zakaria – only I think he says it more succinctly: “We need to step back for a moment and try to understand what happened and learn the right lessons.” Amen! The point I was making in my conversation was that I wanted to see us adjust our approach to problems such that we allowed ourselves to hold onto the problem just a little bit longer – before we rushed to implement solutions – so we could attempt to learn all we could about the causes and the effects. There is little doubt that we will always root out problems, design solutions, and implement corrective actions – no matter what the subject – but it seems we are too anxious to put problems behind us before we have genuinely studied the issues that led to the problem in the first place. Our current analysis is robbing us of the opportunity to “learn the right lessons.”

The set-up phrase that Zakaria uses for his second paragraph is good: “Let’s be clear…” Yes. Let’s be clear indeed! How often do we spend zero time trying to be clear?

“All the facts are not publicly available” is a truism for any organization and any issue. While certain facts are confidential and deserve not to be made public, those are generally fewer for the non-profit sector due to the nature of its business as a public charity serving community interests. We would do well to make sure we find all of the facts and utilize them in the public debate. The public is not required to afford Wall Street practices to Main Street non-profits. If the public seeks opportunities to make quick and decisive changes, it need look no further than its local non-profit organizations where proper analysis and action can deliver tangible results.

It is my intention to encourage the non-profit sector to hold itself to the highest standards, so any discussion about ethics always gets my attention. While actions on Wall Street may not be illegal – but may (technically) be considered unethical – the non-profit sector has the opportunity to focus on ethical standards that distinguish Main Street from Wall Street in a very positive way and a noteworthy time. Proactive ethical behavior by non-profits is not only achievable but would be rewarded by the public.

Within the non-profit sector, I believe “reform” is necessary (albeit regrettable), but I reject an ‘either/or’ situation – I would prefer a ‘both/and’ approach – to Zakaria’s comment: “I want financial reform, but I also want our system of government to be characterized by fair play and equal justice…” I would replace “but” with “and.” I want reform AND fair play and equal justice. This seems to me to be a key difference between Wall Street and Main Street. Non-profits that want to flourish in the future would be wise to take heed of all that is happening around them, making sure to apply the lessons that can be learned before the impending regulation arrives.

Most importantly, I really like the idea of reading articles (such as the one to which I refer) not only for what we can learn directly, but for the thoughtful process that can be applied to any of our many daily challenges. Especially in the non-profit world.