Silence Isn’t Golden

(Mark Rosenman is an emeritus professor at the Union Institute & University and directs Caring to Change, an initiative that seeks to improve how foundations serve the public. In his last post, he urged PhilanTopic readers to assess how they value the things they value.)

Confronted by headlines about truly questionable practices at a few dozen charities, the response of too many nonprofit leaders has been to bury their heads in the sand and try to pull the hole in after them. What these leaders fail to appreciate is that silence in response to scandalous behavior is neither golden nor in their best interests.

By now, most of you have seen the carefully researched list compiled by the Center for Investigative Reporting, in partnership with the Tampa Bay Times and CNN, of "America's 50 worst charities" -- tax-exempt organizations that "channel most of the money they raise to professional solicitors, mimic other charities' names, deceive donors on telemarketing calls, divert money and contracts to people with ties to their organizations, and use accounting tricks to inflate the amount they report spending on their missions."

Yet, despite overwhelming evidence of self-dealing by these groups and their closely associated entities, key leadership organizations in the sector, including Independent Sector, have responded to requests for comment from the press by declaring that they didn't have enough information to make a judgment, while others have defended outrageous fundraising percentages diverted to what the California Association of Nonprofits' Jan Masaoka labels the "philanthropic-consultant industrial complex."

When it comes to nonprofits, these kinds of abuses are nothing new, and neither is the timidity of nonprofit leaders in condemning them. Their silence in the past has greeted media coverage of huge salaries paid to charity officials, outlandish benefits, self-dealing within boards, tax gimmicks for donors, and malfeasance in program operations. Unfortunately, the cost of that silence is something we all bear.

In a report published in 2008, New York University researcher Paul C. Light found that public confidence in charities hit a low in 2002 and has yet to recover, which in turn negatively affects individuals' willingness to give.

Indeed, charitable giving in the United States has remained flat since the onset of the Great Recession in 2008 and today accounts for a lower percentage of GDP than it did a decade ago. And recent trends suggest it will be years before giving returns to its pre-recession high, if it ever does. In fact, giving by high-net-worth individuals, who provide a disproportionate share of charitable dollars, is actually declining, even as their own circumstances continue to improve relative to the rest of the population. So, too, is their confidence in America's charities: Between 2010 and 2012, the percentage of high-net-worth individuals who had "a great deal" of confidence in charities fell 20 percent, while those who had "hardly any" confidence increased 67 percent.

Declining confidence in charities isn't in anyone's interests. Unfortunately, it's likely to become a fact of life if national and local nonprofit leaders refuse to speak up. Trying to sidestep the issue instead of condemning selfish and uncharitable behavior is an abdication of both public responsibility and private organizational stewardship.

Now we all know that administrative and fundraising expenses are a part of the cost of doing business for any charity. But instead of rallying around self-serving calls to desist from any evaluative questioning of overhead and fundraising ratios (as the founder of one for-profit promotions company that collapsed after its own practices were subjected to scrutiny argues), nonprofit leaders should be working to push legislatures and other public officials to craft new laws and regulations that put an end to the worst abuses, instead of touting the effectiveness of illusory self-regulation.

Let's face it, the fundraising challenge all nonprofit leaders face is daunting enough. We shouldn’t make their jobs harder by asking them to embrace new gimmicks, techniques, and strategies in competitive pursuit of a relatively stagnant pool of charitable dollars. As the Urban Institute's Tom Pollak notes, that's a zero-sum game in which one organization’s win is another's loss.

What we need from our nonprofit leaders instead is stewardship framed in terms of the entire charitable sector, not just the needs and concerns of their own organizations. We need nonprofit leaders willing to work to restore Americans' confidence in the sector’s ability to serve the common good and to embrace the fact that a principal function of charity is to connect us to each other and our communities. Expanding and strengthening such connections surely will increase the level and effectiveness of charitable giving.

It's critical that nonprofit leaders find their voice on this issue, and not simply because the silence of good people serves to encourage the bad actors. In the current environment, public officials, be they tax authorities or attorneys general, lack the resources and/or legal power to prosecute malefactors; they need our help. Speaking out against sleazy practices and shameless operators is the least we can do. The interests of the sector, and the public, demand it.

-- Mark Rosenman