The ethics of running a charity or impact enterprise

Of all the things that bothered me about Tony Blair, and there were many, the one that probably  worried me the most was the extent to which his actions often seem to follow from a deep-seated view that if he did something it was almost by definition right. The thinking seemed to go something like this: “I am a good guy and therefore if I feel something is good and the right thing to do, it is by definition the right thing to do”.

Normally I refrain from blatantly political points in this column but I think Blair is a well-known example of the sort of behaviour pattern we sometimes observe. Strong conviction is a very funny thing. We admire people who possess it, and it is vital in the work we all do in impact investing, but we recognise that when individuals or groups of people have too much of it, there can be serious consequences. Terrorism is the worst and most extreme example of this.

I must confess that I sometimes observe some of this behaviour in charities or high-impact enterprises.  Let me be clear about what I mean: I have seen actions by charities and impact-driven businesses that, in my judgement, did not adhere to appropriate ethical standards. My reaction to this was sometimes dismay but I have also been downright shocked. On these occasions, I came across a rationale which is like the Blairite one described above. The fact that the aim of these organisations is to enhance society and achieve some positive social, ethical or environmental impact somehow obviates the need for behaviour which is consistent with good governance, proper behaviour and even in some cases the law.

For obvious reasons, I’m not going to go into specific examples. However, I’ve encountered cases where organisations simply choose not to pay bills, or manipulate accounts, or mistreat staff or a wide variety of other actions which, to be frank, I have rarely observed in the private sector. And I used to work for Lehman Brothers!!

Please understand that I’m not suggesting this is widespread or common, and most of the organisations that we work closely with at ClearlySo show a high degree of integrity in the work they do. But I think that because of the sector’s use of the words “social” or “impact” to describe what we do, we must hold ourselves to a higher standard when it comes to ethical behaviour.  The impact of not doing so affects not only the enterprise involved but also casts a shadow over us all. Consider the scandal which emerged last year around charities and their fundraising behaviour towards the elderly which was uncovered in the media, or the widely-reported problems at Kids Company.

Sometimes I do think the higher level of scrutiny, and the higher standards to which charities and high-impact enterprises are subject seem unfair, but that is the world we live in. For example, Baroness Hogg was recently demoted at the Bank of England for failing to appropriately disclose on a timely basis her brother’s role at Barclays. Mark Carney, The Governor of the Bank of England, made it clear that a “one strike you’re out” policy for such “honest but serious mistakes” was not going to apply to all financial institutions, but suggested that considering MPs’ reactions and the Bank’s position, this action had been taken.  We find other organisations being held to high standards because of their ethical or impact orientation—like the Church, for example.

Organisations must not feel their “higher purpose” gives them license to behave without regard to standards.  If they do, it damages themselves and the entire sector.  And an array of audiences is watching carefully and judging.

This blog first appeared in Third Sector on 29/03/2017.