CODES OF CONDUCT: HOW TO ESTABLISH THE RIGHT TONE It is important that nonprofit leaders maintaining high standards, this attitude maintain the highest ethical standards for could be observed and mirrored by their organizations. Given today’s employees and volunteers. difficult business climate and greater scrutiny of nonprofits, an organization’s B. Duty of Obedience reputation for integrity and good stewardship are more critical than ever. The first expectation that the directors must meet and set for others is the duty One basic step an organization can take of obedience. As part of the duty of to establish and maintain high ethical obedience, directors, officers, employees standards is to adopt a code of conduct, and volunteers must act in a manner also known as a code of ethics. The consistent with the code of conduct, as purpose of the code is to set forth the well with as the provisions of the organization’s values and to make clear organization’s articles of incorporation, that everyone involved in the bylaws, and the organization’s tax- organization is expected to act in exempt status. They should be familiar accordance with those values. with the organization’s mission and strive to uphold that mission at all times. A. The Tone at the Top Finally, they must comply with all federal, state and District of Columbia The first step is for the Board to laws as they apply to the organization. establish an appropriate “tone at the top.” The “tone at the top” refers to the C. Contents of the Code ethical climate created in an organization by its leadership. Through their board The code of conduct summarizes the leadership, directors can foster a climate policies and priorities integral to the whereby everyone – including directors, organization. Generally, the key employees and volunteers - acts in a components of a code of conduct are: manner that upholds the highest ethical standards. • The conflict-of-interest policy. Most organizations have adopted a It is important that the Board foster this conflict-of-interest policy for expectation for themselves and others. If directors and officers. But what directors appear unconcerned with about the office manager? Should he or she buy supplies from a brother- D. Developing the Code in-law’s company? Should the organization do business with a The Board should take the lead in company that employs the CFO’s developing a code of conduct in order to brother? The code of conduct should demonstrate the Board’s support and address these issues. commitment to the code. At the same time, the Board should work with senior • Human resource policies. Certain management to develop a code that human resource policies deal only reflects the day-to-day activities of the with business issues, but others – organization. such as policies prohibiting discrimination and harassment - Once the code of conduct is developed, speak to the moral character of an it should be approved by the Board of organization. By placing these Directors. The audit committee or a policies in the code of conduct, the similar board committee should be organization can highlight its responsible for updating the code of commitment to them. conduct when necessary and ensuring that the organization is in compliance. • Financial integrity. Nonprofit organizations must be good stewards Senior management should be of the donations they receive. responsible for communicating the code Therefore, the code of conduct to the organization’s employees and should call for everyone connected volunteers. It is generally considered a with the organization to adhere to the good practice to have each employee highest standards of financial sign a statement reflecting that he or she integrity. For example, the code of has received a copy of the code and has conduct should address whether reviewed its contents. Thus, if an employees may receive gifts from employer needs to terminate an vendors; when the organization will employee for violating one of the code reimburse the expenses incurred by policies, the employee cannot claim that directors, officers, employees and he or she never received a copy of it. volunteers; and the importance of filing accurate financial reports. E. Client Protections • Nonprofit requirements. In addition Many nonprofit organizations deal with to complying with the same legal vulnerable client populations. These requirements as other organizations, include children, the elderly, victims of nonprofits have special legal violence and abuse, and the homeless. standards they must meet with Without proper safeguards in place, respect to political activity and employees and volunteers may have the lobbying. opportunity to take physical or financial advantage of these clients. Therefore, nonprofit organizations should develop a August 2014 code of conduct for staff and volunteers the chartered organization before who interact with their clients. accepting an applicant for unit leadership. While no current Sometimes these safeguards are screening techniques exist that can mandated by the government, either identify every potential child abuser, through laws and regulations, or by the we can help reduce the risk of provisions of a grant or government accepting a child abuser by learning contract. For example, the D.C. all we can about an applicant for a government requires day-care centers to leadership position—including his or perform criminal background and child her experience working with children protection register checks on its and why he or she wants to be a employees. In other cases, it is up to the Scout leader. nonprofit to develop standards of conduct for its organization. The Boy Scouts of America have also adopted detailed procedures regarding Many organizations have struggled with the appropriate interaction of troop this issue. The most prominent example leaders and the boys that participate in is the Roman Catholic Church, which for the scouting movement.1 the past decade and more has dealt with cases of priests sexually abusing Similarly, groups working with the children. As a result, many elderly often adopt a code of conduct, organizations have taken steps to protect which includes such key concepts as: those in their charge, in order to prevent such incidents from happening within • Protecting the client’s privacy; their organizations. • Being honest with the client; • Never accepting gifts or tips; For example, the Boy Scouts of America • Never entering into a financial performs background checks on all of its relationship with the client, such volunteers. As it states on its website: as lending or borrowing money from the client or witnessing The Boy Scouts of America takes their will; great pride in the quality of its adult • Never becoming personally or leadership. Being a leader in the sexually involved with a client or BSA is a privilege, not a right. The his or her family; and quality of the program and the safety • Reporting suspected cases of of youth members call for high- elder abuse. quality adult leaders. We work closely with chartered organizations to help recruit the best possible leaders for their units. 1 For a copy of the Boy Scouts of America The adult application requests policies, see the first four chapters in Guide to background information that should Safe Scouting at: http://www.scouting.org/scoutsource/HealthandS be checked by the unit committee or afety/GSS/toc.aspx August 2014 F. Implementing the Code may be engaging in inappropriate behavior. While it is important to develop a code of conduct, it is equally important to In addition, the IRS encourages every ensure that it is adhered to. There are nonprofit to adopt a whistleblower’s several critical ways that a nonprofit can policy. This is another vehicle by which do so. an employee may report violations of the law as well as important organizational First, the nonprofit should incorporate policies. The whistleblower policy the code of conduct into orientations for should be incorporated into the new board members, employees and organization’s code of conduct and be volunteers. The nonprofit may also use reviewed with the employee or volunteer board, staff and volunteer meetings as an along with the code itself. opportunity to review different policies in the code, such as the policy about G. Sample Policies and Other workplace harassment or the prohibition Resources against engaging in political activities. For copies of sample codes of conduct or Next, compliance with the code should codes of ethics, please go to: be incorporated into an employee’s work plan and performance appraisal. Finally, http://www.bridgeportdiocese.com/files/hum the employee or volunteer should be anresources/Code_of_Conduct.pdf (Roman Catholic Diocese of Bridgeport) given an avenue by which to report violations of the code of conduct. http://www.scouting.org/scoutsource/Health andSafety/GSS/gss01.aspx (Boy Scouts of There are several ways a nonprofit can America Guide to Safe Scouting) provide employees with a way to report violations. For example, the For more information about this topic, organization’s sexual harassment policy please see: should set out a procedure for reporting instances of sexual harassment. The http://www.boardsource.org (BoardSource employee should have at least two website) individuals to whom the employee can make a complaint. In a small nonprofit, this should include a board member for those cases where the executive director This communication is provided by the D.C. Bar Pro Bono Program and the authors as a public service solely for informational purposes, without any representation that it is accurate or complete. It does not constitute legal advice, and should not be construed as such. It does not create an attorney-client relationship between the recipient and any other person, or an offer to create such a relationship. This communication contains information that is current as of the date it is written.