Transcripts

"Commentary"-Non-Profit Ethics

SUSIE GHARIB: In tonight's commentary, taking stock of ethical practices at non- profit organizations. Here's Harvey Pitt, CEO of Kalorama Partners and former chairman of the Securities and Exchange Commission.

HARVEY PITT, CEO, KALORAMA PARTNERS: Sarbanes-Oxley is now five years old and the standard for public company corporate governance. Yet a recent Ethics Resource Center study found a lag in creating ethical cultures at American businesses. We don't expect to find lax ethics is non-profit organizations. Their mandates are religious, educational or charitable, so it's widely assumed folks there are sensitive to ethical responsibilities.

Non-profits are subject to different imperatives from those of for- profits. They don't answer to shareholders and aren't trying to make a profit. However, non-profits are answerable to contributors. They must provide careful stewardship of the resources they are given to further their missions. To the extent non-profits are different, it's because they must be even more sensitive to ethics and good governance than for-profits. A stain on their reputation ineluctably leads to a death spiral of loss of support and contributions.

Scandals at the Smithsonian, Red Cross, American University and the United Way, to name just a few, demonstrate how critical the same concerns about ethics, conflicts, public perception and fair dealing are for non- profits. SOX doesn't literally apply, but non-profits should take stock and adopt governance best practices, using SOX as a benchmark. Doing so ensures the vital work of non-profits won't be derailed by governance miscues or malfeasance. I'm Harvey Pitt.