Category Archives: Social Sector

Ethics, Leadership, Responsibility, Social Sector

Eudaimonia in the Third Sector

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By: Kyle Pate

What is eudaimonia, and what does it mean for leaders in the social sector? Eudaimonia is the satisfaction in living a virtuous life (Britannica).  Leaders in the third sector can better serve their organizations by achieving eudaimonia through practicing the ethical virtues outlined by the Greek philosopher Aristotle. Unlike other exhausting processes of performing ethical evaluations (Johnson, 2013), Aristotle’s philosophy offers a way to become an ethical leader as a lifelong practice.

Being a Virtuous Person

In Aristotle’s view, the way to develop ethical thinking is to emanate another virtuous person. One should find a moral exemplar, and follow their lead. This person could be someone President Obama or Oprah. According to Aristotle, the ability to be ethical is part of our human nature, and to pursue being a virtuous person is the life-long function of being a human. One’s moral exemplar does not need to be perfect, but there are certain virtues they should habitually practice (Rayner, 2011):

  1. Courage
    Act with bravery and valor. We are seeking the perfect center between cowardice and recklessness.
  2. Temperance
    Seek to offer what is appropriate for the situation, but do not censor ourselves into silence.
  3. Liberality
    This shouldn’t be hard for those in the third sector! Share generously, giving what can be offered freely.
  4. Magnificence
    Aristotle believed a virtuous person could be found through simple observation. Be radiant and charismatic in one’s affairs.
  5. Pride
    Not to be confused with one of the seven sins, the virtue of pride is taking satisfaction in one’s work. Like a craftsman who finished a magnificent piece, one should feel pride in their mastery.
  6. Honor
    Aristotle glorified fraternal love and respect. Virtuous honor is not only about one’s character, but creating a culture of honor through reverence for others.
  7. Good Temper
    As a leader, remain level headed and considerate.
  8. Friendliness
    Despite the situation, it is virtuous to maintain a friendly manner. Imagine a courteous southern politician gracefully ignoring a reporter’s pointed question.
  9. Truthfulness
    Be frank with others.
  10. Wit
    Like a gracious host or charismatic speaker, a smart sense of humor will earn a person favor and illumine their virtue .
  11. Camaraderie
    Aristotle believed in brotherly love, extending a hand to fellow man. Revel in camaraderie with others.
  12. Justice
    Judge with impartiality and fairness.

Achieving Eudaimonia

Leaders who follow Aristotle’s philosophy become ethical through practicing the virtues in all their affairs. The ethical focus is shifted from a situational response, to pattern of behavior. Psychologists posit that moral principles are often a matter of instinct rather than rationality (Johnson, 2013). Aristotle’s philosophy of virtue supports this view, recommending individuals develop their instinctual response through habitual practice of virtuous behavior.

Ethical leaders are to avoid “vices” in search of the golden mean (Nicomachean Ethics). Every virtue has the potential to become destructive, or simply distasteful (either in violation of virtuosity.) Eudaimonia is achieved through the moderation of behavior towards the golden mean, and away from extremes. Join in camaraderie, but do not fall to tribalism. Practice impartiality, but do not become disassociated. Be jovial, but not inattentive.

Aristotle’s is an advantageous moral framework in the third sector. A leader’s decision-making is dominated by perspective of a spectator. Virtue ethics are intentionally ambiguous, requiring an actor to view themselves in third person to assess their own behavior. The “right” thing to do is defined by following what a perfectly virtuous person would do in any given situation. Such conduct will ingratiate leaders with donors, foster strategic partnership, and shine in service to the organization’s constituents.

 

Ethics, Resources, Responsibility, Social Sector

What MNA Students Should Know about Donor Advised Funds

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Image Courtesy of The San Francisco Foundation

By: Jackie Downing & Alexa Davidson

September 15, 2017

The MNA curriculum is rich with information on foundations, but how much do you know about donor advised funds? Did you know that from 2014 to 2015, according to the National Philanthropic Trusts 2016 Donor-Advised Fund Report, the total number of donor advised funds grew by 11.1%, compared to private foundations which grew by 2.6%. Additionally, Donor Advised Fund grants to qualified charities reached an all time high of $14.2 billion, which is a 16.9% increase from 2014 (National Philanthropic Trust, 2016). As greater numbers of donors – individuals, families and companies – choose this low-cost, convenient giving vehicle over the traditional foundation, it is essential that nonprofits leaders understand donor advised funds.

Let’s start with the basics. A donor advised fund, as defined by the IRS, is a fund or account which is separately identified, owned and controlled by the sponsoring organization, and over which the donor(s) (or person(s) appointed by them) have advisory privileges. Like a bank account, the fund bears the donors’ names, unless they choose to name it something else. The account is housed at a large nonprofit, such as a community foundation, university, or the philanthropic arm of a financial firm, such as Schwab Charitable. The donors may recommend grants from the fund to eligible nonprofits. Unlike a private foundation where the “owners” (the trustees) have the authority to make grants from the fund, an advisor to a donor advised fund recommends grants from the fund and these recommendations must be reviewed and approved by the entity that houses the donor advised fund.

If donors establishing donor advised funds are forced to give up some control over the assets in the fund, why then are they so popular? Because donor advised funds offer many advantages over private foundations. For starters, donors contributing highly appreciated property to a donor advised fund can deduct up to 50% of their adjusted gross income for these gifts, compared to 30% for private foundations. Donor advised funds, with fees ranging from about .25% to 1.25% of the fund balance, are generally far less expensive than hiring staff to run your private foundation, especially if it is small. Unlike a private foundation, which must file and publish a 990 annually, disclosing all monies spent on staffing, operations and grants, a donor advised fund offers complete privacy. A donor can give anonymously to any eligible organization. In many instances, particularly at community foundations, donor advised fund donors have the opportunity to consult grantmaking professionals, utilize their services and expertise to learn about grantees, become more informed philanthropists, involve their family in philanthropy, and plan for a charitable legacy after their lifetime.

In addition to these advantages, donor advised funds have a few other positive traits. They are far more flexible than private foundations. They require only one advisor, though most providers will allow a donor to appoint other friends and family to advise on the fund if desired. They do not require a board, board meetings, or any formal decision making process, other than submitting the grant recommendations to the sponsor for approval, which in most instances, donors can do online anytime, day or night. This allows donors to be responsive and generous in their giving, responding to the needs of the community and getting funds to the causes they care about, anytime of the year. Grants are quickly reviewed, approved and paid, generally in one or two weeks’ time. The sponsoring organization conducts appropriate due diligence to ensure that the funds will be used by an eligible nonprofit organization for charitable purposes. Donor advised funds are not designed to live in perpetuity, though most sponsors offer the option of creating a permanent fund after the donor’s lifetime. Instead, donor advised funds typically spend down their assets in one or two generations, with remaining funds going to the sponsoring institution (in the case of community foundations and universities) or directly to nonprofit causes when the donors are no longer living. While private foundations typically spend 5% of their corpus per year and are designed to exist in perpetuity, donor advised funds generally spend well above this, which in a world of great need, is a very important distinction.

When soliciting or accepting a donation from a donor advised fund, keep in mind the following:

Donor advised funds may make grants to eligible causes, including:

  • Domestic 501(c)(3) charitable organizations and 509(a)(1) and 509(a)(2) public c charities, including houses of worship, hospitals, schools, museums, symphonies, zoos
  • Governmental units (if for public purpose)
  • Private operating foundations
  • Some supporting organizations – 509(a)(3) public charities that are not considered disqualified to donor advised funds
  • Foreign charities, using expenditure responsibility (tracking all expenses) or equivalency determination (demonstrating that the organization is the equivalent of a US charity.

Donor advised funds may not:

  • Make grants to individuals selected by or affiliated with donor
  • Make grants which result in benefits for or payments to the donor or related parties
  • Make grants to private non-operating foundations
  • Be used to fulfill pledges or sponsor events
  • Be used pay the portion of a gift that is tax deductible
  • Be given for anything other than charitable purposes

Make the experience positive for donor advised fund donors:

  • Grantees should exercise care when thanking a donor for making a request from a donor advised fund. The thank you letter should not thank the individual donor for the donation, but instead should thank the donor for recommending the contribution.
  • Neither the DAF sponsor nor the individual donor require a tax receipt from your organization.  Any letters are for acknowledgement purposes only.
  • Do not provide tickets, sponsorships, gifts, or any other benefits beyond incidentals (like a coffee mug) to donors. Do not allow donors to split (bifurcate) their gifts, paying for benefits portion personally and the tax-deductible portion with the fund. This is called bifurcation and it is not permissible by the IRS.
  • Do not ask or allow your donors to make pledges. Donors may express their intent to recommend a grant from their donor advised fund to your organization, but they may not commit formally or in writing to a gift without approval from the sponsoring organization.
  • Secure a DAF grant as you would any other gift: Cultivate the donor relationship; Craft a compelling case; Make the ask; Confirm the gift source; Thank and steward the donor. For anonymous donors, ask the sponsoring organization to pass along a thank you letter.
  • For anonymous donors, ask the sponsoring organization to pass along a thank you letter or email to the donor and take great care to treat the donor’s gift with confidentiality.

The rapid growth of donor advised funds in recent years illustrates their widespread appeal. Thousands of everyday Americans who want to be strategic and flexible in their giving, use donor advised funds to support the causes they care about. Donor advised funds should help donors experience the greatest level of satisfaction and joy from the generous support of their favorite causes and charities. Whether at a single-issue charity, a community foundation, or a commercial provider, donor advised funds serve a common purpose:  raising the profile of philanthropy and bringing more resources to worthwhile organizations making positive change.

The authors wish to thank Pamela Doherty, Director of Business Development at The San Francisco Foundation, for contributing her expertise to these recommendations.

CSR, Leadership, Social Sector

Leadership for Social Value Organizations

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Image Source: http://pt.slideshare.net/TikiWen/value-based-leadership-50056805/31

Leadership for Social Value Organizations

By Julie Brown, MNA ’17

With the rise of corporate responsibility among for-profit corporations and the creation of benefit corporations and low-profit limited liability companies (Cooney, Koushyar, Lee, & Murray, 2014), the nonprofit sector is expanding and in the midst of being redefined. The leaders of these socially minded organizations are finding innovative ways to address social issues, redefining ways to measure social impact, creating new funding models, and are putting pressure on the nonprofit sector to professionalize. Today’s nonprofit leaders are being challenged to compete with these social enterprises while also being held to a higher set of ethical standards    (Bowman, 2012). The ethical standards are substantially higher in the nonprofit sector because their mission is to provide a social benefit with income generated through donations and grants.

In order to keep up with the sector changes and its high ethical standards, it is difficult to find a nonprofit leader who possesses the experience and the skillsets needed to manage through changes such as these (Callanan, Gardner, Mendonca & Scott, 2014). According to Harry Jansen Kraemer, Jr. (2011).” Today, there is a widespread lack of confidence in leadership, in business, government, education and elsewhere. Every leader needs to regain and maintain trust. Value based leadership may not be a cure for everything that ails us, but it’s definitely a good place to start.” A value-based leader makes decisions and actions rooted in the leader’s ethical and moral foundation (Copeland, 2014). A leader’s values may include, but are not limited to honesty, open communication, humility, integrity, hard work, and compassion (Rao, 2015). By employing their values, a nonprofit leader not only makes decisions based on what’s right for the organization, but they also encourage others to act in a similar manner (Ethical Leadership, 2013). Even though they are leading their organization through difficult times and may not possess all the skillsets needed, a value based leader is able to instill a culture of ethical behavior among employees and volunteers, seek new revenues sources that align with their organization’s mission and the sector, and help create a sustainable organization.

Regardless of an organization’s size or mission, employees and volunteers alike respond to the moral cues of their leaders. The tone a nonprofit leader sets is critical in an organization’s culture of integrity (Ethical Leadership, 2013). Since no two people have the same set of values or moral judgment, a value based leader adopts and enforces a code of conduct and ethical policies to help clarify what is expected, to try and deter misconduct, promote trust, and minimize conflicts of interests (Rhode and Packel, 2009). Employees and volunteers look to the leader to determine what behavior is acceptable and what is not and will emulate those behaviors. The value-based leader encourages and sometimes demands others in their organization act in a similar fashion.

The leader’s values not only influence employees and volunteers, but also impact donors and the organization’s ability to fundraise. The values of the nonprofit’s leader play a critical part when it comes to earning and maintaining the trust of donors and managing their donations in an effective and transparent manner. With the value based leadership approach, the leader values doing what is right for the organization over the dollars (Rao, 2015). This isn’t to say value based leaders do not care about money; instead, the values of the leader and the organization make sure the revenue sources align with the values of the organization and are used effectively.

In addition, while developing new revenue streams, the value-based leader considers how clients and donors might view these new streams. The leader also considers which revenue generating activities are appropriate for the sector (Bowman, 2012)According to M.S. Rao (2015).” When leaders put profits before values and elevate their interests above others, their businesses are bound to collapse.”

A nonprofit leader has an important role in how an organization fulfills its mission. They also play an integral part in setting and enforcing the values and culture of the organization. Employees and volunteers reflect the values and ethics modeled by their leader. Donors look to the values of a nonprofit organization to determine whether they will invest their dollars or not. The values a leader exhibits in a nonprofit organization often outlive their tenure and can help or hinder the organization in the future. With the entrance of new social impact models, the call for increased transparency, the need to diversify revenue streams and report on the organization’s social impact, nonprofit leaders are faced with a diverse and complex set of challenges. In today’s environment, it is unlikely that a nonprofit leader will possess the experience or all the skillsets needed to lead through these changes. Despite all the challenges a nonprofit leader may face and the high expectation placed on them, a value based leader approach can help navigate through these complexities. By staying true to their values and doing what is right for the nonprofit organization, a value-based leader is able to effectively lead their organization through difficult situations and uncertain times. Not only will the strong ethics of the leader shine through, the strong ethics and values will live on within the organization for years to come.