The Business Ethics Blog

There are narrow and broad interpretations of the scope of the field of “Business Ethics.” The narrow interpretation suggests that Business Ethics is strictly concerned with commercial enterprises (corporations and other kinds of companies).
The broad interpretation suggests that Business Ethics is about organizations of all kinds (with the possible exception of government). On this latter undertanding, charitable organizations and NGOs (NonGovernmental Organizations) are part of the purview of Business Ethics: after all, just like any commercial enterprise, charities and NGOs are involved in providing some product or service, subject to constraints imposed by demand, budget, human resources, etc., all of which raise ethical issues.

Another useful perspective on charitable organizations is provided by Henry Hansmann, in his extraordinary book, The Ownership of Enterprise. Hansmann points out the essential similarity between charitable organizations and for-profit firms (essentially, the provision of some service) as well as the essential difference: the difference, says Hansmann, lies in the separation of buyer and beneficiary that typifies charitable organizations. That is, when I give money to Wal-Mart, it is so that I can receive some benefit in return, but when I give money to a charity, it is so that someone else can receive some benefit. That difference changes some of the ethical issues that will arise, remedying some and worsening others.

We’re all familiar with the kinds of things we look for in assessing corporate ethics. But much less gets said (or written) about assessing NGOs and charities.

So here’s a quick framework for assessing NGOs and charities.

1) Mission
How ethical is the organization’s mission? Many NGOs and charities have goals that are very widely accepted (e.g., improving literacy, feeding the world’s hungry). Others have goals that are more controversial (e.g., bringing an end to animal agriculture).

2) Methods
The ends don’t always justify the means, so it’s worth evaluating the means employed by an organization. NGOs and charities employ a range of means, from the unobjectionable (awareness campaigns, shipping food to those in need, etc.) to the highly questionable (e.g., desctruction of private or public property).

3) Integrity
The internal operations of NGOs and charities can be assessed just like the internal operations of business firms. So, NGOs and charities can be assessed in terms of such things as their careful shepparding of donated money, the honesty of their advertising, and their success at avoiding conflicts of interest.

4) Legitimacy
NGOs and charities generally promote “good causes,” but no one gets the right to speak for some cause just by claiming it. Legimitacy amounts to a measure of the degree of justification with which an organization speaks or acts to promote the things it promotes. Some NGOs and charities gain legitimacy from a broad base of members or donors. So, some environmental organizations, for example, gain authority from their claim to speak on behalf of thousands or even millions of members or donors. Others can’t make such claims. Some NGOs and charities, rather than grounding their legitimacy in terms of the number of people they represent, gain legitimacy from their track record of successfully using donor money to promote their stated goals. Others lack legitimacy precisely because they’re so bad at doing what they claim to do. (There’s a good paper on legitimacy — “Four Criteria of Development NGO Legitimacy” by Iain Atack — that lays out a more detailed framework.)

I think these four measures amount to a pretty robust way of evaluating the ethics of NGOs and charities. Putting forward such a framework and encouraging its use is in no way intended to cast aspersions on the good work so many NGOs and charities do. But as is increasingly being recognized, it’s important that organizations not be assumed to be ethical, just because they seek to promote the public good.

Relevant Books:
The Power and Limits of NGOs edited by Mendelson and Glenn
NGO Accountability: Politics, Principles and Innovations by Jordan and van Tuijl
The Ownership of Enterprise by Henry Hansmann