THE WAGES OF SIN? DOING 'GOOD' WITH BAD MONEY

6 December 2011

For a charity the offer of a donation is, in most instances, a wholly positive thing. However, there are occasionally cases where a charity is offered a gift by a donor about whom there are concerns or reservations. This was the case recently for the National Library of Wales, which received criticism from the Welsh Assembly for accepting a £300,000 bequest from Louis Feutren, a Basque nationalist who was a known Nazi collaborator during WWII.

This example raises a difficult but interesting question: should a charity accept donations from individuals or organizations whose ethics or activities they disagree with? I.e. is it possible to put “bad” money to good uses? In difficult economic times such as these, the question becomes even more pressing because the overall pool of resources is diminishing and so fundraisers are forced to compete ever more fiercely for what money there is.

Legitimate not criminal

So what is the answer? I am assuming here, of course, that even if the source of the money raises questions, it is legitimate, rather than overtly criminal. I would take it as read that the answer to the question “should charities take donations that come directly from the proceeds of crime” is a fairly firm “no”. And there is no suggestion in the Museum of Wales example that any of the £300,000 came directly from Feutren’s wartime activities, but rather from business interests later in his life when he had moved to Ireland. So the question is not about the legality of the money, but the suitability of the donor.

The standard argument against accepting a donation from a questionable source is that charities have an important moral/ethical leadership role to play, and rely on the trust and confidence of the public. So taking money from a source that conflicts with their mission or principles is a no-no because it undermines their credibility and erodes trust in them. This was basically the substance of the argument by the Welsh Assembly, who said that they “felt the acceptance of this bequest could affect the reputation of the National Library of Wales, one of our most respected cultural institutions.”

Preferable to the alternative

Those who believe that it is OK for charities to take the money would, however, argue that this is preferable to the alternative (i.e. the donor keeping it for themselves), as at least in the charity’s hands the money will achieve some good. In the particular example of the National Library of Wales, the picture is slightly muddied by the fact that the bequest does not just contain cash, but also a collection of historically significant papers and tapes, which could not simply be obtained from elsewhere in the same way that cash could. However, in order to stick with the general question of donation ethics rather than get stuck on the specifics of this case and the cultural value of these artefacts, I’m going to skirt over this for now.

Of course, this argument in favour of taking the money does not really answer the concerns of the ‘no’ camp, as it would be quite possible for a charity to accept a donation and do good with it, yet still suffer damage to their reputation or loss of trust. In order to overcome this, I would argue that there are three broad criteria that need to be satisfied in order for a charity to be able to take a donation from a problematic source:

Three broad criteria

1 The charity can demonstrate that some social good is actually being done with the money.

I am not talking here about impact measurement systems or anything quite so complicated (that is a whole other blog post…). I simply mean that anyone looking at the donation can be confident that it is actually going towards addressing a social need. It would be enough for a charity to be able to outline its own charitable purpose and to show that the donation was going to be used to further that purpose, in order to tick the “doing some good with the money” box.

2 No strings are attached to the donation that would compromise the charity’s mission or integrity.

In purely pragmatic terms, if a charity receives a donation from a dubious source but it carries no stipulations about how the money is to be used, it is effectively the same as if it had received unrestricted funding from an anonymous source. In this case, there should be no problem. The issue comes if the donor attaches requirements about how the money can be spent, or on what, and these potentially inhibit the charity’s ability to carry out its mission, or distort the way it operates.

3 Acceptance of the donation is not seen as an endorsement of the donor’s current or future practices.

This requirement is crucial, because the real concern when a charity is receiving donations from questionable sources is that it is being used to “launder reputations”. If a company or individual is allowed to claim that some activity they are being criticised for “cannot be that bad because I/we work with charity X, so they obviously think that we are OK”, then that is a problem as the charity’s hard-won public trust is being exploited. And it is here that the real danger of reputational risk lies: either the charity will end up looking naive for entering into the relationship or, worse, it will be seen as complicit or a “stooge”. This has for a while been a pressing issue for environmental charities, who have to be careful not to be used for “greenwashing” by corporations. And it is managing this risk that will present the greatest challenge to other charities.

Losing trust

For many charities, particularly smaller ones, a decision about whether to accept a certain donation can be extremely difficult. It may offer them the promise of financial security and the ability to work even harder to achieve their mission, which for the majority of cash-strapped organizations would be a huge temptation. On the other hand, it may carry the risk of losing the trust of their supporters or beneficiaries, which for many charities is the most valuable asset they have. There may also be strong differences of opinion about what constitutes an “unsuitable donor”, as there is clearly a spectrum from sainthood to satanic along which all individuals or companies find themselves, rather than a binary division between “good” and “bad”.

Deciding whether the reward outweighs the risk is just one of those tough calls that many working in the charity sector have to make all the time. While each case clearly has to be assessed on its own merits, the three criteria outlined above hopefully give useful pointers about what needs to be considered when faced with such a decision.