The executive director has been with the nonprofit for 25 years and served as ED for 15 years. Most view his tenure as successful, with increases in revenue and strong programs. Some members of the staff are concerned about making way for new voices and allowing for generational change, but they have not raised these concerns with the ED or board. The ED is uncertain about what he wants to do and has talked with a few members of the staff about the possibility of leaving, but he has not spoken to the board or stated a clear intention. The board, concerned about acting respectfully towards the ED, has not addressed the issue.
Is this an ethical issue?
One way to determine if there is an ethical issue is to consider who might be harmed by an action or inaction. This organization’s stakeholders are at risk of harm in a number of ways. By not having an ongoing, open discussion about succession planning, the board and ED have harmed the staff, the ED, the board, the organization, and the public. They have missed opportunities to develop the staff, possibly into the ED position, and eroded morale by creating uncertainty around future leadership. The ED may be worried about his future but has also carried the burden of wondering how the organization will carry on without him, as the board, from his perspective, has shown no interest in planning for future leadership. The board, which is ultimately responsible for the hiring, firing, and supervision of the ED, has made their job more difficult. The organization’s clients will likely suffer from a lack of continuity and reliability when the ED does decide to leave, and donors may delay or redirect their giving until leadership stabilizes.
Finally, when a nonprofit organization flounders, it hurts the public. Nonprofits are exempt from most taxes and that means taxpayers pay more in taxes to subsidize these organizations. Nonprofits operate for the public benefit. In this case, the behavior of the executive director and the board is focused on their own interests and needs, preventing the organization from operating at maximum capacity and needlessly draining taxpayer dollars.
How can an organization use ethics to address a problem like this?
One way boards and management can better serve nonprofits and promote ethical behavior is to follow the Markkula Center for Applied Ethics’ customized Standards for Excellence® Code. This code builds on the standards developed by the Standards for Excellence Institute, and sets forth legal requirements, best practices, and ethical reflections, as well as the Ethics Center’s Framework for Ethical Decision Making.
In this instance, to act ethically and not put the organization at risk, the board and executive director should have engaged in succession planning and leadership development. Standards for Excellence provides:
The board, in partnership with the executive, should engage in coordinated succession planning and leadership development to ensure a thorough process for recruiting and developing new board, executive, staff, and volunteer leaders.
Applying the Standards for Excellence
Having a board-adopted succession plan that is in place well before a key leader identifies an exit date ensures a smooth and high-quality leadership transition. Such a plan indicates to all stakeholders that the organization is ready for and can handle transition. For non-emergency transitions, it encourages EDs to make a decision and make their intentions known with substantial lead time in order to execute the plan.
Such a plan should be in place for both foreseen and unforeseen departures of the executive director. As a good leader, the ED should initiate the adoption of the plan. If he or she does not, the board should suggest it as part of their governance responsibilities. The plan should include clear descriptions for:
- Roles of senior leadership and board members
- Role, responsibilities, support, and compensation for any interim ED
- Communications plan
- Key documents for the interim and new ED, including a briefing packet from the departing ED
One survey of 1200 nonprofit leaders showed that only 20 percent of their organizations have succession plans in place. For the remaining 80 percent of organizations executive directors can meet their ethical obligations by proposing a board-adopted succession plan, alerting the board chair of their departure as soon as the timeframe becomes clear, and being partners for successful transitions. Boards can meet their ethical obligations by executing the succession plans; supporting the ED, new ED, and staff in the transition; and communicating effectively with all stakeholders about the change.
Follow the Markkula Center’s Standards for Excellence Program for Ethics and Accountability to guide your nonprofit. Learn more about the Markkula Center’s Framework for Ethical Decision Making and the Standards for Excellence Program.