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Ethics in Action

By:  Robbe Healey, MBA, NHA, ACFRE 
Founding Member Aurora Philanthropic Consulting 
Immediate Past Chair AFP Global Ethics Committee  

Just to review … most ethical dilemmas focus on one, or more, of the following:   Tainted Money, Compensation, Privacy, Appearance of Impropriety, Stewardship, Honesty, and Transparency or Conflicts of Interest.  How do you apply them to the following:  

“California State University at Fullerton will remove a donor's name from its business school after the donor refused to make good on a $30 million pledge. Telecom executive Steve Mihaylo promised the money in 2007 after making a previous $4.2 million gift to erect a business school building bearing his name. But in 2016, after giving slightly more than a fourth of his subsequent $30 million pledge, he stopped the flow. University officials say Mihaylo was pressuring them, inappropriately, to purchase telecommunications equipment through his company. Mihaylo said the university was ‘not cost effectively run’ and ‘did not keep its commitments’ to him. His name will remain on the building, but the university will rename the business college.” (Orange County Business Journal) 

Review of the known “facts” seem to focus on Conflict of Interest and Stewardship.   

Conflict of Interest 

Conflicts of interest can arise from personal or professional relationships such as faculty and students, supervisors and subordinates, counselors and clients, organizations, and donors.   

This one seems clear on the surface:  If a donor is pressuring the university to purchase telecommunications equipment through his company, there is a perceived, if not real conflict between the university and a major donor.  

Purchasing and Philanthropy departments must function independently.  There is nothing inherently unethical about doing business with a donor or accepting a gift from a vendor as long as there are no quid-pro-quo arrangements. If a company with which a donor has a relationship has the best product or service option as determined through a transparent competitive bidding process, then the bid can be accepted. Purchasing policies and gift acceptance policies must make these standards clear in advance, and then be followed.    


Effective stewardship has multiple meanings and positions an organization to be worthy of continued philanthropic support. It includes acknowledging gifts, donor recognition, honoring donor intent, prudent investment, and the effective and efficient use of funds. Policies for routine or campaign-related naming opportunities protect donors and organizations alike. Gift agreements should include language which reflects all relevant policies. Policies should include, but are not limited to: 

- Who can make the offer and approve a naming? 
- What level of gift is required for a naming for a building, space, or permanent fund?
- How much of a pledge must be paid before signage will be installed or a dedication/ribbon cutting celebrated? 
- What happens if a donor is unwilling or unable to complete a pledge?  
- Is the time span of the naming limited, such as the useful life of a space or vehicle? 
- Who has right of refusal to renew a time-limited naming, such as for a building or a room? Did the gift agreement allow the donor the option to transfer this right to an heir? 
- What are the circumstances which allow an organization to remove a naming? For example:  
- If the donor is unable or declines to complete a pledge; 
- If the individual (living or deceased) or entity is involved in activities that conflict with the organization’s values or that bring dishonor or embarrassment to the organization; 
- If the area dedicated is demolished or is no longer to be used for the organization’s benefit or;  
- If the function of the space changes to the extent that the purpose of the dedication is no longer relevant. 

This one also seems clear on the surface:  Two considerations merit review to determine whether the conditions of the naming may not have been met. 1.  If the donor canceled nearly three quarters of the outstanding pledge balance, may the university cancel the naming? 2.  If the telecommunications equipment sold by his company did not meet the necessary specifications, could its use bring embarrassment to the organization?  In either case, the determining factor would be the terms of the gift agreement. Specifically, what were the circumstances which would allow the University to remove the naming? Did it include the donor’s failure to complete a pledge or if a donor (living or deceased) is involved in activities that conflict with the organization’s values or that bring dishonor or embarrassment to the organization?   

An Ethical Organization 

An Ethical Organization addresses these considerations in advance. A culture of accountability and transparency begins with the board and executive staff leadership adopting policies, procedures, and practices. Organizations which have all the needed policies, procedures, and practices in place, must review each annually and make periodic updates as necessary. Check your organizations.  Do you have and enforce each of the following: 

- Conflict of Interest Policy (for board, staff, and volunteers) is it posted on your website? 
- Conflict of Interest Annual Statement reviewed and signed each year? 
- Gift Solicitation Policy 
- Gift Acceptance Polity 
- Naming Policy 

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