Ethical core

Charities can shape their future by practicing their values.

By Todd Cohen

[03.31.04] -- Charities should shape up.

If they do not police themselves, all charities face serious backlash for the excess and smugness of some.

In the face of toothless regulation, or because of it, some charities act as if they are beyond rules. 

Todd Cohen
Editor and Publisher
Philanthropy Journal

Foundations are unregulated banks. Donors park wealth in foundations they create, take tax breaks up front and, by law, dribble out annual grants that do not have to exceed 5 percent of assets.

As part of that payout, they can count salaries and perks.

Some foundations and charities award lavish pay, and some family foundations cut sweet deals for kin and friends who serve as staff, board members or advisers.

Many federal and state regulators lack the legal claws, and the political spine, to crack down on charities.

Still, their blood up over corporate thugs, some lawmakers and regulators are targeting charities.

Charities need to think hard about their values and operating practices, adopt tough standards of ethics and accountability, and find ways to make sure the public and donors know who they are and how they work.

If they do not fix what is wrong, charities risk regulatory overkill and the loss of trust.