Rodney Schwartz: The ethics of running a charity or impact enterprise

The charity sector must hold itself to a higher standard when it comes to ethical behaviour, says the chief executive of ClearlySo

Rodney Schwartz

Of all the things that bothered me about Tony Blair, and there were many, the one that probably worried me the most was the extent to which his actions often seemed to come from a deep-seated view that if he did something it was, almost by definition, right. The thinking seemed to go something like this: "I am a good guy and therefore if I feel something is good and the right thing to do, it is by definition the right thing to do."

Normally I refrain from blatantly political points in this column, but I think Blair is a well-known example of the sort of behaviour pattern we sometimes observe. Strong conviction is a very funny thing. We admire people who possess it, and it is vital in the work we all do in impact investing, but we recognise that when individuals or groups of people have too much of it, there can be serious consequences.

I must confess that I sometimes observe this behaviour in charities or high-impact enterprises. Let me be clear about what I mean: I have seen actions by charities and impact-driven businesses that, in my judgement, did not adhere to appropriate ethical standards. My reaction to this was sometimes dismay, but I have also been downright shocked. On these occasions, I came across a rationale that is like the Blairite one described above: the fact that the aim of these organisations is to enhance society and achieve some positive social, ethical or environmental impact somehow obviates the need for behaviour that is consistent with good governance, proper behaviour and even, in some cases, the law.

For obvious reasons, I’m not going to go into specific examples. However, I’ve encountered cases in which organisations simply choose not to pay bills, or manipulate accounts, or mistreat staff, or a wide variety of other actions that, to be frank, I have rarely observed in the private sector. And I used to work for Lehman Brothers.

Please understand that I’m not suggesting this is widespread or common, and most of the organisations we work closely with show a high degree of integrity in the work they do. But I think that because the sector uses the words "social" and "impact" when describing what we do, we must hold ourselves to a higher standard when it comes to ethical behaviour. Not doing so affects not only the enterprise involved, but also casts a shadow over us all. Consider the scandal uncovered by the media last year concerning charities and their fundraising behaviour with older people, or the widely reported problems at Kids Company.

Sometimes I think the higher level of scrutiny, and the higher standard to which charities and high-impact enterprises are subject, seem unfair, but that is the world we live in. Organisations must not feel their "higher purpose" gives them licence to behave without regard to standards. If they do, it damages themselves and the entire sector. And an array of audiences are watching carefully and judging.

Rodney Schwartz is chief executive of ClearlySo, which helps bring impact to all investment

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