Podcast: When Big Donors Push Back: Navigating Ethics in Your Capital Campaign
Season 5, Episode 40
What do you do when your biggest donor wants to fund something that isn’t in your campaign plan? Or when a wealthy prospect makes you uneasy but you can’t quite explain why? These are the kinds of ethical gray areas that surface in nearly every capital campaign—and most organizations aren’t prepared for them.
In this episode, Andrea Kihlstedt and Amy Eisenstein tackled the uncomfortable but essential topic of fundraising ethics. Prompted by the ongoing Epstein revelations — where major institutional leaders maintained relationships with a known bad actor long after red flags surfaced — the conversation expanded into the everyday ethical dilemmas that development directors and nonprofit leaders face during campaigns.
Listen Now:
Andrea Kihlstedt:
Fundraising ethics are in the news these days, and we want to talk about it.
Amy Eisenstein:
Hi, I’m Amy Eisenstein. I’m here with my colleague and co-founder, Andrea Kihlstedt. And ethics are in the news a lot these days, and so we are going to talk about it. And of course, we’re talking about Epstein, but it extends so much farther than that.
Andrea, there’s a lot of ethical decision making around fundraising, and sometimes when there’s a really big gift on the line, whether consciously or unconsciously, we tend to look the other way. So that’s, I think, how this has come up for us, with all the news articles around all the, quote unquote, “philanthropy” that Epstein did, but it trickles down. It’s more than that.
Navigating Ethics in Your Capital Campaign
So what’s on your mind around ethics and fundraising these days? What did the news articles bring up for you?
Andrea Kihlstedt:
Yeah, so the news articles, let’s start with the Epstein stuff because they do bring up a lot for me. I am gobsmacked really, and in some sense not surprised, at how many big people in this field, people with big jobs as the heads of big institutions and the chief development officers of big institutions were led on by Epstein and brought into his world by the lure of not only money that he claimed to have and to give away, and he did give away a lot of money, but also by access that he said that he could afford, that if you were the head of a major arts institution and he would invite you to his house for a cocktail party, because then you would get to meet a whole bunch of well-placed people who may eventually become your donors.
These are the kinds of things people who have big fundraising jobs do. We’re always looking to build relationships with people who might become our donors. So when someone who is really there in a major way invites us to their house to a party, do we go? Yes, we go. It’s just what we do.
The Epstein Case
Now, what’s of course coming out about Epstein is that many, many people who really did or are likely to have done nothing wrong in a sexual nature were invited to these events and became sort of part of this community because of how good Epstein was at grooming people, at luring them in, at saying:
“I’ll introduce you to so-and-so. I’ll give money for this project or for that project.”
And in many of these institutions, it ended up that, or it was the case, that he was also looking for other connections that served the more nefarious parts of what he was doing, connections that would introduce him to young women, for example, connections that would give him privileged information about young, talented girls whose families perhaps were in trouble.
And then he would, in a separate way, he would move in. Now, my guess is that, and people have been writing about it, that many development directors actually had some icky feelings about what was going on, but they couldn’t point to anything that really was off. It just felt wrong.
Amy Eisenstein:
Well, I think what really stands out about this case is that even after there were convictions and conversations and pointing, people stayed in touch with him for years. Emails between the head of this institution or that institution, and politicians and fundraisers and CEOs and executive directors stayed in touch even after things came out and were fairly public. And he was just so charming or whatever it was, or wealthy, that it put blinders onto people.
So I think that one of the points is that, well, first of all, once you know, there’s no excuse anymore, but even before you know, when you have an inkling, when you have that feeling in the pit of your stomach or just something doesn’t feel right, pay attention to it, speak up, talk to others. It’s not worth it in the long run, even if there’s a big gift at stake, for the bad press that is coming down the pike and the damage that it is going to do to your organization.
So okay. Anything else about Epstein or let’s keep moving on?
Doing Due Diligence
Andrea Kihlstedt:
I just want to say one more thing about this. Let’s say you’re a development director and you are faced with something like that, with a big person who has a lot of money who gives and you have an uneasy feeling about it and you do some homework and you see indeed there are maybe some telltale signs that things aren’t right. So you should not make it your decision to do something. You should be talking to perhaps board members, perhaps an ethics committee in your organization, perhaps your executive director. You should be surfacing your concerns.
So you don’t have to keep it all to yourself. Even if it’s fairly nefarious, you don’t have to keep it all to yourself. You can be talking to other people about it and make the decision a broader decision than just something that’s on your shoulders. So I want to be sure people know that.
Amy Eisenstein:
In fact, you should. Not you can.
Andrea Kihlstedt:
In fact, you should.
Amy Eisenstein:
You must.
Andrea Kihlstedt:
But you should. It’s important.
Amy Eisenstein:
You must.
Andrea Kihlstedt:
Exactly.
Amy Eisenstein:
You must bring it up. The executive committee needs to know, the board needs to know, and so that it is an organizational-wide decision and it’s not on your shoulders as a development director or even the CEO. This is bigger. This is an organizational decision and something that people need to be aware of, not just one person.
Illegal and Unethical Considerations in Capital Campaigns
Okay, good. So let’s bring it down to sort of a campaign level decision that’s not, maybe the ethics involved aren’t illegal or … Well, certainly there’s a huge difference between things that are illegal and unethical and we could probably talk for days, weeks, months about that, but let’s look at a few examples in campaigns where donors behave in ways that maybe don’t go with the campaign plan or the strategic plan or try and do things that maybe don’t work for the organization. That’s not illegal, but perhaps falls into the category of unethical.
Andrea Kihlstedt:
Yeah. So these sorts of things often come up in private school fundraising. It’s not the only time it comes up, but it often comes up there. And what will happen or what we hear about sometimes is that there’s a campaign to raise a certain amount of money, and the money, the campaign objectives, there are three or four campaign objectives.
Let’s say the gymnasium, for example, is not among the campaign objectives. It had come up in the strategic plan, but it didn’t make it to the campaign objectives in the organizational planning, but there are a few parents who feel strongly about having a new gym. So they have this —
Amy Eisenstein:
And we are talking about this in the hypothetical, Andrea. One of our clients is dealing with this, and we have weekly peer support calls and it was raised as a question by one of our clients. One of her big donors or two of her big donors want a new gymnasium at the school that their kids attend, but it’s not part of the campaign plan. It’s not part of the strategic plan. So what should she do?
Andrea Kihlstedt:
What to do? What to do when Amy decides that her daughter’s school should have a gymnasium because her daughter is a big basketball player in the school?
Amy Eisenstein:
Yes. We’re very tall here in my household. We’re very tall.
We play basketball. No, we’re not. For those of you that have not met me, I am not tall. We are not basketball players. Okay. So what should we do?
Andrea Kihlstedt:
So what do we say to Amy? Amy says, “Listen, I’ll give you a million dollars to your campaign, but I want it to go to a new gym.” So what do we say to Amy? That’s the question. What do we say? How do we handle it?
Let’s say the gym’s going to cost $3 million. So Amy says, “I’ll give you …” Well, what do you say, Amy, as a donor?
Amy Eisenstein:
Right. Yes.
“Well, I want to see the school thrive and I want to support this campaign. And what’s really important to me is a new gymnasium. And my daughter wants to play basketball, so I would happily give to this campaign a million dollars to support the building or the renovation of the gym, even though it’s not in the campaign plan. And I’m happy to talk to the kids’ parents on the basketball team and get them to support the gym so that we can get a new gym quickly. Wouldn’t that be great?”
Andrea Kihlstedt:
Right.
“Yeah. Thank you so much for your wonderful idea. I really have to go and talk to the campaign planning committee. And in fact, the gym, as you know, didn’t make it into the strategic plan for … We know we need a gym eventually, but it didn’t make it into the plan for this campaign. So let us do some thinking about it and come back to you for more conversation.”
Now, here are the various problems with this scenario. Let’s say that Amy is able to raise the $5 million that it’s going to take from her other basketball families to renovate the gymnasium. What’s going to happen is that those families that we had counted on for major gifts to the other campaign objectives are going to be sucked away from the campaign.
All of a sudden, we have a $5 million campaign that’s funded a gym, but hasn’t funded the other things that were on our campaign.
Amy Eisenstein:
Haven’t funded science and technology.
Andrea Kihlstedt:
Or scholarships or all kinds of other things that were part of the campaign. So while it sounds like we should say, “Yes, of course that would be great,” we can’t afford that, not just because of the fact that it’s a gym, but of the fact that it’s going to siphon off money from the rest of the campaign. Problem. Big problem.
Handling the Issue
So we can do several things:
- We can go back to the campaign plan and take a look and see, well, how are we doing with raising the rest of the money?
- Are there parts of the campaign, are there elements in the campaign objectives that we would want to change out, that we would want to substitute, or the things that aren’t going well that we might want to say, “Well, okay, now let’s really re-look at this since we have a donor? Should we include in the campaign the gym and not something else?”
But if the strategic planning committee or the campaign committee or the headmaster is not keen on doing that, you can’t just merrily go ahead with it. What can you do? Amy, what would feel good to you as a donor?
Amy Eisenstein:
Yeah, I mean, I think it’s complicated, but always it’s easier to go back with the backing of the board, of the campaign committee, and say to the donor:
“Listen, we get it. We would love to have a new gym, but we’ve thought about your really generous offer and while the gym would be great to have right now, the priority for funding are these things. And if you would help us fund these things first, maybe as a next phase, we could consider the gym. But right now, we’re hoping that you would contribute to scholarships, the science labs, the teacher training fund, whatever it is that is in the strategic plan.”
And I think that the organization needs to make a decision with lots of people’s input, and maybe you go back to a few of the other lead donors and say:
“Listen, what should we do? Is there somebody else that should talk to this donor, other lead donors to the campaign or the board chair take it off the development director’s shoulders?”
So I think the idea is that it’s an organization-wide decision and no one person is making this decision in a vacuum. And I don’t know if it’s completely unethical, but we’re putting it in this category, right?
Andrea Kihlstedt:
Yeah. It’s not so much an issue of unethical as it’s an issue of values, I suppose.
A Great Story About Values and Ethics
Amy Eisenstein:
Yeah. You had another great story about values.
Andrea Kihlstedt:
Yes. Well, this is one from a long time ago that was just such an object lesson and so difficult. It was a community youth orchestra that had been founded by a husband and wife team. It had been really very successful. And their idea, and they were very clear about articulating it, is that it would be a community youth orchestra. It was set up to serve the broad community, to get as many kids interested in playing music and having a good time playing music and becoming enthusiastic about music as possible, rather than setting it up as an orchestra that was bound for Carnegie Hall, where the value was excellence, musical excellence.
Of course, this orchestra was musically excellent, within the context of the community of … But you imagine, all right, if you do have auditions with one of those sets of values, the auditions would go one way. If you have auditions with the value of we want this to be a top flight orchestra that’s going to perform in Carnegie Hall, your decisions are going to be another way. So the founders of this organization were very clear about the community base of the mission of this organization.
Amy Eisenstein:
Inclusive. Inclusive.
Andrea Kihlstedt:
Inclusive. That’s the word I’m looking for. And all went along really very well. It was a very successful orchestra. They had a senior orchestra and a junior orchestra. They had parents that were excited and involved. But at one point or other, a small group of parents with children that they thought were super talented got hold of the organization. They got onto the board and they started advocating for a change in the values, that they wanted their kids to go to Carnegie Hall.
Amy Eisenstein:
Yes.
Andrea Kihlstedt:
And they gradually started, took some time, but they gradually started shifting and pushing the shift in values until they got the board to fire the original directors.
Amy Eisenstein:
Well, and I think a key piece of the story is that some of those parents were the big pockets of the organization.
Andrea Kihlstedt:
That’s right. Yes, exactly. Big shots in town. Yes.
Amy Eisenstein:
Right. They were the big shots in town. They had the deep pockets and they were using money as a weapon, for lack of a better word.
Andrea Kihlstedt:
Their kids played great instruments and went for great private lessons. And it’s no wonder that these kids performed really well, right? That’s how they came up. And the original founders, they knew what their values were and they were unwilling to budge on their values, but this small cabal of wealthy people were unwilling to stick with the orchestra as formed. And eventually the board fired the founding directors of this orchestra. And it was quite dramatic, actually.
At the same time, the parents who were in favor of the inclusive model formed another organization and rehired the original executive directorate team. So the community had two of these orchestras, one that was bound for Carnegie Hall and one that was not. Of course, it turned out the community was not large enough or rich enough to be able to fund both of them. Eventually, the whole thing went bust.
What To Do
And it was just a sad story. It was a really sad story. But boy, was it one based on people with money having an idea that was going to serve their kids and turning the values of the organization in a way that was detrimental to the entire community.
Amy Eisenstein:
So that story, of course, doesn’t necessarily have a happy ending. And I think the question really is how to manage these situations that are difficult. And they come up. They do. They come up and they’re difficult. There’s no easy or obvious answer or solution, but to me, the answer and the solution is to involve people and to go to your key donors one-on-one. Hopefully they’re not forming a revolt in the back. I think that’s an extreme example. But involve the board, involve the executive committee, involve the campaign committee and talk about the pros and cons and what this means for the organization and what direction you want to go in so that everybody is on board with the ultimate decision.
And sometimes it does cause rifts. I mean, and back to the school and the gym example, there are parents that really want a gym. And so what’s a school to do? But I think that if you go back to the committee and the community, you’ll come to a decision that hopefully works and is not just driven by the wealthiest people at the organization.
Andrea Kihlstedt:
Amy, when we were discussing the gym earlier, you said something I thought was really great, which is that you have a timeline also. You can say to parents, “Listen, we can’t afford to do this now, but the gym is on the agenda for our next project. So if you can stick with us now, then maybe you can head up the committee for the gym. As soon as this campaign is finished, we can dive right back in.” That’s a yes and, yes, let us finish this campaign and we will also get to the gym.
The same thing might have happened in this orchestra situation, that they might have been able to say, “Yes, we want to be inclusive and why don’t we start a smaller group, a smaller chamber group that is going to be Carnegie Hall bound?”
Is this a black and a white? Many things respond if you say, “Okay, how can we find midway? How can we do a yes and with this? And would you be willing to help us become even more inclusive? And then this small star organization would represent us.”
And so maybe there might have been other ways. Now, I honestly don’t remember. This was years ago. Maybe there were conversations like that, maybe not. I don’t know. But that’s one of the ways, is to say, all right, people have strong feelings, particularly when it comes to their children. You find it in other places too, but I think you very commonly find it when parents want their money to support their children.
Another Story
We heard of another example like this recently, which is an organization that serves people with disabilities. And a donor … And the reason they’re doing a campaign is because there’s always a big wait list to get into the services of this organization. A significant donor came forward to give money. Now, that donor made no requests whatsoever, but the reality is that his or her son is on the wait list. So the question is, should someone move that child up the wait list because this donor has massive resources?
Amy Eisenstein:
All right. So to me, that’s a great another example. To me, the key takeaways are these are things that you can be and you should be discussing at the board level now. As you plan and prepare for a campaign, discuss what happens if a donor makes a suggestion that is out of the current scope of the campaign? How might we respond? You can do some scenario planning.
Let’s say that there are concerns raised about the ethics of a donor in business or that one of our donors gets arrested or something. How might we respond? Or even if it’s just, “Here’s the core committee that will discuss it.” So you don’t have to have all the answers, but do start … I think this is an opportunity to start having those conversations. The things come up that we’re living in challenging times and that people are fraught with all sorts of strong feelings and dug-in positions, and how might we deal with them when they inevitably do come up.
The Takeaway
So to me, that’s the takeaway, is that start having these conversations, prepare the board to talk about these things, don’t keep them … You’re not going to publicize them, but you’re not going to keep them quiet either. You’re going to raise the issue. You know, “I have a funny feeling in the pit of my stomach about this conversation. Let’s bring others into the conversation and figure out all the ways that we might respond.”
Final Thoughts
Andrea Kihlstedt:
Amy, this is such a complicated topic, and you and I wanted, we wanted to have this conversation because it’s so in the news now. And I think you’ve offered a great suggestion that really before you have problems, you sit down with board members and discuss, okay…
- How will we handle them?
- What is the structural way we can handle them?
- Do we have a committee?
- How does this information get dealt with?
- Who helps deal with it?
And I think that doesn’t give you specific answers for specific issues, but it certainly gives you a way forward when they, as Amy said, inevitably surface.
Amy Eisenstein:
Excellent. All right.
Thanks, Andrea. Great topic today. Thanks for listening. We’ll see you next time.
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