Trust is so Hard to Earn, yet so Easy to Lose

Jay Love — Tue, 13 Jan 2009 18:49:00 GMT

Anyone who has ever heard me speak or has read any article/blog from me probably realizes just how much the nonprofit sector means to me on a personal basis. I cannot imagine a world without nonprofits to fill in the overwhelming gaps in need. It is also hard for me to contemplate a world devoid of the pure joy derived when people donate funds to help others. However, both come with various responsibilities from my point of view.

During my reading of this well written article from Rick Cohen in the Philanthropy Journal, it struck home just how fragile the trust between donors and charities is. By the way, if you have ever seen the movie Weekend at Bernie’s, it is quite ironic how close to home it hits with unlawful endeavors in New York with a fellow who also goes by the name Bernie. (Clever writing Rick...)

The Bernard Madoff hedge fund scheme defies logic and common sense on virtually every level. How could any one set of funds beat most of the rest of the market every single quarter year after year? How could regulatory agencies turn a blind eye on asking why and digging deeper? Perhaps those huge and troubling questions will be answered. Let’s hope so.

I am not going to jump so quickly and harshly on the charities and foundations who placed trusted funds with Bernie Madoff’s firms. Time and investigations will shape my and others’ opinions on this subject based upon pertinent facts soon. No matter who is to blame, the vital issue of restoring trust must be addressed.

The whole matter serves to underscore what trust is implied by donors when funds are given and how important preserving that trust is. No matter whether it is a small direct mail response gift or an online event registration fee, it is certainly implied that the nonprofit organization will be the finest steward of those funds possible.

I know this issue of trust versus achieving hedge-fund-like higher returns on investments will weigh on my mind as I attend numerous meetings this year of nonprofit boards I serve. During one of the board meetings last year, we had quite a vociferous discussion on whether a portion of our invested monies should be placed with hedge funds. Safety and the preservation of trust won out. In this particular case, having the head of fundraising participate in the discussion helped to sway the thought processes of many. Additionally, the combined opinion of the board was that the value of future giving easily outweighed any "extra" returns that non-traditional investments might bring.

Hopefully, the entire Bernie Madoff scandal and losses will serve as stern warnings to all of us in leadership roles in the nonprofit sector. Garnering and preserving trust must prevail over any item which even remotely takes a chance at destroying it. Much like the family name, once trust is tarnished it is so hard to return the splendor. I wish all of the charities affected nothing but the best in recouping their monies and more importantly their donors’ trust.

The Jay Love Blog : hedge-funds

Trust is so Hard to Earn, yet so Easy to Lose