Ships usually stray from course due to the human frailties of the captain and crew. The same can be said of a nonprofit organization whose mission it is to serve the public good. Whether it reaches its objective is dependent upon the people guiding the organizational ship.

One of the most overriding areas of concern for any nonprofit is that of ethical leadership and governance. Because the reputation of a nonprofit is its most valuable asset, protection of its trustworthiness should take place proactively as opposed to staging frantic attempts at damage control once a serious breach of ethics threatens to destroy its ability to function effectively.

Paul Light, professor at New York University's Robert F. Wagner School of Public Service, recently reported that a March 2011 survey, paid for by NYU’s John Brademas Center for the Study of Congress, showed that only 25 percent of Americans believe that not-for-profits are doing a good job of helping people — a decline from 34 percent in 2006.

Light attributes this trend to "bad press surrounding the September 11 relief funds, criticism of the American Red Cross for its response to Hurricane Katrina, and, more recently, Congressional hearings on the fundraising practices of some veterans' charities."

In the coming years, nonprofit organizations will need to take a hard look at their leadership and governance practices in order to assist in regaining the trust of the American public. Most recently, limiting tax deductions for charitable contributions is already on the table in Congress, along with public rumblings as to whether certain religious nonprofits are deserving of tax-exempt status due to electioneering from the pulpit.

What steps should nonprofits take to avoid crashing their organizational ships into proverbial icebergs? The culture of any given organization can usually be found embedded in its earliest beginnings — in the standards and values of the founders — and the subsequent practice of these standards by board members over its history.

The greatest potential strength (and vulnerability) of any not-for-profit organization lies within its governance, which is almost always placed in the hands of volunteers who may have limited understanding of the consequences of misinformed leadership.

It is for this reason that nonprofit executives and boards need to re-evaluate their practices and make bold changes where necessary. This will be a difficult task for many nonprofits, as it requires a fearless examination of organizational culture and practice, and, if necessary, taking on the perilous and often unpopular task of altering course.

First and foremost, nonprofit boards must make a conscious and active commitment to establish and maintain ethical practices and procedures.

Ethical problems occur on boards either because members are ill-informed regarding such standards, knowingly violate or attempt to circumvent guidelines, or are not paying adequate attention to potentially problematic situations as they evolve. This means that each member must be fully cognizant of their personal responsibility for the board's ethical functioning as well as the individual and collective consequences that result from noncompliance.

The National Council of Not-for-Profits suggests that boards create ethics committees whose sole responsibility is to craft, maintain and enforce a code of ethics designed especially to address issues of governance. This process succeeds in building an awareness that is equal in importance to the actual document — and will "draw a line in the sand" regarding ethical behavior once the document is read and signed individually by each existing member and made a part of the orientation process for new members.

The committee can choose to include areas that may constitute specific risk to their organization such as: conflict of interest, receiving of gifts, use of information, confidentiality, representing the organization, relationships with staff members, financial reporting, and procedures for enforcement.

A portion of this document should include the legal ramifications that members and the organization could face in the wake of proven self-dealing or other actions of ethical malfeasance.

The manner in which boards recruit new participants will influence the success of its ongoing commitment to ethical practices.

People generally join boards for three reasons — a passion to serve the organization and its cause, a partial desire for personal gain, or a total desire for personal gain.

In the best of all worlds, it would be optimal to recruit board members only from the first category. However, this might eliminate those individuals who have a great deal to contribute to an organization — and are willing to limit their areas of gain to those arenas that do not cross boundaries into unethical actions.

For example, a local businessman might choose to join a board in order to optimize networking opportunities. Or the representative of a bank might serve on several boards in the community in order to attract good will for his financial institution. Such relationships can be mutually beneficial.

However, individuals who serve on boards solely for their own benefit should be identified early in the interview process — as even one maliciously self-serving member can alter the culture and climate of its functioning. Such individuals have been known to make alliances in order to wield personal agendas, ultimately creating a political environment of manipulation and mistrust.

The relationship between the board and the executive director will determine whether the ethical standards promoted by the board will filter into the daily functioning of the organization.

Unfortunately, many boards do not have the exprience or expertise to discern the skills and personal character traits required for inspired and competent nonprofit leadership. What often results is incompetent, ineffective and sometimes unethical professional management. Because it is in the nature of humans to deny that they have made poor choices until they are faced with negative consequences, boards will often ignore brewing problems until it is too late.

A case in point is the catastrophic 2011 scandal at Penn State whereby the board turned a blind eye to more than a decade of horrific criminal activity in their own backyard resulting in unprecedented damage to the university. A lengthy after-the-fact report pointed to a nonprofit structure whereby the fervent athletic culture of the university far overshadowed its mission, and the board of directors failed to oversee the activities of the president and the executive staff.

Nonprofit boards cannot afford to be shy in demanding accountability from the professional leadership of their organizations. Had the captain of the Titanic been required to answer to someone other than himself, he would have been ordered to slow down his ship as it blindly headed toward a catastrophe.

Because the executive director serves at the pleasure of the board, he or she is also fully accountable to the governing body for the organization's health and well-being. Adherence to board bylaws defining the roles and responsibilities of the board versus that of the professional staff will avoid micromanaging of the day-to-day activities of the organization.

At the same time, a strong committee structure with the executive director serving as ex-officio member on each committee, will allow for in-depth board oversight of the organization's functioning. An audit committee, investment committee and advancement committee should hold regular meetings to fulfill the fiduciary responsibilities of the board — with extensive quarterly reports from the controller, financial advisors, auditors and advancement director as appropriate.

The executive committee of the board — chair, vice chair, secretary and treasurer — should have job descriptions that are actively fulfilled. All appointments to the board should go through the nominating committee as an executive director should never have complete control of the activities of the board or selection of its membership.

Such blurring of roles was the cause of the debacle at Adelphi University during the 1990s whereby the board put the school in financial jeopardy in order to provide the president with an excessive salary and benefits package.

Transparency should be the order of the day.

In order to maintain the trust of their constituencies, not-for-profit organizations cannot afford to harbor secrets. The board is responsible for making certain that the executive staff provides adequate information to the organization's external constituencies through annual reports, impeccable honesty in solicitation materials, and posting of financial information on the website — including the IRS 990 and audited financial statements.

Cultivating a culture of internal accountability and transparency includes:

• adopting an executive compensation policy whereby the entire board is involved in determining and approving the salary and benefits of the CEO
• maintaining a record of detailed and comprehensive minutes of board meetings, shedding light on all potential conflict-of-interest issues
• ensuring the regular review by the board of current financial statements

Individually or collectively, people tend to embrace behavior that provides them with the most direct and immediate rewards. It is usually only when individuals or groups see imminent danger ahead that they attempt to save the day through desperate last-minute measures.

This being said, organizations that have benefited from a long-standing culture of integrity will probably move toward further enhancing their ethical practices and procedures to protect themselves and their organizations from harm. Nonprofits that are already entrenched in a culture of denial and nontransparency will find these habits difficult to break.

As the consequences of faulty leadership become increasingly painful, and the cost to the American public becomes ever more apparent, those who insist on maintaining the status quo will either choose radical change or be forced to abandon their missions.

It is interesting to note that the Titanic took three years to construct but took a mere three hours to sink to the bottom of the ocean due to its perceived invincibility, flaws in its construction to save money and the captain's refusal to slow down — not to mention the absence of binoculars in the crow's nest.