Incentive Pay

I cringe when I hear about this type of situation. On the face of it, the agreement seems to contradict an established ethical principle of both the Association of Fundraising Professionals and the National Association of Charitable Gift Planners. In March 2009, I wrote about why paying commissions in philanthropic fundraising violates our sense of right and wrong, but apparently the administration at your university didn't get the memo.

Yes, what you have described is unethical – and not just because it says so in some code. While large colleges and universities are looking more and more like corporations these days – one columnist friend of mine calls well-endowed universities "investment management companies with a few classrooms attached" – we have to struggle all the more to maintain our sense of charity and philanthropy, a world where commissions, or "incentive pay," as you describe it, do no one any service. Donors still have the quaint idea that they are giving to a cause close to their heart, that their gift – the making of that particular gift – is not financially rewarding someone who, by contract, is subtracting from what would otherwise be provided for that cause. When the photo of that shiny-faced scholarship student shows up in a brochure as a come-on, is there another picture next to it showing the chief fundraiser's incentive check? I doubt it. Simple math tells us that your boss's annual incentive alone at today's private college prices could pay for two full-pay sticker-price tuitions; maybe four at a public university.

Some people don't get it, the "it" being the nonprofit or charitable ethos that rules, or should rule, our world, a fact that no amount of for-profit mindset can alter. Our job – and I admit that we have not done well at making this case – is to persuasively carve out the differences between nonprofits and for-profits. While we can learn a lot from adopting sound business principles, charities are not for-profit businesses – not only in the sense that we don't have shareholders but because not every bottom line is more important than the values inherent in serving people in need.

With enough leadership like the administration you are working under, Congress will seriously question – some members are already asking about this – the value of charities to society and whether the charitable deduction is all that good an idea. Think of it this way: At a 25 percent tax bracket, the public subsidy to a donor who makes a $400,000 gift is being spent completely on the incentive. I'll go on the assumption that the school where you work is a wonderful place and provides a great education, but the administration's overarching ethical understanding of where the school fits into our society needs a serious overhaul.

Come to think of it, the most serious problem facing charities that look and act like huge businesses might not be Congress or the regulators. Instead, it might just be the donating public. While there is nothing wrong with paying administrators well, within parameters broadly guided by budgets and revenues, it is an insult to donors to pay commissions or incentives directly tied to an amount raised. Not only on the face of it, but deep down . . . it's wrong. And donors know it.