CED Professional Standards & Ethics 2 — Questions and Answers
Question 1: A board member discovers that the executive director has been using organizational funds to pay for personal travel. What is the board's primary ethical obligation?
- Quietly reprimand the ED without formal documentation
- Investigate the allegation thoroughly and take corrective action (Correct answer)
- Defer to the ED's judgment since they lead the organization
- Immediately terminate the ED without investigation
Correct answer: Investigate the allegation thoroughly and take corrective action
Boards have a fiduciary duty to investigate credible allegations of financial misconduct and take appropriate corrective action.
Question 2: Which principle best describes an executive director's obligation to disclose personal relationships with vendors seeking contracts?
- Duty of loyalty (Correct answer)
- Duty of obedience
- Duty of care
- Duty of transparency
Correct answer: Duty of loyalty
The duty of loyalty requires leaders to put the organization's interests ahead of personal gain, which includes disclosing conflicts of interest.
Question 3: An ED receives a substantial gift from a major donor after a successful fundraising campaign. What is the ethically appropriate response?
- Accept it as recognition of personal achievement
- Accept it but report it to the board chair
- Decline or disclose it according to the organization's gift acceptance policy (Correct answer)
- Return it only if the board requests disclosure
Correct answer: Decline or disclose it according to the organization's gift acceptance policy
EDs must follow the organization's gift acceptance policy, which typically requires declining or disclosing gifts above a threshold to avoid conflicts of interest.
Question 4: A nonprofit executive learns that a program officer at a major funding foundation is also a board member at a competitor organization. How should the ED handle grant communications?
- Avoid applying to that foundation to prevent bias
- Proceed normally but document all interactions carefully
- Request the program officer recuse themselves from the review (Correct answer)
- Report the conflict to the IRS immediately
Correct answer: Request the program officer recuse themselves from the review
Requesting recusal from a conflicted reviewer is the standard practice to protect the integrity of the grant process.
Question 5: What does the ethical concept of 'stewardship' primarily require of a Certified Executive Director?
- Maximizing program outputs at any cost
- Managing organizational resources responsibly on behalf of stakeholders (Correct answer)
- Prioritizing staff satisfaction over donor intent
- Delegating all financial decisions to the CFO
Correct answer: Managing organizational resources responsibly on behalf of stakeholders
Stewardship means managing assets, funds, and resources entrusted to the organization responsibly and in alignment with its mission.
Question 6: An ED disagrees with a newly adopted board policy but believes it is legal and not harmful. The most ethical course of action is to:
- Ignore the policy and continue prior practices
- Implement the policy while advocating for change through proper channels (Correct answer)
- Resign immediately in protest
- Delay implementation until the next board meeting
Correct answer: Implement the policy while advocating for change through proper channels
Professional ethics require implementing lawful board decisions while using legitimate governance channels to advocate for policy changes.
Question 7: Which action best demonstrates ethical leadership when an organization faces a budget shortfall requiring staff reductions?
- Announce layoffs without advance notice to prevent panic
- Consult only senior staff to keep decisions confidential
- Communicate transparently with staff about the situation and the decision-making process (Correct answer)
- Defer the decision entirely to the board to avoid accountability
Correct answer: Communicate transparently with staff about the situation and the decision-making process
Ethical leadership during difficult decisions includes transparent communication that respects the dignity and trust of all stakeholders.
CED Professional Standards & Ethics 2
A board member discovers that the executive director has been using organizational funds to pay for personal travel.
What is the board's primary ethical obligation?