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Why Nonprofits Are Viewed Differently Than For-Profits

deception . / Credit: Liar Image via Shutterstock

Not all types of lies are treated and viewed the same, new research has found. In particular, research found that people are much more forgiving of nonprofits when they lie than they are of for-profit organizations that lie.

Not only are for-profit companies less likely to be forgiven, but their CEOs are also more likely to be punished more severely than CEOs  of nonprofits that lie. The reason for the hostility toward for-profit companies is due to portrayals of those companies. In particular, for-profit companies are generally seen as being greedy and manipulative, whereas nonprofits are portrayed in a positive light, the researchers say.   

"The nongovernmental organization (NGO) community as a whole is often treated like a sacred cow and as such, it is often immune from criticism," said Bradford Baker, a research assistant at the University of Washington's Foster School of Business. "Imagine the person who attacks an organization such as 'Save the Children' or 'Doctors without Borders.'"

For that reason, nonprofits are often seen as being immune from criticism even when they are involved in controversy, the researchers say.

"When stories about unethical behavior within the NGO community are brought to light, like the situation with the author of 'Three Cups of Tea,' [alleged to have mismanaged funds from the Central Asia Institute]  are often treated as if they are the exception to the rule," said Baker, who conducted the research with Michael Johnson, an associate professor of management at the University of Washington. "The NGO community has accrued enough 'moral credits' that when situations like 'Three Cups of Tea' occur, the stigma doesn’t spread to the entire industry. We can look to the for-profit industry, and (examples like) Enron, as an example of the opposite."

The researchers say those preconceived notions are particularly dangerous when looking at the precedent set by nonprofits that are not checked for their behavior. However, the researchers admit that there are not many checkpoints in place to prevent such problems from continuing.

"Part of the problem with the NGO and nonprofit community is that there is no standardized way to 'rate' NGOs — and there is little oversight on the industry as a whole," Baker said. "However, recent international situations that have been brought to light have prompted the United Nations to put into place more mechanisms that give the beneficiaries of aid and charity more access to lodging complaints."

The research was based on the responses of 221 participants and was published by the professional group the Society for Industrial and Organizational Psychology (SIOP).

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