Ethics Scenario #45: Harristown Futures Fund

45.. Doug is a well-healed philanthropist who has been making sizeable donations to one particular local charity whose mission is to restore historic buildings in Doug’s community of Harristown. Doug recently asked the executive director of the charity, Peter, to consider making a grant to restore one particular building, a hotel on main street that was owned at one time by Doug’s grandfather. Peter explained to Doug that this particular building did not meet the organization’s criteria, and that his board had voted 12-6 against accepting this project, although Peter agreed that it did make sense to keep the building from being turned into an indoor shopping mall, as was being proposed. Doug wasn’t happy with this answer, but understood that Peter’s organization had some constraints. Doug decided to do whatever was necessary to restore that old hotel, which brought back many memories to him whenever he passed it. He decided to create his own 501(c)(3) where he could make all of the decisions with how his donations would be used, rather than having to depend on decisions made by almost 20 local community members whom he did not know, and who were unlikely to share his love for that hotel. Doug hired a consultant to do all of the paperwork to create the organization, incorporate it, and apply for 501(c)(3) federal tax-exempt status. He wanted to make sure that he would retain complete control over how his donations would be used. So, in his first official act as Chair, he appointed to his board of directors himself, his wife, Ann; his son, Steve; Steve’s wife, Olivia; and his brother, Tom. With that board composition, it would be unlikely that Doug would be unable to see his dream of preserving the hotel from being destroyed.

a. Is Peter being ethical?