Reported Instances of Nonprofit Corruption: Do Donors Respond to Scandals in the Charitable Sector?

• Published in: Corporate reputation review 2019-05, Vol.22 (2), p.39-47
• Main Author: LeClair, Mark S.
• Format: Article
• Language: English
• Subjects: Business and Management; Corporate Communication/Public Relations; Corruption; Management; Marketing; Nonprofit organizations; Original Article; Scandals
• ISSN: 1363-3589; 1479-1889
• DOI: 10.1057/s41299-018-0056-5

Corruption at charitable organizations is, if not growing, becoming more evident to the public. Highly visible scandals reduce confidence in nonprofits generally and may permanently reduce donations. Existing work on malfeasance in the nonprofit sector has analyzed the characteristics of charities where corruption has occurred. What has not been examined in the literature is whether scandals have impacted contributions as a whole. If donations are unaffected by corruption, then there is little incentive to support systemic reforms. This paper will explore the impact of visible corruption on the level of giving by individuals. An econometric model that incorporates the primary drivers of donations will be developed, including such factors as income, net worth and tax policy, coupled with personal attributes, such as religious affiliation. When measures of the magnitude of press coverage of corruption are added to the model, they test as significant, indicating publicized scandals are, in fact, suppressing donations. This analysis contributes to the literature on organizational reputation and its impact on performance.