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Ethical scandals are always bad for business, but they’re especially damaging for nonprofits. Philanthropic organizations are meant to be doing good in the world, and when they’re found to be guilty of sexual assault and corruption, their donors lose their faith in humanity -- and, often, in charitable giving.

Thousands of donors withdrew support from Oxfam earlier this year after an investigation revealed that it had covered up sexual abuse accusations against staff members who were helping Haiti recover after a 2010 earthquake. But it’s hardly the only well-known charity to face misconduct allegations.

Former TED and MIT Media Lab fellow Katrin Verclas was once celebrated as a change-maker thanks to the work of her nonprofit organization, MobileActive. She was later accused of using grant money for the nonprofit to cover personal expenses and was indicted on a charge of defrauding the U.S. Department of State. And the founder of United Way of America famously went to prison in 1995 for defrauding the organization of upwards of $1 million.

Each of these cases represents a failure in ethical leadership. I know how important this issue is from being a nonprofit CEO myself. When people donate money to a cause, they believe they’re contributing to a meaningful initiative. Finding out that a trusted organization stole or misappropriated funds can feel like a betrayal for donors, who will be less likely to donate there again.

High-profile ethical breaches also upset the entire giving ecosystem. According to an online survey of 1,000 women who live in the Midwest, 21% of people surveyed said they will not donate to charities at all this year because of recent scandals, and more than 40% said they will reduce their giving amounts.

The antidote to this concerning trend is better, more ethical leadership.

What It Takes To Be An Ethical Leader

Nonprofit leaders set the tone for their entire organizations. Their behavior signals what is acceptable and what’s out of bounds. If they fail to meet rigorous ethical standards, they can jeopardize their charities’ funding. They can also struggle to recruit talented staff because bright, values-driven people don’t want to be associated with unethical organizations.

The best leaders are deeply passionate about their missions and inspire their employees and donors to rally behind their causes. They’re critical thinkers who aren’t daunted by logistical and financial challenges, and they know how to stretch their budgets.

Part of being a leader is forging ahead in difficult times and motivating others to go along with you -- which is doubly important for nonprofits. There are no overnight fixes for issues such as cancer, educational gaps and environmental resilience. Good leaders can persuade donors to commit to their causes for the long haul because they know that’s what it takes to make change.

Building Better Nonprofits

Truly effective organizations are filled with ethical people. Every staff member knows what’s at stake and is dedicated to the mission. However, leaders are the ones who cultivate that mentality when they lead by example.

Here’s how to ensure that you set the right tone for your nonprofit:

1. Establish organization-wide ethics policies.

Every team member, from the executives to junior-level employees, should know what’s expected. Create a code of conduct, and make sure all staffers are well-versed in the rules. When onboarding new hires, train them in problem-solving skills, using realistic ethical dilemmas. Make sure they know whom to approach when they encounter challenges and encourage them to own their mistakes.

Often, people make bad decisions when they’re afraid of punishment, so don’t penalize employees for their mistakes. As long as they’re forthcoming about their problems, use it as an opportunity to provide feedback and find a viable solution together. It’s only when people start trying to hide their errors that you run the risk of ethical missteps.

2. Implement a zero-tolerance policy.

While it’s important to give employees a chance to correct genuine mistakes, do not excuse unethical behavior. That goes for everyone with whom you work.

Vet your partners and vendors carefully to ensure that they share your organization’s values. If you find out that they are violating your code of ethics, sever your business relationships with them. That may cause some upheaval in the short term, but it’s worth it to keep your nonprofit’s reputation untarnished.

3. Cultivate ethical leaders.

Ethical leadership certification programs provide ongoing learning opportunities and enable you to groom future leaders to uphold the right values.

My organization, Beta Gamma Sigma Business Honor Society, offers such a program to our student members as a means of educating them on how ethics applies to their jobs. They are taught how to handle situations, such as being asked by their boss to falsify reports or expense numbers, which helps them prepare to act more ethically in the face of pressure.

Leadership programs empower participants to uphold the organization’s standards without fear of negative repercussions.

Ethical scandals hurt all nonprofits, so leaders have a duty to hold themselves to the highest standards. By being rigorous in your own behaviors and demanding the same from your team, you can maintain the public’s trust and secure your organization’s future.