Oxfam, the international aid organization with more than 10,000 staff worldwide and many hundreds of millions of dollars of income from donations alone, has been getting a lot of bad press recently. Many readers will likely be familiar with the Oxfam sex scandal, wherein Oxfam workers in Haiti had sex with victims of the 2010 earthquake, perhaps including child victims. In 2014, Oxfam’s former antifraud chief was arrested for embezzlement. And last February, the chairman of Oxfam International, Juan Alberto Fuentes, was arrested in Guatemala for his role in a corruption scandal that developed over his time as the finance minister of Guatemala. Although the arrest of Mr. Fuentes was for conduct that predated his work at Oxfam, the arrest sparked further questions about corruption and accountability in the organization, and called into question the reliability and credibility of Oxfam’s anticorruption advocacy work.
Of course, both sex scandals and corruption scandals happen in other organizations too, including governments and for-profit corporations. So far as I know, there’s no evidence that aid organizations are systematically more prone to such institutional failures than other entities. Yet these scandals feel particularly disturbing when they occur at an organization like Oxfam, perhaps because we implicitly hold do-gooder NGOs to a higher ethical standard. And in fact we should: both the legitimacy and effectiveness of the international work done by NGOs like Oxfam rests, at least to some degree, on some sense that these organizations have the moral authority to enter a country and change the way things are run. To retain that moral authority, aid organizations must take extra steps to ensure they remain above suspicion. The failure of the Oxfam board to conduct due diligence on Fuentes is a strike against Oxfam’s credibility, and this fundamentally hurts its mission.
The question is what Oxfam, or similar organizations, can do to increase the chances of meeting these high standards, and avoid similarly embarrassing scandals in the future. My answer: Oxfam should tie its own hands and mandate top-down, independent integrity oversight, supervised by donating governments.
Fundamentally, the challenge in reforming Oxfam is to create the right incentives. As with any organization, Oxfam is comprised of individuals whose interests differ from those of the organization. Unlike a private corporation, however, there are no shareholders or profit motives that keep incentives aligned, even at the very top of the organization. Nobody profits (in a direct, material sense) from a marginal improvement in the way Oxfam works, and the failure of the organization to deliver on its stated purpose does not usually impact the bottom line of Oxfam or its employees or supporters. While Fuentes has lost his job at Oxfam, there is not a clear system in place to prevent a repeat episode, nor is it clear that any of the people responsible for the selection of Fuentes have taken any heat.
Oxfam’s staff are likely motivated by a combination of altruism and their own future career concerns, like advancement within the organization or getting a desirable position in another organization down the road. Unfortunately, if reporting internal corruption or exposing sex abuse would be bad for an employee’s career within Oxfam, the altruistic motive might not be strong enough to ensure that he or she does the right thing. This leaves those with the most information about Oxfam’s behavior and the most ability to change it—namely the middle and upper management of the organization—in the bind of trying to do good but also protect their careers.
An effective solution must therefore create stronger links between the incentives of those who run Oxfam and the welfare of the organization’s beneficiaries. The power to mandate accountability lies not in the hands of the beneficiaries or governments of developing nations, but rather in the hands of the developed countries that fund NGOs. When the president of Oxfam is arrested for corruption, those in the organization responsible for selecting him should fear that Oxfam might lose its funding from donor governments. Donor governments like the US and the UK have the power to mandate that funding for NGOs must be contingent on the recipient organizations establishing effective anticorruption procedures. Donor governments could take it a step further, and require that NGOs have independent integrity units which report to the funding governments, and mandate exceptional levels of transparency around spending and leadership selection.
Such external accountability must not be conducted naïvely. If the penalty against individuals for bad behavior is overly zealous or poorly designed, individuals within the organization might face increased pressure to cover up misdeeds. Instead, situations of improper behavior should be freely reported and investigated through an independent organization, with sanctions against individuals who engage in misconduct, but not against the organization itself, at least so long as the conduct is not systemic or sanctioned from above. Furthermore, individuals who report misconduct should be protected as whistleblowers by the independent organization.
It seems that moves towards greater donor-driven accountability may be underway. USAID recently took a positive step in this direction, reviewing its agreements with Oxfam following the barrage of negative press. However, there has been no announcement of actual policy change or consequences for Oxfam’s behavior, and furthermore, the changes are not being undertaken proactively by Oxfam itself. Because donor-driven accountability would help organizations like Oxfam become more effective in maintaining their reputation and achieving their goals, these organizations should consider “tying their own hands” and taking these steps proactively.