Chapter 5: Ethics, Corporate Responsibility, and Sustainability

Running a Non-Profit - A Slippery Slope

Elena is a volunteer treasurer for Crest Mountain, a local non-profit ski hill that doesn't have any nearby competitors for 300 kilometers. Crest serves the population of several small communities. She has a dilemma about what to do in her organization based on the proposed actions of her general manager Dave.

Crest Mountain has been in operation for 45 years. At the time of opening, it was run by a for-profit corporation that built a service road to the hill and a chair lift carrying skiers up to the summit. Later, a T-bar and more runs were added to the ski hill's facilities, alongside a lodge and restaurant for people to eat. 10 years ago, Crest Mountain was losing money and was moving to close down.

Local communities surrounding Crest Mountain were in shock. There were two major issues: Crest Mountain is the only accessible ski resort to about 40,000 people, and the ski hill, with its plethora of snow and great rides, served as a tourist attraction that brought money into the surrounding communities.

A plan to rescue Crest Mountain was devised. A non-profit would be created that would purchase the ski hill. The purchase would be funded by annual contributors by memberships in a cooperative where their membership shares doubled as ski passes. This plan was hatched by Dave and through a lot of perseverance, successfully campaigned to complete the purchase a year later

10 years later and Crest Mountain is struggling to break even financially. The ski hill has a very passionate community of members that attend its meetings, but that doesn't always translate into money coming in the door. Both Dave and the membership want to do the right thing and be given to the communities around them. After all, it's a non-profit that was founded for the purpose of serving its communities! This is both a source of pride and frustration for Elena. For example, the membership voted to make New Year's day free to members of the public that brought donations to a local Food Bank. The ski hill could scarcely afford to give up one of the most lucrative days of the year but the members insisted that's what it wanted. "If we give up these profitable days so easily, then it will be our own employees that will be in need of using the Food Bank's services!" Elena thought to herself.

Another problem is looming on the horizon. The lodge is 40 years old and the chair lift is 45 years old. While both of them are still running adequately, they are approaching the end of their useful lives within a decade. The capital costs are anticipated to be between $3 million and $5 million dollars when they need to be replaced. There is no surplus money annually from the ski hill's operations to start saving towards this capital expenditure.

Elena and Dave are in a constant battle over Crest Mountain's operations. Elena recognizes that for Crest Mountain to carry on in its goal of serving its constituents, it needs to be run like a for-profit business to preserve the long-term sustainability of the operation. Dave believes that the cooperative was created to serve its communities and doesn't want to run a business that's indistinguishable from a for-profit counterpart. This internal conflict has manifested itself in a number of ways:

1. Employee pay and bonuses: Most of the labor is low-skilled, and Elena wants to pay minimum wage with few fringe benefits. Dave wants generous compensation packages as he believes minimum wage isn't satisfactory for people to live on.
2. Special events: Elena does not want any charity fundraisers or other events that will cut into Crest Mountain's profitability. Dave believes that community service is core to the identity of the operation. The Food Bank day was one example of this.
3. Fundraising for a lift that can accommodate children and the disabled: The chairlift is not accessible to either children or people who are required to stand and then actively sit on a moving chair. The capital cost is $750,000. Elena thinks that this is a distraction from the inevitable lodge and chair lift replacement and that the community's goodwill shouldn't be spent on this project, while Dave wants an operation that doesn't unnecessarily discriminate against disabled people. Wants to accommodate as many users in the community as possible.

There's a rift growing in both leadership and membership. Running this ski hill would be so much easier if it were for-profit!

Questions

There are numerous ethical principles that can be used to guide decision-making. A summary of these ethical principles can be found on pages 125 to 129.

1. Who are the stakeholders involved in Crest Mountain's decisions?
2. There are two approaches to the non-profit's operations: Using standard for-profit business practices to make an operating surplus and preserve the non-profit's existence, or focusing on the needs of the community before focusing on the bottom line. Using a utilitarian approach to this ethical dilemma, what should the leadership of Crest Mountain do? Use your listed stakeholders from question 1 in your analysis.
3. Do you personally agree with your conclusion after doing a utilitarian analysis? Why or why not?

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