EXERCISING YOUR ETHICS: INDIVIDUAL EXERCISE ARE YOU ENDOWED WITH GOOD JUDGMENT? The Situation Every organization faces decisions about whether to make conservative or risky investments. Let's assume that you have been asked to evaluate the advantages and of conservative versus risky investments, including all relevant ethical considerations, by Youth Dreams Charities (YDC), a local organization that assists low- income famil firm that employs a full-time professional manager to run daily operations. govemance and policy making reside with a board of directors-10 part-time, community-minded volunteers who are entrusted with carrying out YDC's mission. For the current year, 23 students receive tuition totaling $92,000 paid by YDC. Tuition comes from annual fund-raising activities (a white-tie dance and a seafood carnival) and from financial returns from YDC's $2.1 million endowment. The endowment has been amassed from charitable donations during the past 12 years, and this year it has yielded some $84,000 for tuitions. The board's goal is to increase the endowment to $4 million in five years to provide $200,000 in tuition annually. The Dilemma Based on the finance committee's suggestions, the board is considering a change in YDC's investment policies. The current, rather conservative, approach invests the ies in gaining access to educational opportunities. YDC is a not-for-profit Overall, endowment in low-risk instruments that have consistently yielded a 5-percent annual return. This practice has allowed the endowment to grow modestly (at about 1 percent per year). The remaining investment proceeds (4 percent) flow out for tuition. The proposed plan would invest one-half of the endowment in conservative instruments and the other ip stocks. Finance committee members believe that-with market growth-the endowment has a good chance of reaching the S4 million goal within five years. While some board members like the prospects of faster growth, others think the proposal is too risky. What happens if, instead of increasing, the stock market collapses and the endowment shrinks? What wil happen to YDC's programs then? QUESTIONS TO ADDRESS 1 Why might a conservative versus risky choice be differ ent at a not-for-profit organization than at a for-profit organization? 2 What are the main ethical issues in this situation? What action should the board take