Reputation & NGOs Workshop: What are the challenges in generating trust for NGO brands?

by Liz David-Barrett

Ronnelle Burger: 'The tight rope of NGO reputation: Concealment and Misrepresentation Amidst Competing Stakeholder Demands' (Ronnelle Burger and Trudy Owen)

Ronnelle focused on NGO performance on funder-required reporting. This study asked, can oversight structures or self-regulation promote transparency, and further, do unrealistic donor demands discourage transparency? Recognizing that NGOs may have multiple reasons for withholding information, the authors speculated that some NGOs may report in ways that are inaccurate or incomplete – in effect, adhering to the letter of the law, not the spirit. In developing countries, much funder-monitoring relies on self-reported data, so the opportunity for ‘cheating’ is high. Using Benford’s Law, this study examined patterns of cheating among 300 Ugandan NGOs on these reporting requirements. Findings showed that NGOs who adhere to requirements by funders to provide a larger amount of reporting tend to provide less reliable data.

Sera Linardi: 'Religion and Risky Social Investments: An Experiment on Sharia Banking' (Sera Linardi, Rebecca Morton, Kai Ou, Gumilang Sahadewo, Xiangdong Qin)

Sera described an ongoing experimental project which examines the extent that religious beliefs and social and political norms affect investors’ micro-financing behavior. Specifically, the study attempts to tease out individuals’ propensity for altruism in the context of capitalistic interest-bearing lending versus the shared profit and loss system advocated in shari’ah law. Having completed a first stage of the study, administering this experiment to participants in China and in the US, Sera reported that initial findings indicate that the effect of religiosity on the willingness to think of others when deciding upon investment vehicle appears to be limited to less experienced lenders; even those individuals who initially chose responses consistent with a profit and loss system changed to interest-bearing choices when given another opportunity to cycle through the experiment. Later phases of the study will involve participants in Indonesia and the United Arab Emirates

Facilitator Comments: Liz David-Barrett

The Burger and Owens paper can be looked at in the wider context of the transparency agenda which has gained momentum over the last 20 years.  This has largely been initiated by the anti-corruption NGO Transparency International, which was set up by a group of development economists concerned that aid money was failing to reach intended beneficiaries because of corruption.  Their proposed solution was, broadly speaking, to increase transparency, on the logic that sunlight is the best disinfectant.  Transparency can help detect and deter corruption; although, incidentally, there is very little empirical research that seeks to establish whether transparency does have this effect and under what conditions. 

This paper looks at reporting by NGOs, but it highlights a slightly different angle.  It raises the problem that NGOs might mis-report their activities or impact, in an effort to please donors or comply with the demands of an umbrella organization.  Thus, for Burger and Owens, transparency is not just a question of whether you report something or not, but also of the validity of what you report.  This is a useful and interesting distinction.

The paper also highlights the way in which transparency tools can serve as tools for building reputation – something that Ken Okamura and I have also argued in our paper on the Extractive Industries Transparency Initiative – and that this carries a risk that the tool can be hijacked.  Organisations seeking to build a certain reputation with a certain stakeholder group can put on the costume of transparency, regardless of whether that reputation is deserved.  This question of whether it is possible to build a fake or unjustified reputation has exercised researchers in the Centre for some time.

The paper by Linardi et al raises a similar issue. Using the experimental tools of behavioural economics to look at motivations and commitment to sharia banking, the authors find that some individuals may fake their commitment to abiding by sharia rules when investing.  Again, when social norms change and a particular behavior pattern emerges as socially desirable, organisations or individuals may be tempted to fake their commitment to complying with the norm so as to build a certain favourable reputation. 

Linardi discussed a further step in their research which will allow them to address the question of which audiences or stakeholder groups individuals have in mind when they consider faking their reputation.  Presumably, concerns about complying with the norms of a particular group are driving their behavior, but if the audience is a different group, this effect might fade.

Both papers raise very interesting questions about the emerging set of tools for reputation building – whether they are rankings or commitments to standards or reporting mechanisms.  Such tools are likely to spring up in response to the demand to build reputations, but some are more robust than others.