Transparency is key if your company is dependent on the good will of others

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Most Canadians remember where they were last winter when they heard the terrible news about the Humboldt Broncos bus crash that killed 16 people, most of them young hockey players. Horrified, many of us searched for ways to help.

A local mother quickly set up a GoFundMe page as a way to lend her support in the hopes of raising $10,000 to assist the victims’ families. In just 12 days, the fund ballooned to $15.2 million thanks to more than 140,000 donations from people in 87 countries.

It was the largest amount ever raised in Canada via GoFundMe, and among the most successful fundraising campaigns in the crowdfunding platform’s history. But the Humboldt campaign had to be shut down amid percolating disputes about how to divide the torrent of incoming cash. The money was eventually transferred into a trust managed by a Saskatoon law firm.

The entire saga has raised difficult questions for crowdfunding companies and illustrated how easy it is for such campaigns to spiral out of control. How to ethically divvy up the cash became a critical question in Saskatchewan, and that of course spurred scrutiny of GoFundMe’s business model. Was it fair that the company made a profit of 30 cents to every dollar donated and charged a processing fee of 2.9 per cent?

None of it has made for great marketing material for GoFundMe. While originally designed to drive participation in important causes to help improve people’s lives, Humboldt proved how easily crowdfunding campaigns can become problematic, not to mention illustrating how some other companies use tragic events to profit. Indeed, in some cases, for all the good they do, crowdfunding campaigns can sometimes make life more complicated and stressful for people already dealing with the trauma of loss.

Many crowdfunding companies also grapple with embarrassingly trivial campaigns, like engaged couples seeking honeymoon funds or a television director looking to create a pitch for a pilot called FatManFit. And there have been allegations about fraudulent campaigns, including the recent scandal about a New Jersey couple and a homeless veteran who conspired to fabricate a story that led to more than $400,000 in donations — and will soon result in hefty fines and possible jail time.

What are some lessons brands can take away from these examples?

Companies like GoFundMe, Kickstarter and other crowdfunding platforms must constantly evaluate the security measures they have in place and figure out how best to screen people who are setting up campaigns.

They also need to be clear in their public communications and marketing messaging about how funds are distributed, and to draw a very clear line in the sand between legitimate causes and brazen attempts at cash grabs by dubious people over self-serving or frivolous causes.

Every crowdfunding company should also have something like GoFundMe’s “VIP team” that works with campaign organizers to guide them through the process of equitably distributing funds. GoFundMe deployed its team when the Humboldt fund swelled into the tens of millions last spring.

Being completely transparent about these efforts and communicating them loudly and concisely to the public should be a key part of advertising and marketing strategies for crowdfunding companies, especially since they seek to tap into the good will of citizens and communities. Their reputations depend on it.

They must also have a clearly defined corporate social responsibility (CSR) strategy in place, along with a comprehensive issues and crisis plan. This will help to assure the public of their commitment to ethical practices and due diligence, and ensure there’s an actionable plan in place in case things go wrong.