Sage Opinion: Profits Rule

A short time ago The New York Times published an article about the Goldman Sachs Foundation and their $200 million endowment. They grant millions annually to two causes: women entrepreneurs and business education for disadvantaged people. Both are international programs. What may be of special interest to non-profits is a brief mention of Warren Buffet buried in the middle of the article. It seems the "Sage of Omaha" has his own ideas about corporate giving. He doesn't like it. In fact, he thinks it's contrary to the purpose of publicly traded corporations. They're here to serve  the stockholders and make sure their dividends are as substantial as possible.

Website Clones Cause Reports

Upworthy.com recycles Internet content. Their editors monitor the Internet for stories of relevance to non-profit missions and finding some, they craft catchy headlines to draw the reader into the narratives. The stories are unfailingly about disasters, famines, plagues and other charity issues. Recently the Gates Foundation discovered the site and has contributed money to it in exchange for running stories relevant to the Foundation's agendas. The Atlantic Monthly website has run a good story about Upworth complete with links to some of their stories.

Dan Pallotta speaks out on TED about nonprofit overhead caps

Dan Pallotta/TED

Dan Pallotta, a consultant who works in the non-profit sector, gives a lively presentation on the topic of the economics of survival in the world of charities. He good humoredly points out that non-profits cannot compete with for-profit companies for talent, capital, or visibility. And he is pissed off about it.

At one point Pallotta provides us with an anecdote from his own experience with the problem as he sees it. When he worked for a charity that ran a major walkathon, he was able to see the amount of  money collected for the charity soar to over $90 million and then sink to less than $10 million, a roller coaster built on the fact that no non-profit can spend enough on overhead to keep going. This is because there is an assumed ethical cap on that spending. The public won’t stand for it if you pay your officers a competitive wage, allow them necessary travel expense accounts and give them whatever it takes to retain their services, which may go for a higher price in corporate venues.

Pallotta points out that a young college graduate can go into business and reasonably hope to be making six figures by the time they’re thirty. But the same college grad going into the non-profit sector may feel  bitter about making far less that he would in the corporate world.  What may be seen as an irony of this system is that the well-paid person in business can afford to give generously to his favorite charity, getting a tax credit and acknowledgment of his generosity, while his non-profit colleague languishes with little hope for large merit raises.

According to Pallotta, the origins of our broken charity system can be traced back to the Calvinist Puritans who were great at making money and even better at feeling guilty about it. To gain penance, they decided to give a percentage of their wealth to charitable deeds. But being good businessmen, they kept the giving to a minimum. Praying on it, they came up with 5%.

Dan Pallotta can be seen and heard on TED.com.

Finding The Words That Support The Arts

In an article for TheNew York Times (September 10, 2013), art critic/reviewer Roberta Smith reports on the proposed sale of art works in the collection of the Detroit Institute of Arts. She decries the city managers in Detroit who raised the idea of selling works, “as if the institute were a goose whose golden eggs included art by Rembrandt, Van Gogh, Caravaggio, van Eyck and Breughel”. She makes it clear that the loss of this institution would be a disaster for Detroit and a great loss for culture.

In the final paragraphs of her article, Smith says, “One reason such cuts are tolerated is America’s shortsighted separation of education and economics.  If the United States aims to produce more and import less, it needs designers and inventors of things to be produced.  Such skills require just the kind of imagination and ingenuity that are nourished by art training from an early age and by museums.”

She concludes, “Detroit has survived many losses, but the destruction of this museum would leave a wound that would be impossible to bear.  It would mean not only the loss of a great civic achievement and of a beacon, but also of an essential life tool.” 

Smith's eloquence speaks for a non-profit sector that regularly struggles to find new words to convince a dubious public that the arts are worth the money we spend on them. Sure there are arguments for social service causes and many of these pull at the heart. But the arts are vital. As Smith points out: they nourish the imagination and ingenuity that fuel our progress and our dreams.

Transparency Versus Privacy

The IRS regulates its taxation of non-profit organization under the designation 501(c). Charitable organizations are tax-exempt if they follow the rules of their 501(c)(3) status. And organizations that lobby legislatures must obey the stipulations of their 501(c)(4) status.

Now, apparently in response to the Supreme Court’s Citizens United decision that permits organizations to donate any amount of money to political candidates, some state legislators have passed laws requiring lobbying groups to reveal the sources of their money.

In other words, by law in some states, contributors to lobbyists must be named.

Naturally the enforcement of these laws poses a threat to organizations that have been targeted by hate groups. Naral Pro-Choice of New York, for instance, asked for an exception because its pro-abortion agenda makes it a target of violent protests. The legislature of New York State has granted them the exception, but not without a fight with Republicans who felt that it was special treatment for a liberal cause.

The issue comes down to one of transparency versus privacy. Groups like Naral fear not only that their contributors may become targets, but that as a result, their contributions may dry up. The public may have a right to know, but it also has a right to be safe from harassment.     See The New York Times article

Naming Rights Manhattan Style

Naming Rights. We’re very familiar with the concept by which an organization offers as one of its valuable assets the right to publish the name of some entity on one of its properties – the name of a donor, contributor or sponsor (take your pick). This routine is commonplace in the non-profit world and it is so entrenched that it is difficult to find out when the process began. Perhaps in the bad-old, distant 1970s when everything was going to hell in a hand basket. Sort of like now.

New York City has long been a center for creativity in the arts, and in business. When some new idea or process is invented, no matter where the origin, it inevitably, if it is good enough, shows up in New York. But in the case of naming rights the World City appears to be a little behind the times.

Recently the Metropolitan Transit Authority (MTA) decided to visit (or perhaps re-visit) naming rights. What motivates this concern for new revenue is the lack thereof in the city for maintaining the subways, tunnels and ports. It is a “revenue strategy” that is being taken quite seriously now.  Now that potential advertisers are reaching out to the MTA and negotiations are underway, it is time that this idea meets the light of day.

The central argument against naming rights is that renaming stations that have traditionally been named for the geographic location of the station. New names mean confusion for the subway rider. Change 77^th Street and Lexington Avenue to Edward Koch Station and you have a lot of New Yorkers complaining, to put it mildly.

Clearly the New Yorkers heading up this campaign to bring revenue in by eliminating simplicity and clarity, should take a lesson from the non-profits. Namely, just do the name, and let the people get the message. After all, we’ve got a business to run here.

Naming Rights

Komen's Rise and Fall

When the time comes to write the history of the Rise and Fall of the Great Non-profits, at least one will have the honor of being both great and small.

The Susan G. Komen Foundation a.k.a. Race for the Cure has recently come under fire. It started last year when Komen cut funding from Planned Parenthood, another charity that serves women with support and medical assistance, including legal abortions. This was a problem for conservative religious leaders among the Komen elite, and so the organization made the mistake of removing millions of dollars of vital funding to the much smaller, but very popular organization that was already suffering from attacks from the religious right.

Think what you will about abortion, it remains that many people support a woman’s right to choose. Abortion is a right according to the Supreme Court and so it has been since the 1970s.  In any case, when Komen turned its back on Planned Parenthood, so did Komen supporters by the thousands turn their backs on Komen.

In 2013, Komen announced that it would cut back by half the number of cities holding a signature Komen Race for the Cure. This decision followed on a lot of bad press, such as that its CEO, Nancy Brinker, already wealthy, was making $684,000 annually. Not only that, but Komen funds, measured in the hundreds of millions of dollars taken in per year, are distributed in ways that are surprising. Such as that only 15% of the organization’s budget goes to medical research – the true race for the cure.

Someone said the Komen has reached its half-life, which is a shame because we don’t appear to be much closer to a cure for breast cancer than we were in 1982, when Komen started. Anyway, It may be time to switch emphasis from breast cancer to heart disease, now the prevalent killer of women.

Of course, another scenario would have Komen getting creative with its fundraising, perhaps by moving away from the now commonplace walkathon. The novelty’s worn off.

Philanthropy, Wither Goest Thou?

It is always worth surveying the philanthropy scene. There are so many people with great wealth now. And many feel the obligation to spend some of their riches establishing charities for a multitude of purposes, from protesting the mistreatment of animals to saving the dance culture of the Amazon River basin. And it is informative whenever we can find out who among the very rich have been thinking of others. Or, by contrast, have been investing their money to make more for themselves.

With regard to the takers, I often wonder the directions to which they aim their conspicuous consumption. Surely they have enough, so why want more? The answer is different for each, and buried deep within their psyches. After all, there have been greedy souls since mankind gathered in families around a fire. You can be sure there was one hoarding food or fire, whatever the commodity most in demand.

As for the others, despite their kindness and obvious love for humanity, we must ask why the beneficent are benefitting us in so many important ways. As for myself, I would give because of an embarrassment of riches. In order to equitably distribute my giving, I would hire advisors in each sector of humanity's need - people, places, things - and I would ask these very adept and intelligent advisors to find out the worthiest to whom to offer my help.

Outright giving of money, no matter how dire the need, has often seemed condescending to me and I know causes that could use the money, whose leaders feel that way.  They will find a way to avoid "accepting charity", no matter how sincerely it's offered and no matter how much its denial will hurt..

And of course there are people among the super wealthy who adhere to the corollary: people who need charity should get a job and take care of themselves.

This kind of sentiment has been attributed to Jeff Bezos, of Amazon fame, who has deservedly become rich from sticking it out for over a decade, watching a bad business plan flourish. Anyway, in response to the question of why he doesn't contribute to charitable causes, he said that people should start their own businesses and grow them and contribute to the economy, rather than accept charity.

As Andy Warhol once said  “Money doesn’t worry me, either, though sometimes I wonder where is it? Somebody’s got it all!”