Economics%20of%20the%20Nonprofit%20Sector%20-%20Introduction - PowerPoint PPT Presentation

View by Category
About This Presentation
Title:

Economics%20of%20the%20Nonprofit%20Sector%20-%20Introduction

Description:

Economics of the Nonprofit Sector - Introduction Literature Assignments for Next Time O&D 14, 17 Brokaw, L. (2012, November 28). The Benefit Corporation ... – PowerPoint PPT presentation

Number of Views:46
Avg rating:3.0/5.0
Slides: 79
Provided by: Mleclair
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Economics%20of%20the%20Nonprofit%20Sector%20-%20Introduction


1
Economics of the Nonprofit Sector - Introduction
2
Introduction
  • Syllabus
  • Class format
  • Key topics
  • Funding mechanisms employed by nonprofits/charitab
    le organizations
  • The relationship that exists between the
    government sector and the Nonprofit Sector
  • Details of the organizational characteristics of
    effective and ineffective charitable
    organizations
  • New forms of philanthropic organizations
  • The implications of agency problems and possible
    solution
  • Comprehensive analysis of how charitable
    organizations are assessed
  •  

3
Funding of Nonprofits
  • Four major sources of funds and funding
  • Individual
  • Corporate
  • Foundations
  • Bequests
  • Altruism(?)
  • Donor control do donors get what they want?

4
What Motivates Giving
  • Individuals
  • Altruism
  • Social Stature
  • Warm-glow
  • Businesses
  • Altruism of Managers
  • Profit Motive
  • Foundations
  • Altruism
  • Social Goals

5
Discussion
  • Should donations be tax-deductible?

6
Looking Towards Meeting 2
  • Familiarize yourself with Blackbaud Index, the
    Chronicle of Philanthropy, Giving in Numbers
  • These are major sources of data on charitable
    giving and philanthropy
  • Read Ott Dicke, Chapters 10, 13 and 22.
  • Read Van Slyke and Brooks piece and McClelland
    and Brooks
  • Student Presenters

7
Meeting 2
  • Ott Dicke Chapter 10, The Fundraising Process
    (Lindahl)
  • Planning for fundraising
  • SWOT analysis
  • Strengths, Weaknesses, Opportunities, Threats
  • Analysis of a well-known local charity
  • Based on SWOT outcome, setting of goals
  • Operating, endowment, capital (facilities)
  • Establishing an Action Plan
  • Including cultivation and solicitations
  • Cultivation of long-term donors

8
Evaluation of Fundraising
  • Steps
  • Achievement of goals within certain constraints
  • Achieved within a reasonable time
  • Frugality were goals achieved without spending
    large proportion of raised funds to conduct
    campaign
  • Dont want to end up on this list

9
Worst Charities
Rank Charity name Total raised by solicitors Paid to solicitors spent on direct cash aid
1 Kids Wish Network 137.9 million 115.9 million 2.5
2 Cancer Fund of America 86.8 million 75.4 million 1.0
3 Children's Wish Foundation International 92.7 million 61.2 million 10.6
4 Firefighters Charitable Foundation 62.8 million 53.8 million 7.4
5 International Union of Police Associations, AFL-CIO 66.6 million 50.4 million 0.5
6 Breast Cancer Relief Foundation 63.9 million 44.8 million 2.2
7 American Association of State Troopers 48.1 million 38.6 million 8.9
8 National Veterans Service Fund 70.2 million 36.9 million 7.8
9 Children's Cancer Fund of America 43.7 million 34.4 million 4.6
10 Children's Cancer Recovery Foundation 38.5 million 28.9 million 0.7
10
  • Ott Dicke, Chapter 13 Foundations (Boris)
  • Types of Foundations
  • Private foundations
  • A private foundation is a legal entity set up by
    an individual, a family or a group of
    individuals, for a purpose such as philanthropy
    or an object legal in the economic operation. The
    Bill Melinda Gates Foundation is the largest
    private foundation in the U.S. with over 38
    billion in assets.1 However, most private
    foundations are much smaller. Approximately
    two-thirds of the more than 84,000 foundations
    which file with the IRS, in 2008, have less than
    1 million in assets, and 93 have less than 10
    million in assets.1 In aggregate, private
    foundations in the U.S. control over 628 billion
    in assets1 and made more than 44 billion in
    charitable contributions in 2007
  • -Tax Laws more stringent Deduction limited to
    30 of income

11
Public foundations A public foundation is also
called a grantmaking public charity. They raise
money from the public (individuals, corporations,
and other foundations) to provide grants. The IRS
does not consider these as private foundations
since their base of support is typically broad.
Community foundations are recognized as public.
Tax Laws less stringent Donations up to 50 of
income
12
Government Foundations
  • Funded through tax dollars
  • Fund through grant-making process

13
Foundation Governance
  • Corporate Governance
  • Donor
  • Small Foundations managed by family and small
    set of donors
  • Administrator
  • Board makes decisions on funds Administered by
    small professional staff
  • Director
  • Executive Director manages funding process
  • Presidential Model
  • Managed primarily by Nonprofits CEO
  • ? Impact on the administrative costs of nonprofit?

14
Ott Dicke (Drapkin and Hayden), Chapter 22
  • Managing Volunteers
  • Nonprofit sector typically highly dependent on
    volunteers
  • Lowers cost of operation makes nonprofit
    expenditures a lower proportion of donations
  • Authors note the complexity of the volunteering
    population
  • ex. Coerced versus free-will
  • Politically motivated volunteerism
  • Volunteers are not free, as supervision
    consumes staff time
  • Ott Dickey note that increased lifespan
    produces a larger pool of potential volunteers
  • Government programs such as AmeriCorps are
    providing more outlets for volunteering

15
What Does philanthropy mean?
  • https//www.youtube.com/watch?vtZ5t8xD7qGU

16
READINGS
  • 3 of 5 assigned readings are primary data sources
    for information on nonprofits and charitable
    giving
  • (Reading 2) Blackbaud Index (charitable giving
    report)
  • Provides statistics on charitable giving by
    source, purpose and by method by which it was
    raised
  • Major findings are the rapidly rising importance
    of online giving, along with a trend towards
    giving towards international affairs causes
  • Blackbaud targeted more towards nonprofits
    managers, less towards researchers

17
Reading 3
  • Chronicle of Philanthropy
  • Comprehensive data on giving, including corporate
    giving (key corporate donors)
  • Includes the Philanthropy 400 interactive
    database of organizations
  • Filtered by cause, location
  • information on Americas top donors
  • Considered the premier source of data

18
Reading 4
  • Conference Board, Giving in Numbers
  • Best source of data on corporate giving
  • Gives numbers by industry cross-referenced with
    cause
  • E.g. what firms in the petroleum industry give to
    artistic causes
  • Figures help illuminate corporate goals
  • Firms with P.R. problems (tobacco firms) might
    give to causes that are highly visible and
    enlightened (the arts)
  • Firms that need highly trained labor might give
    to educational causes
  • Further Reading LeClair, M. and Gordon, K.
    (2000), Corporate Support for Artistic and
    Cultural Activities What Determines the
    Composition of Corporate Giving? Journal of
    Cultural Economics, 24(3), 2000.

19
Article presentation
  • Van Slyke and Brooks
  • Why do People Give?
  • Point of article is to understand what motivates
    giving, and how nonprofit managers can use that
    information
  • Authors note that philanthropy is no longer a
    private concern part of civil society
  • Competition among nonprofits for donors dollars
    is increasing
  • And, through the tax code, the public IS paying
    for part of each nonprofits budget
  • Article focuses on which strategies work for
    which donors
  • Page 201 notes that the increasing availability
    of data means that nonprofit managers have much
    more information to utilize in setting strategies
    (e.g. Giving USA)
  • Page 202 Factors that correlate with giving
  • Age, gender, religiosity, income, wealth
    (difference?), taxes and volunteerism

20
  • Tax Implications note that if you do not
    itemize, the tax deduction is of no value
  • Up to 50 of AGI anything near this will get
    you audited!
  • Authors then apply empirical test to determine
    what variables best determine giving (Page 308)
  • gtgtgtbrief explanation of regression
  • Results on page 309 indicate that the following
    are significant
  • Income, age, Christian (5), college-educated,
    married, nonwhite (5), civically active,
    volunteer
  • Rest are at 1 level
  • These can become the basis for targeted
    fund-raising
  • Authors note that in some cases, the results may
    simply indicate that potential donors had never
    been approached.

21
Looking towards next meeting
  • Class Discussion on Effective Charitable
    Organizations
  • Visit Charity Navigator and Charity Watch
  • Pick one charity that is highly ranked and
    another that is poorly ranked
  • Find out why!
  • Literature assignments
  • Bradshaw, P., Hayday, B. and Armstrong, R.
    (2007), Nonprofit Governance Models Problems
    and Prospects,  Christopher Bernard
  • Bekkers, R. and Wiepking, P. (2011). A
    Literature Review of Empirical Studies of
    Philanthropy Eight Mechanisms that Drive
    Charitable Giving, Chris Cahill
  • How to Determine if a Charity is Effective,
    online at http//online.wsj.com/news/articles/SB1
    0001424127887323977304579000433238565634, Jack
    Delaney

22
Effective and ineffective nonprofits Meeting 3
  • TOPICS
  • Fundraising methods and effectiveness
  • Fundraising costs as a percentage of donations
    (or budget)
  • Effectiveness of programs
  • Who benefits in short- and long-run
  • Management accountability and reporting
  • Dedication to charter do nonprofits follow the
    intentions of their donors (financers)?

23
Case Studies The Best Charities (source CS
Monitor)
RANK NAME WEBSITE CATEGORY TOTAL INCOME IN MILLIONS (2011) PUBLIC SUPPORT IN MILLIONS (2011) PERCENTAGE OF TOTAL EXPENSES SPENT ON PROGRAMS SALARY BENEFITS OF HIGHEST-PAID OFFICIAL CHARITYWATCH GRADE WISE GIVING ALLIANCE CHARITY NAVIGATOR
1 YMCA of the USA ymca.net Social services 5986.1 823.4 87.4 441,438 A MEETS STANDARDS ????
2 Goodwill Industries International goodwill.org Social services 4,437.0 778.0 89.0 508,571 A MEETS STANDARDS NO RATING
3 Catholic Charities USA catholiccharities.usa.org Social services 4,422.8 679.2 79.6 265,356 NO RATING MEETS STANDARDS ????
4 United Way unitedway.org Social services 4,139.9 3,903.2 90.6 763,394 NO RATING NO RATING ????
5 American Red Cross redcross.org Social services 3,453.0 945.9 92.2 568,594 A MEETS STANDARDS ???
6 The Salvation Army salvationarmyusa.org Social services 3,203.8 1,697.6 84.0 216,182 A / A MEETS STANDARDS NO RATING
24
Examination of American Red Cross
  • Website includes state goals and pricinples
  • Governance Documents
  • Committees
  • Audit and Risk Management Committee
  • Quality and Regulatory Compliance Subcommittee
  • Board of Trustees of the Endowment Fund
  • Compensation and Management Development Committee
  • Executive Committee
  • Governance and Board Development Committee

25
  • Posted Ethical Rules by which the organization is
    run
  • Strict guidelines and oversight have protected
    the organization from scandal
  • 92.2 of raised funds go to programs
  • Volunteers used extensively to keep costs down
  • Auditing process includes external oversight

26
The Bad Angel Food Ministries
  • Georgia-based nonprofit that used donations to
    buy food at wholesale and sell it to the needy at
    bargain prices
  • Operated out of numerous churches
  • At pinnacle, Angel Food was providing discounted
    food to 500,000 families
  • Problem Cash-based business with poor
    accountability
  • Also Run entirely by close circle of family
    members with no external auditing process
  • Cash was siphoned off to purchase cars, real
    estate and even a private jet.
  • Raided by FBI in 2011 had received substantial
    federal funding (7 million), so federal
    government got involved.

27
  • Ultimately led to jail time for those involved
  • Most unfortunate part was loss of service to ½
    million beneficiaries
  • Other very bad nonprofits
  • Foundation for New Philanthropy (Ponzi scheme)
  • United States Navy Veterans Association
    Collected 100 million dollars over 10 years no
    charitable activity of any kind

28
Readings for the week
  • Ott Dickey (Eadie) Chapter 2 Governance
    Models
  • Boards may be high impact or at arms length
  • Meddlesome or arms length
  • Authors note (page 20) that boards of small
    organizations may find it difficult to separate
    themselves from day-to-day operations of the
    entity, instead of providing oversight.
  • Ideally, boards should provide oversight on
  • Strategic questions
  • Operational questions
  • Accountability questions is the organizational
    accountable to its stakeholders and the broader
    public

29
Four Streams of governance identified by eadie
  • Board self-management (who serves and what is
    expected of them)
  • Planning stream strategic goals, annual budgets
  • Performance oversight and monitoring stream
  • External stakeholder stream How to communicate
    with donors and the community

30
high impact board
  • High-stakes issues are addressed fully and in a
    timely fashion
  • Board members (not bored members) are fully
    invested in the success of the enterprise
  • Board members work effectively with CEO of
    organization

31
The old model The passive-reactive board
  • Board stays out of decision-making process
    (allows wide leeway to CEO) until crisis
  • Then reacts to problem rather than providing
    leadership
  • CEO now views board action as interference
    defensive posture inevitable
  • If CEO and Board are in partnership, this is
    avoided.

32
The high-impact board
  • Requires
  • Strong mission statement to provide guidance
  • Standing committees so the boards work does not
    take place 4 days out of the year.

33
Class exercise
  • Samaritans Purse v. Wishing Well Foundation
  • Address four issues in group
  • Overall and categorical rating of each
  • Effectiveness
  • Governance model
  • Malfeasance is nonprofit doing anything
    under-handed? clue answer for one of these is
    yes

34
Ott Dickey, Chapter 3 (American Bar Association)
  • Author provides look at impact of Sarbanes-Oxley
    on nonprofits
  • 10 General principles off corporate governance
  • Role of the Board should provide oversight that
    ensures effective and ethical management
  • Importance of Independent Directors Directors
    should not be subservient to management, as is
    frequently the case when nominated and appointed
    by management
  • Need for an Audit Committee lack of independent
    auditing and cross-checking of finances a major
    source of problems
  • Existence of a nominating committee for the Board
  • Compensation Committee Independent directors
    that examine pay and compensation issues
  • Should have intervened in United Way scandal

35
  • Complete and accurate disclosure of the
    financials of the nonprofit
  • Appropriate business conduct and ethics codes in
    place
  • Executive compensation should reflect
    responsibilities and backgrounds of executive -
    problems arise when Board members are appointed
    by executives and OK excess compensation
  • Procedures should be in place to receive and
    respond to complaints (ethical, financial)
  • Document retention rules should be in place
    rules should lay out when documents may be
    destroyed

36
Looking towards Next week
  • Begin look at effective fundraising, including
    new forms of securing donations
  • e.g. Crowd-funding
  • First cover chapters 10-12 as background (OD)
  • Then, each group will design an on-line
    fundraising for a designated charity
  • I will be handing out assignments
  • Work will be presented next week

37
Meeting 4 Designing an effective fundraising
model
  • OD, Chapter 10 (Lindahl)
  • The Fundraising Process
  • Chapter emphasizes research on process,
    prospects, etc.
  • Also, fully understanding ones own organization,
    so its goals, etc. can be explained to potential
    donors
  • Lindahl, Page 119 goal-setting
  • Facilities, Endowment and Operating
  • Some donors may be much more responsive to one
    type of donation (e.g. some may only give to
    facilities improvement)
  • Steps
  • Cultivation
  • Fairfield example
  • Solicitation

38
  • Types of solicitations
  • Planned giving
  • Major gift solicitations
  • Role of Stewardship
  • Possible alternative goals of managers
  • Self-interest, social status
  • Good stewardship requires goals of nonprofit are
    paramount
  • Lindahl (page 124) note that a ex post evaluation
    of how well the fundraising worked is critical

39
  • OD, Chapter 11 (Pratt) Analyzing the Dynamics
    of Funding
  • Key focus of chapter is on the reliability of
    fund-raising and the degree to which the funding
    binds the hand of the nonprofit
  • Reliability
  • High Individual donors, endowments,
    memberships, rental income, advertising
  • Medium fees for services, continuing government
    contracts, corporate charitable contributions
  • Low Government grants that are project-driven,
    foundation grants, corporate sponsorships

40
  • Autonomy
  • High small- to medium-sized individual
    contributions, foundations, fees for service,
    endowments, memberships
  • Medium large individual contributions,
    corporate contributions
  • Low project grants, government contracts,
    United Way support
  • Pages 130-31 Eight forms of funding and
    resulting reliability and autonomy
  • Discussion particularly the issue of
    government-funded nonprofits

41
Giving Circles and crowdfunding
  • What happens when charity becomes a social act?
  • Chapter12 focuses on giving circles
  • Groups that pool resources to leverage donations
  • Eikenberry notes that these groups are
    educational in nature, and that giving becomes
    part a members social life
  • Giving can be more informed and members can find
    new ways to engage with issues they are
    interested in
  • Forms
  • Page 136 Organizational form
  • Most operate on a fee basis (which funds
    donations)
  • Large donation groups typically have a more
    formalized grant-making procedure
  • Some are formal groups that meet, some are loose
    networks

42
Eikenberry Provide 2 case studies
  • Shared Giving Small (16 members) group that
    focuses on leveraging individual donations
  • Started by couple that realized they were giving
    away a lot of money, but randomly and in small
    amounts
  • Decided to increase the impact of giving by
    organizing and targeting contributions
  • Womenade 38 giving circles under this name.
    Join for a small fee (35) Money used to
    provide small donations to women (families)
    experiencing financial stress
  • Such as paying an over-due utility bill
  • http//www.givingcircles.org/

43
Benefits of giving circles
  • Charity as a way of life
  • Giving is consistent and targeted
  • More informed!
  • Social aspect encourages participation
  • List of Giving Circles can be found at
  • http//www.givingcircles.org/

44
Crowdfunding
  • Means by which to draw in many donors at a very
    small price per donor.
  • Cause and monetary goal posted on the web
  • Rely upon social contacts to encourage
    participation
  • Top ten sites can be found at
  • http//www.crowdfunding.com/
  • Example Kickstarter seeks individual
    donations to fund creative work that otherwise
    would not be funded (e.g. cinema)

45
  • Crowdfunding also used to fund medical treatment
    for those with serious long-term illnesses who
    are in financial stress
  • Avoids costs of approaching donors, but
    visibility is an issue

46
Literature for Next Time
  • 9. Heutel, Garth (2014). Crowding Out and
    Crowding In of Private Donations and Government
    Grants, Public Finance Review 42, 143-75.
    (Christina Howell)
  • 10. Brokaw, L. (2012, November 28). The
    Benefit Corporation Movement, MIT Sloan
    Management Review. Retrieved from
    http//sloanreview.mot.edu/artucle/the-benefit-co
    rporation-movement/
  • (Julie Labbadia)

47
Class Exercise
  • Donation effectiveness
  • Design a website that
  • Promotes Cause
  • Will be easily found by those searching
  • Details finances of nonprofit
  • Provides searchable statistics (why?)
  • Stories of assistance
  • Mission statement
  • History
  • Media resources
  • Major Donors (why might you want to omit this?)

48
Web design session
  • Handout

49
Meeting 5
  • Return to Meeting 4 of Syllabus
  • Ott/Dicke 28, Journal Readings 8/9
  • Presentations (Tom and Patrick)
  • How to Determine if a Charity is Effective,
    online at http//online.wsj.com/news/articles/SB1
    0001424127887323977304579000433238565634
  • Heutel, Garth (2014). Crowding Out and Crowding
    In of Private Donations and Government Grants,
    Public Finance Review 42, 143-75.

50
The Economic Impact of the Nonprofit Sector
  • Magnitude of donations and where they go
  • Plus, further insights on crowding out/crowding
    in
  • Data on total giving

51
(No Transcript)
52
(No Transcript)
53
(No Transcript)
54
(No Transcript)
55
Examples of giving by State
56
(No Transcript)
57
(No Transcript)
58
Assessing the Role of the Nonprofit Sector
59
  • Chapter 14 (Young) Nonprofit Entrepreneurship
  • Innovation in the way a nonprofit raises money or
    pursues its cause
  • Traditional model New methods of fundraising,
    new causes
  • Less traditional model Web-based philanthropy
    (crowd-funding, etc.)
  • This has, of course, also led to some malfeasance
    (fundraising that seems too good to be true)
  • Or, Innovation in causes

60
  • Authors note that 57 of all nonprofits have come
    into existence in the last 20 years
  • Entrepreneurship is alive and well
  • Motivators
  • Increased prestige and income
  • Deep devotion to an idea or cause (e.g. religious
    causes)
  • Young (page 167) notes that commercial operations
    frequently become part of a nonprofits operations
    (logo-items)

61
American Cancer Society
62
Formulas for success
  • Page 168
  • Eisenbergs 1986 piece
  • Ten characteristics of a successful style of
    management at a nonprofit
  • Coherent aims and values
  • Focus on comparative advantage
  • Innovative decision-making
  • Adaptive environment
  • Excellence of execution
  • Staying power
  • Marshalling talent
  • Finesse with diverse constituencies
  • Knowledge of where the action is
  • Active-positive leadership

63
  • Also present the list of abilities put forth by
    Young (1985, 1991)
  • Many are appropriate for entrepreneurship in
    general, not just nonprofits

64
  • Chapter 17 Commercialization of nonprofits
  • Predicted by Hansmann (1989)
  • Philanthropic sector would divide into two
    distinct components
  • Traditional nonprofits
  • Commercial nonprofits that sell a product in
    order to conduct business
  • Hospitals, universities, nursing homes, daycare
    centers
  • Commercialization has actually been much broader
    gives example of PBS marketing content (e.g.
    Sesame Street)
  • Case Study of Metropolitan Museum of Art
    operating revenue
  • Traditional sources of revenues for nonprofits
    Fees (museums, concerts), grants, endowments,
    gifts
  • Auxiliary Merchandising
  • As noted on page 194, merchandising was briefly
    very important, but has declined to a minor
    source of revenue

65
  • But, on page 195 Total figures instead of Net
  • Merchandising far more important
  • Presents a puzzle sales add a good deal to
    revenue, but little to net revenue
  • May be viewing merchandising mostly as another
    form of advertising
  • Table 7.3 is perhaps most important
  • Admissions and endowments are the only two
    sources of revenue that are really growing
  • Troubling, since admissions are hard to raise,
    placing the burden on increasing endowment
  • Museums are somewhat unique. Picture at a
    nonprofit hospital would be quite different

66
(No Transcript)
67
Literature Assignments for Next Time
  • OD 14, 17
  • Brokaw, L. (2012, November 28). The Benefit
    Corporation Movement, MIT Sloan Management
    Review. Retrieved from http//sloanreview.mot.edu/
    artucle/the-benefit-corporation-movement/
  • Crane, A. (2001). Unpacking the Ethical
    Product, Journal of Business Ethics 30, 361-73.
  • Kannon, S., Could Impact Investing Help Indias
    Poor? BBC News (Dehli), September 29, 2011.

68
Looking Towards Meeting
69
Meeting 6
  • Philanthropic Models that involve purchasing a
    product and simultaneously making a contribution
    to a cause
  • Or, investing and making a contribution
  • Class Project (2nd ½ of class)
  • Design a product that will be sold to the general
    public that also contains a contribution to a
    cause
  • Carefully consider pricing and packaging
  • How are cause and product related?
  • How will you convey that to consumers
  • Example Fair Trade

70
What is Fair Trade all About?
  • Origins
  • Edna Ruth Byler of the Mennonite Church
    frequently credited with starting the Fair Trade
    movement
  • Returned from a visit to Puerto Rico deeply
    concerned about the plight of workers
  • Began selling handicrafts out of the trunk of her
    car
  • Increased proceeds enabled her to pay handicraft
    producers higher prices for their products
  • The Mennonite efforts eventually led to the
    establishment of Ten Thousand Villages, most
    common retail example of Fair Trade in the U.S.

71
Intended Message Apparent in Packaging
72
What does Fair Trade Cover?
  • List of products that are sold through Fair Trade
    Channels include
  • Commodities Coffee, cocoa, chocolate, tea,
    honey, beans, seafood, fruits, spices and
    vegetables
  • Other Handicrafts, apparel, wine
  • List of Products available at Fair Trade USA

73
How it works
  • Fair Trade products require certification
  • Largest body is the Fairtrade Labeling
    Organization (FLO)
  • Extensive set of criteria, including workers pay,
    production methods, environmental standards, etc.
  • Workers form a coop and work with FLO to achieve
    these standards
  • Products are then FLO-certified Fair Trade

74
After a cooperative if formed
  • Coops contact a Fair Trade distributor
  • Oxfam, Equal Exchange, Ten Thousand Villages
  • Distribution takes place through these
    organizations
  • Workers receive a higher than market price for
    their products, frequently with an established
    floor to eliminate the dips in commodity prices
  • Sometimes greater returns are distributed in-kind
    (medical, educational services)
  • Smaller producers may sell online only
  • Fair Trade is certainly a form of philanthropy
    Is it charity?

75
(No Transcript)
76
Other models of giving-through-buying
  • This type of fund-raising is now pervasive in
    retailing
  • e.g. Buy X and a 1 will be donated to breast
    cancer research
  • Difficult to unravel whether product is bought
    because of the donation or just because the
    consumer wanted the product
  • Buyer knows very little about where is actually
    going.
  • Raises (once again) the Principle-Agent Problem
  • What is double bottom-line accounting

77
More formalized approaches
  • Benefits Corporation model
  • For-profit firm that also pursues a social goal
  • Examples
  • Agricultural businesses that support
    sustainability and land reclamation
  • Or support the nearby food movement (Epiphany
    Farms)
  • Commodity Sellers that support the well-being of
    growers (Moyee Coffee)
  • Can find an extensive list of CERTIFIED B Corps
    at bcorporation.net
  • Benefits corporations approved in 22 states and
    DC.
  • Legislation important, since firms are
    technically violating their fiduciary
    responsibility to stockholders (not maximizing
    profits)

78
Group exercise on Social market enterprises
  • Design an SME domestic or international and
    determine how the organization creates public
    good
About PowerShow.com