Tag Archives: Non-profit organization

Does private/social melding work?

B Corporation logo, trademark B-Labs

“The social responsibility of business,” Milton Friedman once wrote “is to increase profits.”

That was in 1970. Since then a massive movement has grown up around the rather vague notion of CSR, or Corporate Social Responsibility. Promoting the triple bottom line – people, the planet and profit – they seek to strongly consider the side effects of all the different operations and then act accordingly – from helping fight global warming to expanding employee health benefits.

Soon some corporations may attempt a “third way”: neither explicitly non-profit nor solely concentrated on bucking up the (single) bottom line. To manage this somewhat dicey balance a new term has arisen: a B Corporation, or Benefit Corporation, which includes in its bylaws specific legal responsibilities not only to its shareholders but also to “stakeholders” – those that the organization affects, if only tangentially. Their status as a B Corporation is reconsidered annually by a recognized third party; if they fail to live up to their by-law obligations they lost the status.

Maryland has become the first state to pass this category into law; in possible contradiction  to Friedman’s own words, Andrew Kassoy, one of the promoters of B Corporations, said: “”Milton Friedman would have loved this, for the first time, we have a market-based solution supporting investors and entrepreneurs who want to make money and make a difference.”  Now in part he is right – this is partially a market solution because by using the basics of tort law they’ve made sure part of the voluntary contract used in starting the corporation includes this social commitment.

Two caveats, however:

1. B Lab specifically promotes the legislation because it can make sure that even under new ownership this commitment remains.

2.  Perhaps mor importantly, there have started to be some tax breaks packaged with incorporating as a a B Corp. These tax breaks are admittedly extremely minor, but that’s no guarantee that they will remain so and it certainly gives the lie to the claim of a Friedman-like market solution.

But to most people who aren’t hardline libertarians, the most important question is, does this ideal of responsibility actually yield a better world than traditional corporations? I for one think that this is hardly the “first time [we have] a market-based solution supporting [those] who want to make money and make a difference.” Would we really be better off if Google shifted resources from computing to fight oil spills? If Phizer dropped its main devotion to creating pharmaceuticals and threw itself into investing in the local community? Both of these companies have done extraordinary good while doing extraordinarily well; they both do have CSR components but that cannot, and I believe should not, be their essential concentration – or even a particularly large one.

While CSR has been found to have positive, neutral and negative effects on profits, there’s no doubt that many companies think that it helps their bottom line to help out society – or, at least, to appear to. Ultimately corporations that are not B Corporations have legal duties only to their shareholders (and to abide by the law), and so as their actual incentives don’t really align with doing a lot of conscious good, it should not surprise us that CSR often doesn’t do much at all. Whether somewhat vague promises built into their by-laws can help B Corporations avoid this incentive trap is an open question.


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Non-Profit Restaurants: Exciting Innovation or CEO Ego-trip?

Slices of French Bread
Image via Wikipedia

Via Charity Navigator, a USA Today story:

Imagine walking into a Panera Bread and picking out anything you wanted to eat or drink — then, at the end of the line, instead of handing your money to a cashier, you faced a donation box…. A sign at the entrance says: “Take what you need, leave your fair share.” Customers who can’t pay are asked to donate their time. The cafe opened Sunday and will operate seven days a week from 7 a.m. to 4 p.m.

Basically, the you pay what you want and the proceeds go to charity. Charity Navigator and some quoted experts in the story seem excited by this notion. But this seems like a major breakdown of specialization. Why should a restaurant try to be a soup kitchen and nonprofit? Does it really have the relevant expertise to organize people donating time and money, not to mention actually making back the money it takes to rent, staff and supply the store? An increase of “20% on opening day [of being a non-profit] vs. the previous Sunday [when it was still a for-profit]” is not such a shockingly high jump in revenue. Of course, I do wish them well.  Just take this with a grain of salt…

And what would be the preferred scheme? Less exciting, but more realistic: specialize! Sell tons of French food in a normal restaurant and then, if you want, give the profits to charity. If preferred, have a selection of charities to donate to. Frankly, I suspect that former Panera Bread’s former CEO is eager to swoop down on from on-business-success-high and sprinkle the shower of brilliant innovation onto the nonprofit world. But somehow a soup-kitchen/pay-what-you-want/charity/French chain cafe combo seems less than realistic.

Also: Freakonomics collects a gaggle of pay-what-you-want schemes.

Another also: USA Today has a blog about weird non-profit schemes

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Making a Difference

As I was driving on the highway the other day, I saw a billboard that caught my attention. It said something about “Ordinary People Making a Difference,” and I perked up, only to realize it was a military recruitment advertisement.

This got me thinking, what does it mean to make a difference? My experience leads me to think that “making a difference” relates to social entrepreneurship and other types of social action. However, the fact that the US Air Force is using the same terminology makes me wonder whether I am placing too much importance on the type of work that I enjoy.

So how can an ordinary, everyday person make a difference?

  1. Decide what bothers you about the world – Have you been compelled by the heart-wrenching tales from earthquakes in Haiti? Perhaps you just witnessed a documentary about the plight of sex slaves in cities around the world? It is important to pinpoint an issue that you are passionate about, something that you are willing to devote your free time to.
  2. Educate Yourself – Learn more about the topic at hand. Read newspaper articles on the subject, watch a documentary about it, follow a blog that covers your topic. It is important not to take action without knowing what you are confronting (that is not to say you should be paralyzed, but simply a reminder to “look before you leap.”)
  3. Find out what is being done already – You are probably not the first person to notice this issue, find out what organizations have already been dealing with the subject. Check out their profile on charity navigator.
  4. Join the movement – Find other passionate about your cause. Donate to good non-profits whose missions align with your principles. Organize a fundraiser. Educate your friends and family about the issue, show them an article, recommend a documentary, etc.

This is what I view as the basic model for making a difference. Perhaps this model is too narrowly focused. It focuses on charity and non-profits, while these may not even be the best models for enacting real change. They also assume that one cannot make a living off of fighting for his favorite cause.

However, for the majority of those living in the developed world, careers, social lives, family life, and other daily obligations do not often integrate people’s favorite humanitarian causes. The model outlined above is a suitable route for someone looking to incorporate social causes into their daily agenda.

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