October 06, 2008
Scandals Prove Need for Leadership Turnover
An expert on nonprofit governance says nonprofit groups should be more careful about limiting the power of their leaders in wake of the recent embezzlement scandal at the Association of Community Organizations for Reform Now, or Acorn.
In May year, a whistle-blower in the organization forced the disclosure that Dale Rathke, brother of Acorn’s founder and chief executive, Wade Rathke, had embezzled nearly $1-million from Acorn.
Dan Prives, an expert on charity finances, writes on Where Most Needed, that the situation raises significant questions about how much authority should be given to nonprofit leaders.
Mr. Prives writes that Wade Rathke, who founded Acorn in 1970, set up the organization in such a way that other employees and its board of directors could not easily follow its financial structure. That structure helped enable the embezzlement scandal, he says.
Worse, Mr. Prives writes, the organization has lost much of its influence and credibility.
“Executive tenure over a decade is always going to be problematic, especially since board tenure is typically much shorter,” Mr. Prives writes. “Some people would like to call it founder’s syndrome, but the issue isn’t about being a founder as much as it is about being in power long enough to be the only one remaining who really understands how everything works.
“The result is often a crash-and-burn scandal, confirming the adage that absolute power corrupts absolutely. “
Is it possible for long-tenured leaders to maintain successful organizations? Or should there be “term limits” for those who oversee nonprofit groups?
Click on the comments link below this post to share your thoughts.
October 03, 2008
Newspaper Blog Follows Charity Trail
On the Crime Blog, Jason Trahan, a reporter for the Dallas Morning News, is following the retrial of five men affiliated with the Holy Land Foundation for Relief and Development, a Muslim charity based outside Dallas accused of supporting the Palestinian militant group Hamas.
A previous case ended last year in a mistrial after jurors were deadlocked on charges against the defendants. Prosecutors charge the five men raised more than $12-million to support terrorism. The defense says there is no evidence that private donations went to finance violent activities.
Mr. Trahan this week writes that the judge decided to allow the jury to see videos produced for the Holy Land fund that feature a controversial Palestinian cleric, who is reportedly a spiritual mentor to Osama bin Laden.
While the videos were not found at Holy Land’s offices, a prosecutor “argued that the advertisements were authentic because they were found among many other documents and videos naming the defendants and showing them interacting with Hamas leaders. They are relevant to the case because they show that the defendants were not merely a charity, as they claim, but rather Hamas’ designated fund-raising arm,” Mr. Trahan writes.
However, a defense lawyer “said there is no proof the defendants had anything to do with producing them. Besides, she said, the videos were made well before support of Hamas was outlawed in the U.S. in 1995. Also, she said, the government just wants another opportunity to mention Osama bin Laden,” Mr. Trahan writes.
Silver Lining in Economic Turmoil
Charity Navigator, a nonprofit watchdog group, says there may be a silver lining for donors hidden within the dark clouds of the financial meltdown and fears of an economic depression.
“The bad news in the bad economy is that vitally important services may be closed or downsized. However, the good news is that some of the worst-run organizations will no longer be competing for donations and it will be easier for donors to choose which organization to support. Also, due to mergers, more efficient organizations will be operating,” writes Ken Berger, the group’s chief executive, and Leonie Giles, a Navigator program analyst.
“This is good for donors and for the causes we care about,” they argue.
What do you think? Can a downturn in the economy thin out the number of poor-performing charities?
October 02, 2008
Wealthy Families Rethink Charitable Giving
The financial crisis is already affecting how some modestly wealthy families approach giving and may jeopardize how much charities can raise in the future, says Richard Marker, a nonprofit consultant, on his Wise Philanthropy blog.
Mr. Marker writes that in recent meetings with families he advises there are more questions about the balance between leaving an inheritance and how much to provide to charity.
“The issue, it seems, has taken on new meaning in the face of an insecure economy. If one’s net worth can drop precipitously overnight, how much is enough to guarantee anything to one’s children? If family health care or education for your grandchildren or subsidies for family gatherings are important, can you chance leaving your money to charitable causes?” he writes.
“Or conversely, if you feel that some of your money must go to make some part of the world a better place, shouldn’t you guarantee that commitment, even at the risk of imposing on your grandchildren to make it on their own?” he continues.
“The discussions are just beginning, but I suspect that the much-ballyhooed transfer of wealth theories, which have informed the philanthropic thinking of many, are in for a serious challenge. Buckle up.”
(Read The Chronicle’s article about how the financial insecurity could hurt nonprofit groups and their workers.)
What do you think? Have you seen signs that the financial problems will hamper giving? How has your nonprofit group been affected by the credit crisis?
October 01, 2008
Charity May Benefit from Movie Mogul's 'Bet'
According to The New York Post’s gossip column, the Robin Hood Foundation will probably receive $1-million, somewhat reluctantly, from the Hollywood mogul Harvey Weinstein.
In a sense, Mr. Weinstein lost a bet. He told the newspaper that an e-mail message, which shows him in a negative light in regards to a movie negotiation, didn’t exist, and that if someone could prove its existence, he’d contribute $1-million to charity.
Well, the message was produced by DeadlineHollywoodDaily.com, and the Post writes that a person associated with Mr. Weinstein said that once the e-mail message is verified, he will give the gift to Robin Hood.
It’s not exactly stealing from the rich, but it’s probably a sure bet the charity will accept the money.
Giving Nonprofit News a Big Digg
The social-media expert Beth Kanter is frustrated with the popular news networking site Digg.
Digg — which allows readers to highlight news article, blog posts, and videos that they find interesting and recommend them to other people — has become a highly influential traffic source for many news organizations and blog writers.
When an article gets a high number of “diggs” — or votes — from readers, it rises in prominence on the Digg Web site.
The higher it rises, the more likely it is to get noticed by other Digg viewers.
Stories about nonprofit groups and philanthropy tend to score low on the site, in part because there is no category on Digg for such stories.
Digg uses broad categories — and many philanthropy stories end up getting tagged as “business and finance.”
Ms. Kanter, on Beth’s Blog, writes of a campaign to persuade Digg’s creators to create a category called “Nonprofit and Social Change.” By doing so, she argues that those who care about these topics will be able to find, and Digg stories.
Appropriately enough, the article now appears on Digg.
September 30, 2008
For-Profit Microfinance Efforts Under Scrutiny
The ability of commercial microfinance institutions to fight poverty is under renewed scrutiny because of the current financial crisis.
While subprime housing loans — loans made to people who don’t have long credit histories and documented earnings — triggered the market meltdown and the collapse of several venerable investment banks, Daniel Gross, a writer for Slate magazine, says the poor need greater access to credit.
“What the world needs right now is more subprime lending — a lot more of it,” writes Mr. Gross.
To be sure, the journalist was supporting the growth of microcredit, but others have derided any comparison between subprime lending and microloans.
Last week during a World Business Forum meeting, Muhammad Yunus, the Nobel-Prize-winning founder of the Grameen Bank, said the subprime market failed for one reason — greed.
According to Felix Salmon, a blog writer for Portfolio magazine, Mr. Yunus went on to question all loan businesses serving the poor that seek to make a profit. “Breaking even, said Yunus, was a great idea,” writes Mr. Salmon.
Based on problems a Mexican bank has had with mixing profit with microfinance, writes Mr. Salmon, “for the time being, I’d keep the idea of for-profit philanthropy in the ‘not proven’ category.”
However, the moderator of the World Business Forum’s session, Matthew Bishop, an editor at The Economist magazine and co-author of Philanthrocapitalism: How the Rich Can Save the World, disagreed with Mr. Salmon’s conclusions.
On a blog that promotes their book, Mr. Bishop and co-author Michael Green write that a diverse source of funds — nonprofit, government, and commercial — are needed to get microfinance to reach the world’s poor.
“As we report in the book,” they write, “Pierre Omidyar, the founder of eBay turned philanthrocapitalist, calculates that meeting the needs of all the potential poor borrowers would require about $60-billion and that ‘there is not enough nonprofit and aid capital in the world to get microfinance to the scale it could achieve.’”
(Read The Chronicle’s interview with Mr. Bishop and Mr. Green. A paid subscription is required to view the article.)
What do you think? Does microfinance need both for-profit and nonprofit supporters?
September 29, 2008
What About a Bailout For Nonprofit Groups?
Congressional leaders spent all weekend debating the $700-billion bailout of the financial industry. Ruth McCambridge and Rick Cohen, of The Nonprofit Quarterly, are asking their readers to do the same.
Ms. McCambridge and Mr. Cohen ask readers to weigh in both on the overall merits of the bailout (“Is it the right thing to do or the wrong thing to do or something in between?”) as well as what the nonprofit world should be doing to influence the debate.
“What should the nonprofit sector do, locally, regionally, and nationally, to make sure our voices are heard on what could be not only the largest federal government intervention in the economy in modern history, but the most threatening economic climate since the Great Depression?” they ask.
Some readers said that nonprofit organizations could use a bailout, too. Wrote one commentator: “Perhaps a $700-billion bailout is in order to save the financial markets and ultimately the American economy – but who is going to bail out the not for profit community when its various funding sources dry up as a result of fewer federal and state dollars and diminished funds for donors and foundations? For some of us, everyday is a ‘financial meltdown’ as we struggle to provide the services necessary that governmental agencies simply cannot or will not provide.”
What do you think of the bailout? What more should charity leaders be doing to respond to the economic crisis and influence the actions of government leaders?
Paul Newman's Gifts to Philanthropy
Much has been written in the past few days about the philanthropy of Paul Newman, the actor who died on Friday at age 83. Michael Seltzer, a consultant to charities and foundations, writing on the PhilanTopic blog, says Mr. Newman should be remembered as the pioneer of a specific kind of giving: “consumer philanthropy.”
Newman’s Own, the company Mr. Newman and his neighbor, A.E. Hotchner ,started 28 years ago, helped “prove that the generosity of Americans does not stop when they go shopping,” says Mr. Seltzer.
The two men created the company just before Christmas of 1980, when they stocked the shelves of a local store with Mr. Newman’s homemade salad dressing. By the end of the 1990s, Mr. Newman’s dressing had annual retail sales of $33.5-million, making it the eighth-biggest seller in the salad-dressing market. By 2008, the Newman’s Own Foundation had given more than $250-million for charities.
Mr. Seltzer writes that Mr. Newman was initially wary of promoting the products with his face and name.
When someone first suggested Mr. Newman put his face on salad-dressing bottles, he said he was bothered by what he called “noisy philanthropy.” It was only after a former food executive joined the company that its packaging included more-prominent mentions that all the proceeds were donated to charities.
Mr. Newman also sought to raise the level of giving among Fortune 500 companies, creating in the mid-1990s the Committee Encouraging Corporate Philanthropy.
What do you see as Mr. Newman’s contributions to philanthropy?
September 26, 2008
How the Federal Government Is Hurting Relief Groups
Changes the Federal Emergency Management Agency made since Hurricane Katrina are hurting charities, writes Mary Theroux, senior vice president of the Independent Institute, on the group’s blog.
Ms. Theroux says that by creating the Aidmatrix Foundation to collect donations, the agency is depriving disaster-response charities of money.
She describes how government officials told the Salvation Army that it would be among the organizations listed on a screen at the Republic National Convention, when Cindy McCain and Laura Bush made an appeal for hurricane victims. But instead, the screen directed viewers only to Aidmatrix’s toll-free number.
Says Ms. Theroux: “The flow of money out of Aidmatrix is completely intransparent, and will, by definition, be determined politically by inside interest groups. In the case of the aforementioned Gustav appeal, for example, Web sites for the four states ruled by Republican governors were displayed on the convention’s screens; relief for the one state ruled by a Democrat—Louisiana—was referred directly to Aidmatrix’s site. And the resulting influx of funds can only provide attendant political benefits to those Republican governors.”
Read a Chronicle story that discusses changes to FEMA and the impact on charity fund raising.
Do you agree with Ms. Theroux’s criticisms? Or are they overblown? What is your view of Aidmatrix?