The Double Standard for Nonprofits and For-Profits
We live in a world where double standards are the accepted norm. As a society, we are slowly working on redressing certain double standards, as in race and gender. It’s time to call attention to an enduring double standard for for-profits and nonprofits.
Why is it okay for a for-profit company to use the profit made from the sale of shoes in the first quarter to buy handmade mahogany furniture for the CEO’s executive secretary, but the executive director of a nonprofit should be grateful for the donated desk from a family downsizing its home? Why is it okay for some for-profit companies to get the latest and best in technology each year, while nonprofits, who are still not even networked or have web access, struggle to find donors willing to help them gain the infrastructure support they need to deliver their programs? When we buy that pair of shoes, the price tag doesn’t come labeled: $50 for shoes, $10 for the electric bill, $30 for new desk, but, in essence, that is what that $90 dollar price tag is all about.
But nonprofits trying to sell their pair of “shoes” must detail that price tag: $50 for food to feed the hungry, $10 for the electric bill, $10 for new furniture, and hope that donors will be willing to pay the full freight. But, as one of my graduate students said, “I don’t want to pay the electric bill. I only want to feed the hungry.” Does he understand that the lights must be on in order for that soup kitchen to serve meals to needy people? Absolutely. But he doesn’t want his dollar paying that bill; he only wants his dollar to buy the food being served.
It’s not uncommon to read an article that identifies the compensation packages of the region’s highest paid for-profit executives. When some of us see those numbers, we give a nod to the benefits and rewards of capitalism. Others of us read those articles, see those numbers, and are appalled that one person makes so much money. But how many of us think, “I’m not going to buy any more of that company’s products because I don’t want to pay for that CEO’s penthouse?”
And then there’s the annual story about the salaries of the heads of large nonprofits. When the last such story came out in 2007, one of the people at the top of the list was the president of WHYY, one of the region’s public radio stations. Shortly after the article, WHYY was doing its annual fundraising drive. An area nonprofit had signed up to cover the phones during a period of the fund drive, but when the board got wind of the salary of the head of WHYY, they pulled out, saying that their organization would not help to pay for what they saw as an outrageous salary. And this one nonprofit board was not alone.
Competitive salaries and compensation packages are a way of life in the for-profit sector. Why? Every company wants to woo the best and the brightest. Shouldn’t that include nonprofits? Our employees, too, want smart, bright colleagues, as well as nice offices with the latest technology, health and retirement benefits, a living wage, professional development opportunities, and so on. We all want the same things because we understand that running a business requires, among other things, investing in our most important commodity—our people. But why, then, is one sector—the nonprofit sector—criticized for and hampered in trying to achieve that goal?
Let’s be real here. For-profits fund their businesses in a very similar manner as nonprofits. The latter, however, is required to be absolutely transparent about it while the former, well, not so much.
Nonprofits, as noted above, must give you the option of picking and choosing which part of our business you wish to fund. For-profits don’t: we can’t elect to pay for the meal, but not the chef’s salary. We can’t elect to pay for the shirt, but not the labor that went into making the shirt. Because to do either would be absurd, correct? Everyone knows that if the laborer doesn’t get paid the shirt doesn’t get made, so of course we understand that a share of the price of the shirt includes a fee for the laborer. Then how come everyone doesn’t know that if the electric bill isn’t paid the hungry don’t get fed, and that, therefore, a share of the price of feeding the hungry must go to pay the electric bill.
Thought-provoking stuff, Laura, and much of it on-target. Though I’d argue that high executive compensation in the for-profit sector is getting viewed more and more skeptically, especially now that the economy is in such weak shape.
I think that the sentiment in this post was on target. The perspective on the funds we give to a for-profit versus a non-profit needs to change. It costs the same to power a light-bulb in an office no matter whether they are for or non-profit. However, I think it’s a bit shortsighted to not take into consideration the tax breaks the non-profits receive and the duty to which they are inherently called. When we pay for “shoes” at a for-profit we probably aren’t doing it to specifically fund their shoe making efforts, or because we think there should be more sneakers in the world for example. In contrast, when we give to a non-profit it is for the specific purpose of furthering their mission and supporting their efforts to provide those who need “shoes” with “shoes”. Again, it IS ridiculous for people to want to donate to non-profits and not want to help cover overhead. I know many people who would LOVE to work in the non-profit sector but simply can’t afford to because of the salaries and benefits that are being offered.
Considering human nature’s way of “making things fun”, I think one piece of the solution is creating more for-profit social-ventures that use a portion of their profits to support social causes to take some of the burden off of the non-profits. For-profit and non-profit need to work more closely to make sure the benefits of each business model is being optimally distributed over the issues that need to be addressed.
Boy I’d love for some foundation execs to read this blog entry. Not only are non-profits expected to account for every dime spent (and ensure the donors that not one penny was spent on a salary or a bill) but now they are also expected to undergo evaluation after assessment after evaluation. The situation is bordering on the absurd. What is this about??
Surely the nonprofiteers are cheering loudly in their stands as they should be. Though it is not exactly correct to say that donations can’t go to pay the electric bill: for two reasons. 1) Most non-grant donations (annual appeal, annual gala, annual auction, direct mail and online solicitations etc.)are unrestricted and can go toward the electric bill. 2) The standard grant does take into account “overhead,” although the average percentage going to overhead (12%) is not nearly enough to run a “company.”
Also Karen says “not one penny” can be spent on salary or bills, but it can if you write them into your grants. If you can justify salaries (for example teachers salaries) as part of the programmatic expense you’re golden.
If your ED, program director etc. spends time/effort implimenting programs, write that cost into the proposal.
I think the real answer to your double standard question, “Then how come everyone doesn’t know that if the electric bill isn’t paid the hungry don’t get fed, and that, therefore, a share of the price of feeding the hungry must go to pay the electric bill?” Is because the “buyers” of the nonprofit “meal” never actually eat it.
They are giving a “meal” to someone else and they simply want the person fed. They don’t understand that food alone will not eliminate hungry people (even if we factor out all the non-eating related causes of hunger, i.e social inequality etc.)
It is our job to get them to “eat” the meal they buy. Explain to them that a source of food alone is not enough to feed the hungry. One needs to 1)find a way to let the hungry know where the food is (marketing), 2) get them to the food or vice versa (Transportation), 3) create a balanced meal (program planning), 4) cook and plate the food up (administration), 5) store the leftovers (PP&E), and 6) Make sure new food comes in to replace that already eaten (Fundraising) .
But thankful for small favors, at least we dont have to create the hungry (the sneeker companies are already doing that for us)!
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