The stock market: Alternative financing for non-profits

Lucy at Philanthropy 2173 has started an interesting discussion regarding cross-platform philanthropy:

“Just as a radio program or tv show must now be developed with an eye toward its other media platforms and outlets, our public/philanthropic financing of these ventures need to be considered within these “cross sector” financing opportunities. We need to think of philanthropic funding strategies – and the public goods they support – as cross-platform. Public goods are now provided by private firms, public agencies, nonprofit organizations, and social enterprises. They are funded by public dollars, charitable donations, fees for service, corporate sponsorship, licenses, social investments, sales, and search engine/ad revenue. Oh, I like this metaphor – I’m gonna have to expand on it — next post.”

Taking the idea further, I started thinking about changes that might take place if non-profits were traded on the stock market like for-profit enterprises.

1. More secure and steady source of funding

Currently, non-profits compete for a limited set of funds among possible donors. A donor’s choice of the beneficiary may be influenced by media coverage of the cause the organization supports. Because there is a finite source of funds, prevailing priorities determine which causes and organizations gain the most. Reliance on quarterly fundraising totals can swing between feast and famine with any number of factors affecting donors: economic conditions, other pressing events, etc. Companies participating in stock exchanges generate profit from the value they offer through goods and services. Generating profit is not a zero sum game in the market; all organizations have the opportunity to show the value that their organization brings about and earn profit.

2. Changes in the organizational governance structure

Trading non-profits on the stock market also democratizes the governance structure of the organization. Shareholders have a financial stake and hopefully a personal interest in effective programming. Members of the community can share their insight about how the organization can be most effective directly with management. Involving more opinions in the direction and governance of the organization diversifies perspectives and strategic direction, much like some organizations hope to do by recruiting millennials to non-profit boards.

3. Altered definition of organizational accountability and responsibility

Non-profits would have an external measure to determine how well they are at doing good. Right now, most accountability for evaluation and demonstration of effectiveness is less of a requirement for continued donor support. Within the market, organizations that could prove they actually accomplish what they set out to accomplish will see the dividends literally in the stock dividends. Developing and maintaining effective and sustainable programs would affect the bottom line, promoting evaluation and the incorporation of best practices.

What do you think about the idea of nonprofits on the stock market? Worthless adaptation from for profit enterprises or the future of nonprofit fundraising? Let me know what you think in the comment section below.

4 comments so far

  1. Jamie Beckland on

    I can see this having some use from a social markets perspective, e.g. http://www.intrade.com. That would be a fairly easy way to quantify and compare reputation between nonprofits.

    However, nonprofits have to deal with the challenge of staying true to their missions, which will sometimes get punished in a perfect market scenario. Orgs have to maintain their focus even when it’s not popular or “profitable” – unless the reason for the org’s existence has been resolved!

  2. Milena Thomas on

    All right! Vanessa, great thinking. I have been confounded about the non-profit dilemma. I believe deeply in the missions of many non-profits, but as you know, I’m a pretty hard-core advocate of small government. With small government comes decreased funding for many non-profits. However, that doesn’t mean funding has to or will dry up.

    Ideas like this show that a non-profit can and should find ways to thrive without the government.

    I especially like the idea of accountability and a non-profit finding out how good they are at doing good.

    As for “staying true to their mission” – that should not be difficult to do. I firmly believe most organizations are ethical and should find it easy to remain true to themselves. Their reward? Financial support. If they are truly benefitting society, their mission shouldn’t need to change or find reason to fail.

    I love this.

  3. Vanessa on

    @Jamie I don’t think it will be a problem of maintaining their mission in a market. When nonprofits fail, I don’t think it is because their mission was not supported by the public. It is usually because the way they chose to carry out their mission did not appear satisfactory enough to attract donors. I think that is where markets can induce accountability.

    @Milena Haha! I know that I have advocated the expansion of government in other circles. For me, government is about being a safety net for people that would otherwise fall through the crack.

    Government funding for nonprofits is drying up, especially with some of the biases in this administration against certain causes such as reproductive rights. I do think with the current financing structure that nonprofits lack accountability that makes their forprofit counterparts function well. Introducing markets is a way to correct this.

  4. Nomadic Matt on

    Hey,

    I just wanted to say thank you for coming over and commenting on my blog. It’s always nice to hear from new readers.

    Hope to “see” you again sometime.
    -Matt


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