When to Donate

Since my last post about non-profit activity there have been a number of other rumblings from the industry turning up in the news online. A brief firestorm broke out last week because the American Cancer Society’s listing on Charity Navigator is only 3 stars and not 4; several people were also raising cane about their overhead levels and the amount of money they devote to awareness, counseling, support groups, education and even political efforts instead of spending every dime on research. Here again, it sounds very upsetting, but the fact is that the Navigator doesn’t award all that many 4-star ratings (and has a surprising number of 1-star and no-star charities listed), and without the Society’s support (especially in education and awareness) many of the pure-research anti-cancer groups would be far less successful. This doesn’t even consider the number of outright trolls who were posting that the ACS had two stars and not three…

The point here is that non-profits and charity donations are a good deal more complicated that most people would like. Even if you can find a charity whose mission and methods you completely agree with, they still may not act in ways you find acceptable, and your recourse to demand that they do may be limited. Consider the case of a man in Texas who donated $40,000 to the Jesuit prep school he had attended 37 years earlier on the understanding that the school would find a place for his own son when the boy was of age to attend. You can find the account from his local ABC station here if you want to, but the upshot is that the school took his money and then refused to admit the kid. This sort of quid pro quo arrangement is considered ethically dubious, but is not generally illegal as such (and apparently there’s no law against such things in Texas). Refusing to honor a contract is another matter, however…

In this particular case, the school hasn’t denied that there was such an arrangement, or that a written document confirming it exists. If this is the case, then taking their graduate’s money and rejecting his son because the boy “wouldn’t be happy here” is completely asinine, and if the school’s defense is the usual “Oh, we’re a nonprofit! Nobody would sue US!” then they’re about to be in serious trouble. Statements like the one they’ve issued about keeping fund-raising and admissions activities separate won’t help either; their only options may be returning the money (which they say they’ve already spent) or declaring bankruptcy – which will be tricky, since technically they’re owned by an arm of the Catholic Church…

All of this raises a number of ethical questions which I will probably address in a later post. For today, I just want to consider if it makes sense to donate money to a non-profit organization with the intent to get them to do something in particular in the business sense. On the one hand, as with any other corporation, the specific goals and activities of a non-profit agency are probably beyond the ability or resources of any single “investor,” which is why we band together to concentrate our capital into a larger company in the first place. So if there is specific social change you want to accomplish, and you can’t just write a check to do it, a donation makes sense. At the same time, if you invest money in Apple, Inc. that will not allow you, personally, to determine what new projects they fund; you need to be clear that the same situation will occur with a non-profit. You can exert some influence on them, particularly by offering or withholding future donations, but just as the stockholders can’t directly control a company, so you will not be able to direct the non-profit unless you become its director…

So when should you give money to a specific charity? As with any other investment decision, I’d have to say that would depend on what goal you are trying to accomplish – and how much risk you are willing to accept…