

The Sin in Doing Good Deeds - eugenejen
http://www.nytimes.com/2008/12/25/opinion/25kristof.html?_r=1

======
GavinB
If an organization is turning a profit for its owners or shareholders then
it's a business, not a charity. That's a definition, not a moral judgment.

There are lots of businesses that do good work for people. The tricky part is
when you're soliciting for donations, you just need to be extremely
transparent about where the money is going.

What we need is not a rethinking of what a charity can be, but a rethinking of
what a business can be.

~~~
h34t
My first business was designed with two purposes: to earn a profit, and to
support artisans in developing countries. Was it a business or a charity?
Well, its legal structure was 'business' but its purpose was not only to earn
a profit for me. I would consider it a failure if it had only helped myself,
because that was not why I started it.

So I don't care whether you call it a charity or business. What is important
is clearly understanding your purposes and means and making damn sure you
communicate them well to the people who matter for your success.

The important realization I had was that it doesn't matter what traditional
expectations are. As long as I stayed within the law, my limits were simply
defined by the agreements I could make -- with artisans, with customers, and
with all the other players in-between.

Later on I went to university, and that was the first place I was confronted
with this inane idea that it was a structural necessity for a business to be
driven solely by profit, etc. etc. -- as if this was an immutable law which
transcends human nature and society.

I didn't get into business only to live up to expectations that society has
created, as though I was a gas waiting to expand to fill whatever chamber I
was put into. I got into business as a way to express myself through thought
and action in whatever ways might lead to the most impact.

------
gyeh
I think part of the fear regarding for-profit aid organizations is this: the
pursuit of profit will create an incentive for organizations to follow the
money.

As a result, more resources would be allocated for the problems in more
wealthy nations (ie. cancer), while problems in poorer regions would be
neglected (ie. maleria). The same problem would exist even within a nation
through existing class divisions.

While this schism already exists today, an increase of for-profit aid
organizations/charities will probably exacerbate this divide.

In the end, this discussion opens a whole host of ethical issues and
philosophical questions. Life is rarely simple.

------
anthonyrubin
Obviously people aren't very aware of how much the CEOs of various not for
profits make. The CEO of United Way for instance makes over $500K. All of this
can be investigated on Charity Navigator.

------
12ren
_In the aftermath of a wave of criticism, his company collapsed.

One breast cancer charity that parted ways with Mr. Pallotta began producing
its own fund-raising walks, but the net sum raised by those walks for breast
cancer research plummeted from $71 million to $11 million._

But because his company collapsed, the true comparison figure that Mr.
Pallotta raised became $0 million. As a business, it didn't succeed. And he's
blaming the world. People often give to charities to feel charitable, and
having a profit-motive undermines that - even if the result is that less money
is raised. This is because people making donations are often fulfilling a need
to give and help people - not by what is best for those being helped. The
latter requires a kind of ruthless saint, quite different from the human
motivation of brotherly love.

In contrast, ordinary businesses helps people, or else no one would give them
money. A fantastic example of this is Grameen Bank "microcredit":
[http://www.grameen-
info.org/index.php?option=com_content&...](http://www.grameen-
info.org/index.php?option=com_content&task=blogsection&id=8&Itemid=170) Usury
(interest for credit) has got to be pretty much the opposite of charity, yet
it seems to do tremendous good.

------
quoderat
The problem is that there are many qualified people in charity work who make
barely-subsistence wages who would likely do an as-good or better job with far
less pay.

So, for the most part, my guess is that $500,000+ salaries are a form of rent
seeking, and are not justified in the so-called marketplace.

It'd be nice if someone could crash together the stats and see if this
intuition bears out. You know, look at percentage of donations used to
actually help their stated cause, and see if having a super-star CEO actually
results in a more well-capitalized charity.

I doubt it, but I depend on evidence, not ideology.

~~~
sokoloff
Did you read the article at all?

Take the case of the breast cancer charity which, from the article, was
pulling in $71mm from charity walks using his services. They stopped using his
services and continued the walks and are taking in $11mm now.

You might argue that several other variables might have also changed, but a
6.5x factor is hard to ignore.

~~~
quoderat
I read the article. I wouldn't call one anecdote data, though it's about
1/10,000 of a good start.

~~~
albertni
That's a little harsh. It was a pretty significant anecdote - a 6.5x decrease
with the only clear change being Pallotta's company-charity being forcibly
stopped from continued involvement. Is there room for other plausible reasons
to have caused the drop? Definitely. And of course if, hypothetically,
Pallotta's company-charity was involved with sufficiently many causes, you
would even expect there to be at least one anecdote with such a substantial
drop. But to call it "1/10,000 of a good start" is much more unreasonable and
illogical than thinking the anecdote might be of worth.

~~~
DabAsteroid
_a 6.5x decrease_

That would be negative 5.5 times, or 5.5 times below zero.

------
tome
Renumeration is tricky for charities.

In a public company, and to a large extent a private company, the bottom line
is the bottom line. Investors invest, and they want money out of it. As long
as it's legal, anything goes to get that profit.

In a charity the bottom line is providing some much less tangible benefit to
someone or something. The bottom line is a much fuzzier concept. The benefit
is harder to gauge than when you're just looking at a number of currency
units.

~~~
cabalamat
Indeed. People give money to charities because they want to help a cause, not
because they want to help the chief executive get paid lots of money.

~~~
trominos
No. That's exactly the point: people don't give money to charities to help a
cause, they give money to _feel good._

If they gave to help a cause, then they would support whatever (reasonably
ethical) methods best helped that cause. The fact that so many donors bitch
about frankly miniscule CEO compensation proves that the majority of them are
not in it to improve the world -- or at least that there are other things they
want out of their donation.

~~~
h34t
I don't know anyone who actually gives just to feel good. Feeling good is a
by-product of giving, but only because you've done something worthwhile (or so
you believe).

That people bitch about CEO compensation doesn't mean they don't want to
improve the world. They bitch _because_ they want to improve the world, and
they believe that high CEO compensation (as they perceive it) is a modern evil
that stands in the way of improvement.

~~~
netcan
I agree.

Also, they bitch because it's hard to measure performance directly. The best
we can do is often look at the % of administration vs programs vs fund
raising. Even there you can have a lot of funky accounting.

If you really want to get into it, we can look at the names & brochures of the
individual programs. Going all out, we might news search the names of the
programs to see what news references we come up with.

We know that charities are inefficient. But we can't work out who or how.
Charities don't have ROI or p/e. So we look at things like CEO salary.

------
mleonhard
[http://www.amazon.com/Uncharitable-Restraints-Nonprofits-
Con...](http://www.amazon.com/Uncharitable-Restraints-Nonprofits-Contemporary-
Perspectives/dp/1584657235)

------
ars
It's not that complicated: If you are collecting donations from people (i.e.
they give you something for nothing), then you must not make a profile.

If you are getting your money in other ways, then go for it.

~~~
jd
It's not that obvious where to draw the line. Executives of charities need to
get paid. And because charities deal with large amounts of money,
mismanagement can be very costly. By increasing the salary of the executives
you can get more qualified people. As a result, the charity becomes more
efficient and effective and everybody's happy.

Often charities have billions (?) of capital. If they hire a local private
bank to look after the money they will have to pay for it, and the bankers
will be driving porches. But if they manage the capital in house they suddenly
can't compensate people for it similarly, because they're still a charity?

Charity.

Raise money: OK

Spend money: OK

Save money, use part of savings as bonus: Evil?

I haven't really thought this through, so my logic could be flawed. Still, I
think that most charities should become more business-like. (Good) Businesses
are, after all, all about creating value.

~~~
ars
No, they are paying people to make more money with investments or whatever -
that's fine, do what you want - the money comes from the investment income, it
doesn't matter if it's inhouse or out.

But if you pay people from donations directly then it's not OK to pay a lot.

Are you paying people to get more donations (no good), or are you paying
people to make more money in some other way - including by saving you money
(...more efficient and effective....), then it's fine.

Basically if by paying people you will end up needing to collect less
donations - or you use those more effectively, then I'm fine with it.

But if you pay people to work on methods of getting more donations in the
first place, then I'm not OK with it (if it's excessive, more then a few %) -
even if it means you have more money in total.

~~~
shader
>But if you pay people from donations directly then it's not OK to pay a lot.

Unless the donator is aware of the fact that you are paying your employees
with the donations, and choose to give anyway. In fact, most large charities
have employees who get paid, usually out of donations :). But you don't make
your decision based on their management process, but based on the service they
provide you; namely aiding some cause on your behalf.

You don't decide whether or not to buy a burger at McDonald's based on what
percentage of your dollar goes to the CEO, but based on the quality of the
service they may provide. Same with charities. If a charity can get away with
paying exorbitant amounts to their CEO and still be the best value per dollar,
people will donate, and it won't be wrong. Maybe the reason they do so well is
that they were able to hire great high level management.

However, to convince people that you were going to spend their money one way
and then actually spend it another is fraud. If you paid McDonald's for your
burger, and they didn't give it to you, you would be within your rights to
sue. At the very least you wouldn't go back. So it is with charities.

It is perfectly fine if you feel that a particular charity spends too much on
management, and therefore decide not to donate your money to them. I realize
that you may have been stating your personal opinion as to how you decide
which charities you donate to, and that's fine. But to then claim in
newspapers or other places that because they don't match your standards they
are objectively evil and should be shut down/boycotted is a completely
different thing. I think that is more what the article is about.

~~~
ars
But I do actually make my decisions based on their management process.
Personally if they spend more than 5-10% of the money on administrative
expenses I don't donate. And BTW that cuts out the vast majority of the
charities, I think (wild guess) that most spend around 50%, and some as high
as 75% (police fraternities for example (again, wild guess)).

The newspaper example, I think, was more a case of the person not being
upfront about it.

Also, I personally think that if the charity money did not go to him, it would
go somewhere else. So by him consuming 50% of the donations for his own pocket
he is reducing the amount of charity money in the world.

Others might disagree and say that if he didn't get the donation, no one
would. So you might as well allow him to exist.

If that's your opinion fine. But I feel that even if the second case is the
real one I _still_ am not OK with it (but I think the first one is what
actually happens).

------
newt0311
Wow. An editorial on the NY that makes significant economic sense and goes
against the liberal ideology. This is a first.

On the op-ed itself. I don't understand why anybody considers profit evil if
said profit is not gotten through fraud or coercion. Exactly what is so evil
about making money? Furthermore, all donations to charity are completely
voluntary _and private_. Whether for-profit charities are evil or not is not
something to the public at large to decide. We have no business passing
judgment on any charity unless we happen to be one of the donors (and even
then, clauses from their contracts apply). Lastly: if I was donating to a
charity, I would not be concerned by how much they got in profit or how much
their chief manager was paid. I would be interested in what I was giving them
money for: how effective they were is helping the people they claimed to help.

~~~
qqq
> I don't understand why anybody considers profit evil if said profit is not
> gotten through fraud or coercion.

For example, Marx said that more capitalism logically leads to subsistence
living conditions for the workers. He gave arguments for this. I think they
are mistaken, but if you are wondering why people think profit is evil, that's
a reason. Marx said that without fraud or coercion, and just free trade, most
people will have very bad lives.

And, yes, obviously one can live in the US for a lot less than minimum wage,
and be doing a lot better than the subsistence conditions Marx had in mind
from his own time period. So Marxism is blatantly, factually inapplicable to
the US (whether that's b/c Marxism is false, or b/c the US has been saved by
it's non-pure capitalism with govt intervention is not obvious just from the
plain facts). Why people are blind to this is a tough question.

~~~
eugenejen
I think the capitalism today is much tamer than the capitalism was in Karl
Marx's time. My opinion is based on this
[http://en.wikipedia.org/wiki/List_of_most_wealthy_historical...](http://en.wikipedia.org/wiki/List_of_most_wealthy_historical_figures)

At the time of Karl Marx, the wealth built by Rockefeller and Carnegie is such
a big portion of wealth of the U.S. But when you look at Buffet and Gates,
they are not as wealthy as Rockefeller and Carnegie were. Besides Gates and
Buffet's influence on political power is limited.

