Uncharitable: How Restraints on Nonprofits Undermine Their Potential by Dan Pallotta is more a howl than a book. I enjoyed opening it at random, reading a few pages, agreeing with the author that the current situation is idiotic, and then going back to whatever I was doing. It is too repetitive to read sequentially but read in bits it makes a lot of sense. His big point is that nonprofits are forced to operate under weird moralistic constraints that do no one any good — and I’m sure he’s right. The main benefit of those moralistic constraints — no one must profit from charity! for example — is that the moralizers feel good. The charities are badly damaged. And the charities are self-destructive, too. After Pallotta’s company ran highly successful 3-day Breast Cancer walks for several years, the Avon Products Foundation, which benefited from these walks, decided they could do better themselves. After a year (2002) in which Pallott’s company raised $140 million, Avon themselves ran a similar event for four years (2003-2006) during which they raised about $60 million/year.
Without any constraints Walmart would probably register itself as charity as a way to pay less taxes.
You need to write a law in a way to prevent companies like Walmart to register themselves as charity to get the benefits that charities get without providing the good.
If an charity doesn’t want to operate under the rules for charities it can register as LLC.
Now the law makers think that not every organization has to be a LLC and gives organization that don’t want to make profits some benefits while structuring the system in a way that the average LLC doesn’t get those benefits.
Organizations like Walmart pay lawyers to find every loophole in the rules that allow them to maximize the benefits that they get.
Do you want to create rules after which government officials decide on a case by case basis whether the company provides enough good to be a charity? Does Google provide enough good?
Maybe a charity provides good in a way that government officials don’t understand? Maybe they practice political speech contrary to the governments interests?
Writing good laws is hard. How would you write the laws? Would you simply remove the distinction between LLC and nonprofit?
There are a lot of interesting people out there whose views about Aid I don’t quite grok yet. Surely I don’t understand non-profits too, but I know I have some pretty strong views about reform for a certain number of them. What is not clear from this post or the first couple on uncharitable.net is the numbers.
If Pallot’s company raised $140M in one year, and Avon raised $40 x 4, then a) is this a worse outcome (I suspect this is an easy yes) and b) how much did Avon get from Pallot’s company? My worry is for the deadweight loss of the marketing company (absent any other abstract benefit like publicizing an issue) subtracts from other charities. I’m sure this is a typical concern addressed in the book.