Democracy & Nonprofits

So much of the organized effort to ensure freedom arises and is sustained in the world comes from the nonprofit sector, and that effort is inspired by great ideas, a foundational one of which is explored by the seminal 2004 book by Natan Sharansky, The Case for Democracy: The Power of Freedom to Overcome Tyranny & Terror.

Against the background of what is now occurring in the Middle East, the Wall Street Journal reports on Mr. Sharansky's current perspective.

An excerpt.

“If you want a glimpse of how I think about foreign policy, read Natan Sharansky's book, 'The Case for Democracy.'" With that comment in 2005, George W. Bush created a best seller, impelling hordes of statesmen, policy wonks and journalists to decode this Rosetta Stone of the "freedom agenda."

“In the book, Mr. Sharansky argues that all people, in all cultures, want to live in freedom; that all dictatorships are inherently unstable and therefore threaten the security of other countries; and that Western powers can and should influence how free other countries are. Rarely have these arguments been dramatized as during the past weeks—in Tunisia, Jordan, Yemen and especially Egypt. So late Wednesday night I interviewed Mr. Sharansky to hear his explanation of our current revolutionary moment.

"The reason people are going to the streets and making revolution is their desire not to live in a fear society," Mr. Sharansky says. In his taxonomy, the world is divided between "fear societies" and "free societies," with the difference between them determinable by what he calls a "town square test": Are the people in a given society free to stand in their town square and express their opinions without fear of arrest or physical harm? The answer in Tunisia and Egypt, of course, has long been "no"—as it was in the Soviet bloc countries that faced popular revolutions in 1989.

“The comparison of today's events with 1989 is a common one, but for Mr. Sharansky it is personal. He was born in 1948 in Donetsk (then called Stalino), Ukraine, and in the 1970s and 1980s he was one of the most famous dissidents in the Soviet Union—first as an aide to the nuclear physicist-turned-human rights activist Andrei Sakharov, then as a champion for the rights of Soviet Jews like himself to emigrate. His outspoken advocacy landed him in the Soviet Gulag for nine years (including 200 days on hunger strike).

“Mr. Sharansky was released from prison in 1986, after his wife Avital's tireless campaigning earned his case international renown and the strong support of President Ronald Reagan. He moved to Israel, where he eventually entered politics and served until 2006 in various ministerial posts and in the parliament. Throughout, he preached and wrote about, as his book's subtitle puts it, "the power of freedom to overcome tyranny and terror."

“This idea is the animating feature of a worldview that bucks much conventional wisdom. Uprisings like Tunisia's and Egypt's, he says, make "specialists—Sovietologists, Arabists—say 'Who could have thought only two weeks ago that this will happen?'" But "look at what Middle Eastern democratic dissidents were saying for all these years about the weakness of these regimes from the inside," and you won't be surprised when they topple, he says.

“And yet policy makers from Washington to Tel Aviv have seemingly been in shock. Many of them—on the right and the left—look upon the demise of Hosni Mubarak and the potential rise of the fundamentalist Muslim Brotherhood with dread.

"Why is there such a big danger that if now there will be free choice for Egyptians, then the Muslim Brotherhood can rise to power?" Mr. Sharansky asks. "Because they are the only organized force which exists in addition to Mubarak's regime." Mr. Mubarak quashed almost all political dissent, with the general acquiescence of his American patrons. But he couldn't stop the Brotherhood from spreading its message in mosques. Meanwhile, he used the Brotherhood as a bogeyman, telling the U.S. that only he stood between radical Islamists and the seat of power.”

New Donors

For small nonprofits, building the donor base is a mandated chore, and this article from Guidestar provides some guidance in getting started.

An excerpt.

“In today's tough economic environment, many not-for-profit organizations are struggling to grow donations. For many, the impact of a relatively weak economy has affected the quality and quantity of gifts. Taking a more strategic approach to donor development has never been more important. When our principals meet with those seeking donations, we hear common themes of why many are struggling to find new opportunities. See whether any of these reasons apply to you:
• No time—Most of those responsible for development are busy. Even the best are bogged down with multiple organizational tasks (returning calls and e-mails, attending conferences, stuffing envelopes, to name a few). Not-for-profit employees wear many hats, and just keeping existing donors happy can be a stretch.
• Not sure whom to target—Taking a shotgun approach to calling on "everybody who has a heartbeat" or cold calling potential donors rarely results in producing quality prospective donors who are ready to write a check.
• Prospecting potential donors is a low return activity—Given the amount of time involved in prospecting for new donors and the difficulty in landing a good prospect, many responsible for development question whether the effort provides a reasonable return. (Note: Some development officers equate prospecting donors with "cold calling," which is usually a waste of time. We believe there are other, more productive ways to attract new donors—see below.)
• Prospecting new donors is frustrating—Nobody likes rejection. The research is pretty clear: donations have decreased over 25 percent from 2009 to 2010; many donors are not in the mood to entertain giving money away.

“Getting new donors is tough. Making sure you have done everything possible to make it easier is not to say it will be easy. Here are some techniques being used by some of the most successful organizations:

"1. Make sure your organization is targeting the right prospective donors. The responsibility for providing clear direction starts at the executive level. Organizations need to understand the necessity of creating a target profile that gives staff and volunteers clear direction about the types of industries and individuals that provide the best opportunities for developing partnerships. If you don't like pizza parlors for donations, say so. If you overdepend on doctors for donations, say so. But also be explicit about what the most desirable industry segments are for the organization and why. Time is a very precious commodity; wasting time on the "wrong" donors' takes away time from the "right" donors.”

Government & Catholic Nonprofits

The Catholic Church essentially began the institutional charitable effort in Western civilization—as recounted in the book How the Catholic Church Built Western Civilization, which notes: “The Catholic Church invented charity as we know it in the West.” (p. 170)—and their work today remains crucial, as reported by this article from America.

An excerpt.

“Whether measured by annual revenues, number of employees or the market value of property holdings, the nonprofit sector has grown dramatically in recent decades. Indeed, it has grown faster than either the public sector or the business sector.

“Today, with over a trillion dollars a year in revenues, hundreds of thousands of nonprofit organizations of all sorts and sizes qualify under federal, state and local laws for multiple tax benefits. Nonprofit organizations pay no property taxes. Their donors may get federal tax deductions. Their members (like students at private colleges) may get tax-funded grants or vouchers (like loans to pay college tuition). And their leaders may apply for government aid or compete for government contracts to fund employees’ salaries or to cover certain operating expenses.

“What would it cost Uncle Sam to replace Catholic agencies?

“As the fiscal crisis, which first showed itself in 2007, continues, ever more federal, state and local policymakers in both parties are asking tough but timely questions about the nonprofit sector: How much does it lighten local property tax coffers and reduce federal tax revenues? What is the total tab for all the tax-funded subsidies? And what does the wider public actually get in return for all the tax breaks and government funding?

“Studies are underway, but nobody knows for sure what the results will be. Yet no matter what the research ultimately shows, public pressure for accountability will continue to grow as more media attention is focused on corruption scandals involving nonprofits and as the public sees and hears more about nonprofit executives who make really big bucks (like the many private university presidents with million-dollar-plus annual compensation packages).

“Already some city governments have experimented with payment in lieu of taxes or so-called PILOT arrangements, by which properties owned by large nonprofit organizations are taxed at a rate higher than zero but lower than the same properties would be taxed were they owned by a for-profit firm. And at the federal level, nonprofit hospitals in particular have come in for ever-greater scrutiny of their balance sheets, executive pay and service to low-income communities.

“Grandstanding politicians and sensationalizing journalists can quickly turn legitimate concerns about accountability or performance into a three-ring circus. But, putting that prospect to one side, do nonprofit leaders have more to hope or to fear from calls demanding that they justify their tax-exempted properties and tax-subsidized personnel or programs?

“At least where most Catholic nonprofit organizations are concerned, I would say there should be hope: Catholic nonprofit organizations are second to none when it comes to predictably and reliably producing benefits for nonmembers, wider communities and the public at large.”

Redevelopment Funds

As many states, ours is one, debate the future of redevelopment funds which have driven some urban development for several years, it is worthwhile to consider, as this article from the Wall Street Journal does, allowing the effort to become a nonprofit enterprise.

An excerpt.

“Some cash-strapped states have identified another job they want to shift to the private sector: economic development.

“A number of governors are working to turn their development offices into some form of nonprofit private entity, a move that would transfer the task of giving out state grants, tax breaks and other economic incentives from the hands of government.

“The idea, which has as much to do with economic philosophies as with saving money, is mainly gaining ground in states with Republican governors, including Ohio, Wisconsin, Iowa and Arizona.

"It's a matter of greater flexibility and the ability to act more like a chamber [of commerce] rather than a state agency," said Wisconsin's new Republican governor Scott Walker, adding that private groups are better equipped to create jobs and attract companies.

“As tax revenue has shriveled in recent years, cities and states have moved to privatize various operations, such as state-run liquor stores, local libraries and parking meters.

“Seven states, including Michigan and Florida, already have some form of private group filling the economic-development role. Critics say handing this power to a private entity can create conflicts of interest, because the nonprofits usually have boards made up of public officials and private business leaders. This can create conflicts as these boards help steer tax breaks and incentives.

“Also, in many cases private economic-development agencies aren't subject to the same standards for public disclosure as government agencies, even though they receive government money. In Ohio, where newly elected Gov. John Kasich has proposed dissolving the state's Department of Development and creating an entity called JobsOhio, lawmakers have pushed to increase disclosures and allow the state's inspector general to investigate the proposed entity.

“Advocates say it makes sense to separate the task of creating jobs from large government agencies that often have a broader mission. In Wisconsin, the current Department of Commerce has responsibility for regulation as well as economic development. Among the 400 employees in Ohio's Department of Development, 60 are focused on economic development; the balance handle areas including homeless programs, community development and home energy assistance.”

Social Innovation

How to do it, or is our particular nonprofit effort engaged in it, are becoming key questions for nonprofit executives, especially as more and more funders see it as a marker for funding.

A great source to look to is Dr. Paul Light, and in this article by him from the Nonprofit Quarterly, that is examined.

An excerpt.

“How do societies create the breakthroughs needed for a more just, tolerant, healthy, educated, and equitable world? How do they challenge the prevailing wisdom without losing hope? How do they enact lasting change and protect it from the inevitable backlash?

“Many of us look to 24/7 heroes and highly visible organizations for the answers. After all, they get the uncommon hero awards and the public admiration, often because they have forged their brand identities around big-ticket change. They are easy to identify and admire.

“However, there are dangers in focusing almost exclusively on what I call Type-A, hero-driven social entrepreneurship as the central driver of change. First, we may underappreciate the new combinations of ideas that come from Type-B, team-driven social entrepreneurship, which may yet prove to be a more effective approach for challenging the status quo.

“Second, we may underinvest in other, equally powerful drivers of social change needed for the enactment (broadly defined), implementation, expansion, and defense of past breakthroughs.

“And, third, we may underestimate the impact of the challenges embedded in the larger breakthrough cycle that ignites, frustrates, and sustains change from the initial commitment to act all the way through to the full embrace of a new prevailing wisdom….”

Donor’s Influence

In an ongoing discussion spanning generations, the ability of donors to influence the nonprofits they support, is examined in this article from the New York Times resulting from one major college donor wanting his money back after the school did not consult him on a recent personnel decision.

An excerpt.

“In the past week, Robert G. Burton has been portrayed as the flawed face of highly commercialized intercollegiate athletics.

“In a scathing letter to Jeff Hathaway, the University of Connecticut athletic director, Burton demanded the return of $3 million because he felt he had not been sufficiently consulted in the hiring of Paul Pasqualoni as the Huskies’ football coach. He demanded that his family’s name be removed from the team’s training complex.

“Now Burton, the chief executive of Burton Capital Management based in Greenwich, Conn., has been cast as a spoiled booster who feels that a $7 million contribution to the football program over the years gives him the right to be included in decision-making. Criticize him all you like, but Burton is the face of UConn’s new reality. The university embraced big-time football; now it must deal with the attendant big-time headaches.

“Philip E. Austin, UConn’s interim president, and Lawrence D. McHugh, the board chairman, have privately tried to mend fences with Burton, their largest sports donor.

“If the incoming president, Susan Herbst, who takes over in July, is wise, she will phone Burton now, assuring him that no disrespect was intended. If Burton insists that Hathaway be fired, Herbst should gently tell him that $7 million is not nearly enough to influence personnel decisions.

“The question raised by Burton is whether large donors have the right to call the shots.

“In almost any area of life, yes, but not in the university,” said James W. Earl, a professor of medieval literature at the University of Oregon. “A general rule is that your money does not win you influence. When word gets out that the donor is pulling this string, it’s a scandal.”

“Earl has been a voice of resistance at Oregon for years, protesting in particular that the presence of Phil Knight and Nike, the company Knight helped found, has injured the university even while elevating the football team into national title contention. During a telephone interview Thursday, Earl said he had raised the white flag.

“I’ve given up the fight,” he said. “We’re so deep in this that we can never go back. A professor can only do so much, and money talks. Phil Knight is a major donor. You really don’t want to get in his way or cross him. It does not take much to get him to walk away.”

Microcredit Pioneer’s Troubles

One of the founding leaders of one of the most promising nonprofit innovations—microcredit—in years, is experiencing some difficulties, as reported by the New York Times.

An excerpt.

“DHAKA, Bangladesh — Any other year Muhammad Yunus, the Nobel Peace Prize laureate and a pioneer of microcredit, would be in Davos, Switzerland, this week. For years he has been celebrated at global gatherings like the World Economic Forum there for helping move millions of impoverished women toward a better life through tiny but transformational loans.

“Instead, he was in court again on Thursday, facing accusations, considered frivolous by most accounts, that one of his nonprofit companies adulterated vitamin-fortified yogurt. On Jan. 18, he was summoned to a rural courtroom to face charges of defamation lodged by a local politician.

“Microcredit, the idea that Mr. Yunus popularized as a path out of penury for those long excluded from the banking system, has increasingly come under scrutiny. Scholars have cast doubt on its effectiveness in fighting poverty, and politicians and other critics accuse microfinanciers, many of whom, unlike Mr. Yunus, profit from the loans, of getting rich off the poor.

“Now, the government of Bangladesh has ordered a wide-ranging inquiry into the microfinance institution he founded 34 years ago, Grameen Bank, after a Norwegian documentary accused him of mishandling donors’ money. Norway’s government has said no money was misused. Still, Mr. Yunus’s troubles will deepen what has become a global crisis in microfinance that threatens to undermine the very concept — small loans to poor people without collateral — on which his reputation rests.

“Long accustomed to adulation at home and abroad, suddenly, at 70, Mr. Yunus, Bangladesh’s best-known citizen, finds himself very much on the defensive. In an interview at his office here, Mr. Yunus seemed stunned and deeply stung.

“There is some kind of misinformation,” he said, his voice trailing off. “I shouldn’t say more.”

“A pause.

“Every word I say will be held against me,” he said finally.

“On one level, his troubles seem to be largely political. Mr. Yunus, who leads a spartan life, has for decades floated well above the muck of Bangladeshi politics. Then in 2007, while a caretaker government backed by the military ruled Bangladesh, he waded in, egged on by supporters who argued that his leadership was needed in a time of crisis.

“He declared in an interview that Bangladeshi politics were riddled with corruption. He floated a short-lived political party. Bangladesh’s political class did not take kindly to being lectured by the Nobel laureate. The steely leader of one of the main political parties, Sheikh Hasina Wazed, took umbrage, analysts say.”