This story of a successful capitalist and his subsequent social entrepreneurship is a great reminder of the inner goodness that has come to define much of the world of American capitalism, and that is a very good thing.
An excerpt from the article from Philanthropy Magazine.
“Patrick Byrne is an entrepreneur—a self-described “rapacious capitalist.” His father, John J. Byrne, turned around auto-insurance giant GEICO. While he did, Warren Buffett began accumulating its stock, eventually purchasing the entire company. In the process, Mr. Buffett met 13-year-old Patrick, and he became what Mr. Byrne describes as “one of his life’s great teachers.” While a teenager, Mr. Byrne started his first business. He bought a wholesale lot of 500 pine trees—paying $8 each—and retailed them at Christmastime for $28 apiece.
“Mr. Byrne went on to Dartmouth College, where he earned his B.A. in philosophy and Asian studies. He won a Marshall Scholarship and received a master’s degree from Cambridge University. After picking up a certificate from Beijing Normal University, he returned to the States and earned a Ph.D. in philosophy from Stanford University. While in his 20s, he also pursued his dream of becoming a heavyweight boxer.
“Everything was put on hold when cancer struck. Mr. Byrne fought back, beating the disease three times. Afterward, he re-focused his energies on business, eventually serving as chairman, president, and CEO at Centricut, a manufacturer of industrial torch consumables, and later at Fechheimer Brothers, a Berkshire Hathaway–owned manufacturer of police, firefighter, and military uniforms.
“In 1999, Mr. Byrne bought a small, bankrupt firm that had been serving the flea-market industry. Four months later, he relaunched it as Overstock.com, an online retailer specializing in the discount liquidation of overstocked inventory. Under his leadership as chairman and CEO, the company’s annual revenues have soared, from $1.8 million a decade ago to approximately $900 million today. Mr. Byrne’s success in business has allowed him to support causes that create similar opportunities for others.
“Mr. Byrne works to reform American education through his service as chairman of the Friedman Foundation for Educational Choice. Founded by the late Nobel Prize–winning economist Milton Friedman and his wife, Rose, the Friedman Foundation is the nation’s original advocate of school choice.
“Mr. Byrne also works extensively in the field of international development. In 2001, he launched Worldstock, a store within Overstock that sells handcrafted products from artisans in the developing world. An average of 60 percent of the sales price is passed back to the suppliers, generating more than $40 million to date for more than 10,000 craftsmen in the developing world.
“Since 2005, Mr. Byrne has built 22 private schools throughout Africa, India, Asia, and Latin America, all of which are structured around a profit-making enterprise to sustain their ongoing operations. Each of the schools is named for his mother, Dorothy Byrne. They have educated more than 7,000 students worldwide.
“Philanthropy spoke with Mr. Byrne about his background in developing countries, his work on behalf of school choice, and his use of for-profit entities to achieve charitable ends.”
Sunday, March 21, 2010
Saturday, March 20, 2010
Social Entrepreneurship
In this excellent article from the Stanford Social Innovation Review, we are reminded that virtually "all entrepreneurship is social".
An excerpt.
“Over the past decade or so, the term social entrepreneur has become a fashionable way of describing individuals and organizations that, in their attempts at large-scale change, blur the traditional boundaries between the for-profit and nonprofit sectors. Given the ceaseless appearance of innovations and new institutional forms, we should welcome a new term that allows us to think systematically about a still-emergent field.
“One danger, however, is that the use of the modifier social will diminish the contributions of regular entrepreneurs—that is, people who create new companies and then grow them to scale. In the course of doing business as usual, these regular entrepreneurs create thousands of jobs, improve the quality of goods and services available to consumers, and ultimately raise standards of living. Indeed, the intertwined histories of business and health in the United States suggests that all entrepreneurship is social entrepreneurship. The pantheon of model social entrepreneurs should thus include names such as railroad baron Cornelius Vanderbilt, meatpacking magnate Gustavus Swift, and software tycoon Bill Gates.
“THE STEW OF POVERTY
“People tend to think that advancements in health care, for example, are the achievements of either government or the social sector. More recently, they note how the work of social entrepreneurs is improving population health, particularly in developing countries.
“Yet the experience of the United States demonstrates that business entrepreneurs have done as much—if not more—for American health in the past century and a half as did medicine or public health. In the middle of the 19th century, most of the U.S. population was ridiculously poor by today’s standards. Americans not only had low incomes, but also spent the bulk of their money on life’s basics: food, clothing, and shelter. What they purchased, moreover, was of questionable quality. Because there was no refrigeration or ability to transport foods over long distances, most people subsisted on a kind of stew that, by all accounts, was simple and tasteless. A poor diet meant poor nutrition, which meant poor health.”
An excerpt.
“Over the past decade or so, the term social entrepreneur has become a fashionable way of describing individuals and organizations that, in their attempts at large-scale change, blur the traditional boundaries between the for-profit and nonprofit sectors. Given the ceaseless appearance of innovations and new institutional forms, we should welcome a new term that allows us to think systematically about a still-emergent field.
“One danger, however, is that the use of the modifier social will diminish the contributions of regular entrepreneurs—that is, people who create new companies and then grow them to scale. In the course of doing business as usual, these regular entrepreneurs create thousands of jobs, improve the quality of goods and services available to consumers, and ultimately raise standards of living. Indeed, the intertwined histories of business and health in the United States suggests that all entrepreneurship is social entrepreneurship. The pantheon of model social entrepreneurs should thus include names such as railroad baron Cornelius Vanderbilt, meatpacking magnate Gustavus Swift, and software tycoon Bill Gates.
“THE STEW OF POVERTY
“People tend to think that advancements in health care, for example, are the achievements of either government or the social sector. More recently, they note how the work of social entrepreneurs is improving population health, particularly in developing countries.
“Yet the experience of the United States demonstrates that business entrepreneurs have done as much—if not more—for American health in the past century and a half as did medicine or public health. In the middle of the 19th century, most of the U.S. population was ridiculously poor by today’s standards. Americans not only had low incomes, but also spent the bulk of their money on life’s basics: food, clothing, and shelter. What they purchased, moreover, was of questionable quality. Because there was no refrigeration or ability to transport foods over long distances, most people subsisted on a kind of stew that, by all accounts, was simple and tasteless. A poor diet meant poor nutrition, which meant poor health.”
Friday, March 19, 2010
Nonprofits & Public Disclosure
While it seems clear that all nonprofits—because of the tax exemption benefit they receive from the government—need to embrace the right of the public to know about anything they do; some corporate laws give them more protection than is perhaps warranted, a situation recently rectified in New Hampshire, as reported by the Nashua Telegraph.
An excerpt.
“EDITOR’S NOTE: Newspapers are watchdogs of government because of laws that protect the public’s freedom of information and right to know. Sunshine Week is an annual examination of government’s responsiveness to citizens. The project is spearheaded by the American Society of Newspaper Editors and includes the participation of newspapers across the country.
“In following the state Right-to-Know Law, municipal governments have to make most information available for public review.
“Allowing citizens to see how elected officials and public employees govern is the underpinning of the checks and balances system conceived by the Founding Fathers.
“But what happens when a nonprofit has a quasi-public function and its staff salaries are paid largely by tax dollars?
“Until last month, a nonprofit corporation fitting that profile had contended its salaries and other information were not for public consumption. The Local Government Center in Concord for seven years fought the release of its salaries, arguing that its wages were not of public interest.
“But the state Supreme Court rejected that opinion and in January ordered LGC to give a list of staff salaries to the state firefighters union as well as the public. The Professional Firefighters of New Hampshire wanted to see the salaries, and other documents, because the union contends LGC has misused public money.”
An excerpt.
“EDITOR’S NOTE: Newspapers are watchdogs of government because of laws that protect the public’s freedom of information and right to know. Sunshine Week is an annual examination of government’s responsiveness to citizens. The project is spearheaded by the American Society of Newspaper Editors and includes the participation of newspapers across the country.
“In following the state Right-to-Know Law, municipal governments have to make most information available for public review.
“Allowing citizens to see how elected officials and public employees govern is the underpinning of the checks and balances system conceived by the Founding Fathers.
“But what happens when a nonprofit has a quasi-public function and its staff salaries are paid largely by tax dollars?
“Until last month, a nonprofit corporation fitting that profile had contended its salaries and other information were not for public consumption. The Local Government Center in Concord for seven years fought the release of its salaries, arguing that its wages were not of public interest.
“But the state Supreme Court rejected that opinion and in January ordered LGC to give a list of staff salaries to the state firefighters union as well as the public. The Professional Firefighters of New Hampshire wanted to see the salaries, and other documents, because the union contends LGC has misused public money.”
Thursday, March 18, 2010
Tax Property of Nonprofits?
In this story from the Albany New York Times Union, the idea is being proposed as legislation, and it is an idea with long history, cutting to the heart of the nonprofit ideal, that work for the public good by non-governmental organizations, should be tax exempt as a way the public—in addition to donations—supports their work.
An excerpt.
“ALBANY -- A plan that would require nonprofit organizations -- from private colleges to public authorities -- to pay property taxes is being put together by a high-ranking lawmaker as Democrats who dominate the Senate develop a budget that will come with some real estate tax relief.
"It's our No.1 priority," said one senator headed for a private budget conference of Senate Democrats Tuesday.
“Three Senate officials said a budget resolution to be released soon would likely include at least parts of a circuit-breaker bill introduced by Sen. Jeff Klein, D-Bronx, and quite possibely the whole package. The component of Klein's bill most likely to be part of the plan calls for a $290 million STAR program for low-income senior citizens. The circuit breaker Klein envisions would give property taxpayers a credit or rebate based on their income level.
“While Klein's proposal would cost money -- Senate officials estimate $1.2 billion -- Senate Majority Leader Pedro Espada, D-Bronx, said he is researching a revenue-raising proposal. It would require nonprofits to pay into the real estate tax base so that tax relief would be spread through a community. He said he wants to include public authorities owned by the state in the group of currently tax-exempt entities that would have to share the real estate tax burden.
"Have nonprofits contribute at a time of national sacrifice," Espada said. "It's not such a bad idea." A person familiar with his plan said he is expected to introduce a bill next week. It is projected to raise hundreds of millions of dollars.
“The Espada plan would likely require nonprofit property owners, including private colleges, to pay taxes. He is proposing some exemptions, such as for small nonprofits. It is unclear whether his bill would cover the nonprofit health services network he runs in the Bronx.”
An excerpt.
“ALBANY -- A plan that would require nonprofit organizations -- from private colleges to public authorities -- to pay property taxes is being put together by a high-ranking lawmaker as Democrats who dominate the Senate develop a budget that will come with some real estate tax relief.
"It's our No.1 priority," said one senator headed for a private budget conference of Senate Democrats Tuesday.
“Three Senate officials said a budget resolution to be released soon would likely include at least parts of a circuit-breaker bill introduced by Sen. Jeff Klein, D-Bronx, and quite possibely the whole package. The component of Klein's bill most likely to be part of the plan calls for a $290 million STAR program for low-income senior citizens. The circuit breaker Klein envisions would give property taxpayers a credit or rebate based on their income level.
“While Klein's proposal would cost money -- Senate officials estimate $1.2 billion -- Senate Majority Leader Pedro Espada, D-Bronx, said he is researching a revenue-raising proposal. It would require nonprofits to pay into the real estate tax base so that tax relief would be spread through a community. He said he wants to include public authorities owned by the state in the group of currently tax-exempt entities that would have to share the real estate tax burden.
"Have nonprofits contribute at a time of national sacrifice," Espada said. "It's not such a bad idea." A person familiar with his plan said he is expected to introduce a bill next week. It is projected to raise hundreds of millions of dollars.
“The Espada plan would likely require nonprofit property owners, including private colleges, to pay taxes. He is proposing some exemptions, such as for small nonprofits. It is unclear whether his bill would cover the nonprofit health services network he runs in the Bronx.”
Wednesday, March 17, 2010
Nonprofits and Politics
The ability of nonprofits to advocate politically is being examined, as reported by The National Journal, as a result of the recent Supreme Court decision that corporations are persons—long enshrined in law—and they have freedom of speech and cannot be restricted in their political donations and advocacy.
An excerpt.
“In the wake of the Supreme Court's recent ruling to deregulate corporate political spending, public attention has focused squarely on whether businesses and for-profit companies will now lavish big money on elections.
“But Citizens United v. Federal Election Commission may have as much or more impact on another type of incorporated organization -- nonprofits of all stripes. These include 501(c)4 advocacy groups, 501(c)5 labor unions, 501(c)6 trade associations and even 501(c)3 charities, which face both fresh opportunities and dangers in the wake of Citizens United.
“Associations and advocacy groups can be expected to ramp up their political activities, election lawyers say. At the same time, the ruling -- by equating corporate and individual First Amendment rights -- could trigger sweeping changes in IRS law as it applies to political activity, some tax experts say. All this could thrust 501(c)3 charities, which are now barred from engaging in partisan political activities, into an uncomfortable spot.
"Potentially, it's going to profoundly change nonprofit tax law," said Frances R. Hill, a professor at the University of Miami School of Law. Questions raised by the ruling include: Is the ban on partisan political activity for 501(c)3 charities now vulnerable to constitutional challenge? What about the ban on charities making political contributions? It's only a matter of time before these questions land before the high court, Hill argued.
"Their general constitutional principle is that corporations are persons, and we can't distinguish among them," Hill said of the Supreme Court. "So I would regard it as a sweeping case that has the potential for changing the entire landscape for exemption in the area of political involvement."
An excerpt.
“In the wake of the Supreme Court's recent ruling to deregulate corporate political spending, public attention has focused squarely on whether businesses and for-profit companies will now lavish big money on elections.
“But Citizens United v. Federal Election Commission may have as much or more impact on another type of incorporated organization -- nonprofits of all stripes. These include 501(c)4 advocacy groups, 501(c)5 labor unions, 501(c)6 trade associations and even 501(c)3 charities, which face both fresh opportunities and dangers in the wake of Citizens United.
“Associations and advocacy groups can be expected to ramp up their political activities, election lawyers say. At the same time, the ruling -- by equating corporate and individual First Amendment rights -- could trigger sweeping changes in IRS law as it applies to political activity, some tax experts say. All this could thrust 501(c)3 charities, which are now barred from engaging in partisan political activities, into an uncomfortable spot.
"Potentially, it's going to profoundly change nonprofit tax law," said Frances R. Hill, a professor at the University of Miami School of Law. Questions raised by the ruling include: Is the ban on partisan political activity for 501(c)3 charities now vulnerable to constitutional challenge? What about the ban on charities making political contributions? It's only a matter of time before these questions land before the high court, Hill argued.
"Their general constitutional principle is that corporations are persons, and we can't distinguish among them," Hill said of the Supreme Court. "So I would regard it as a sweeping case that has the potential for changing the entire landscape for exemption in the area of political involvement."
Tuesday, March 16, 2010
Catholic Charities Demands Adherence to Principles
Nonprofit organizations—and their staff/boards—which are part of the institutional Catholic Church should clearly support the teachings of the Church, just as employees/board members of any nonprofit have to be supportive of the mission of the nonprofit they serve.
This story from the Washington Post reports on the issue.
An excerpt.
“Shortly after imposing limits on spousal health benefits for employees, Catholic Charities of Washington has begun requiring new employees to promise they will not "violate the principles or tenets" of the church.
“That language was added March 3 to a hiring letter that new employees are required to sign, according to spokesman Erik Salmi. He said the move did not reflect a policy change because employees have been told during training that the organization is Catholic in more than name.
“Catholic Charities, one of the region's largest nonprofit organizations, has been trying to develop a way to continue its multimillion-dollar social service partnerships with the District while not recognizing the city's same-sex marriage law, which the D.C. Council approved in December. Employees were told this month that the agency was changing its health-care coverage to avoid offering benefits to its workers' same-sex partners.
“Salmi said the addition of the clause to the hiring letter was not a result of the new law but rather reflected a longer-term concern that employees adhere to the organization's Catholic philosophy.
“Salmi said the new language "is more of an expectation than a condition. It's letting people know this is the culture." Asked if that meant employees could speak or act against the church without being fired, Salmi said: "We can't speculate on the hypothetical. It's handled on a case-by-case basis."
“A former vice president of the organization's human resources department, however, said the new language appeared to be a change.
"Putting it in a letter and requiring a signature, that's a condition of employment. There's no way to dance around that," said Wayne Swann, who served 3 1/2 years on Catholic Charities' board of directors and an additional four years as its vice president.
“Shortly after imposing limits on spousal health benefits for employees, Catholic Charities of Washington has begun requiring new employees to promise they will not "violate the principles or tenets" of the church.
“That language was added March 3 to a hiring letter that new employees are required to sign, according to spokesman Erik Salmi. He said the move did not reflect a policy change because employees have been told during training that the organization is Catholic in more than name.
“Catholic Charities, one of the region's largest nonprofit organizations, has been trying to develop a way to continue its multimillion-dollar social service partnerships with the District while not recognizing the city's same-sex marriage law, which the D.C. Council approved in December. Employees were told this month that the agency was changing its health-care coverage to avoid offering benefits to its workers' same-sex partners.
“Salmi said the addition of the clause to the hiring letter was not a result of the new law but rather reflected a longer-term concern that employees adhere to the organization's Catholic philosophy.
“Salmi said the new language "is more of an expectation than a condition. It's letting people know this is the culture." Asked if that meant employees could speak or act against the church without being fired, Salmi said: "We can't speculate on the hypothetical. It's handled on a case-by-case basis."
“A former vice president of the organization's human resources department, however, said the new language appeared to be a change.
"Putting it in a letter and requiring a signature, that's a condition of employment. There's no way to dance around that," said Wayne Swann, who served 3 1/2 years on Catholic Charities' board of directors and an additional four years as its vice president.”
This story from the Washington Post reports on the issue.
An excerpt.
“Shortly after imposing limits on spousal health benefits for employees, Catholic Charities of Washington has begun requiring new employees to promise they will not "violate the principles or tenets" of the church.
“That language was added March 3 to a hiring letter that new employees are required to sign, according to spokesman Erik Salmi. He said the move did not reflect a policy change because employees have been told during training that the organization is Catholic in more than name.
“Catholic Charities, one of the region's largest nonprofit organizations, has been trying to develop a way to continue its multimillion-dollar social service partnerships with the District while not recognizing the city's same-sex marriage law, which the D.C. Council approved in December. Employees were told this month that the agency was changing its health-care coverage to avoid offering benefits to its workers' same-sex partners.
“Salmi said the addition of the clause to the hiring letter was not a result of the new law but rather reflected a longer-term concern that employees adhere to the organization's Catholic philosophy.
“Salmi said the new language "is more of an expectation than a condition. It's letting people know this is the culture." Asked if that meant employees could speak or act against the church without being fired, Salmi said: "We can't speculate on the hypothetical. It's handled on a case-by-case basis."
“A former vice president of the organization's human resources department, however, said the new language appeared to be a change.
"Putting it in a letter and requiring a signature, that's a condition of employment. There's no way to dance around that," said Wayne Swann, who served 3 1/2 years on Catholic Charities' board of directors and an additional four years as its vice president.
“Shortly after imposing limits on spousal health benefits for employees, Catholic Charities of Washington has begun requiring new employees to promise they will not "violate the principles or tenets" of the church.
“That language was added March 3 to a hiring letter that new employees are required to sign, according to spokesman Erik Salmi. He said the move did not reflect a policy change because employees have been told during training that the organization is Catholic in more than name.
“Catholic Charities, one of the region's largest nonprofit organizations, has been trying to develop a way to continue its multimillion-dollar social service partnerships with the District while not recognizing the city's same-sex marriage law, which the D.C. Council approved in December. Employees were told this month that the agency was changing its health-care coverage to avoid offering benefits to its workers' same-sex partners.
“Salmi said the addition of the clause to the hiring letter was not a result of the new law but rather reflected a longer-term concern that employees adhere to the organization's Catholic philosophy.
“Salmi said the new language "is more of an expectation than a condition. It's letting people know this is the culture." Asked if that meant employees could speak or act against the church without being fired, Salmi said: "We can't speculate on the hypothetical. It's handled on a case-by-case basis."
“A former vice president of the organization's human resources department, however, said the new language appeared to be a change.
"Putting it in a letter and requiring a signature, that's a condition of employment. There's no way to dance around that," said Wayne Swann, who served 3 1/2 years on Catholic Charities' board of directors and an additional four years as its vice president.”
Monday, March 15, 2010
Nonprofit Salaries
It is appropriate that nonprofit organizations with exceptional leadership who bring sustainable and expansive funding to an organization, vastly increasing its ability to fulfill its mission, should be paid at whatever level the board of directors feels adequate, in some proportion to related salaries, given particular circumstances.
That being said, this example reported by the Washington Post, might not be appropriate, but until all of the circumstances are reported it can’t be determined.
An excerpt.
“Several Republican senators are questioning expenses at the Boys & Girls Clubs of America, a national nonprofit organization that receives millions of dollars in federal funding.
“Sens. Charles E. Grassley (Iowa), Tom Coburn (Okla.), Jon Kyl (Ariz.) and John Cornyn (Tex.) asked in a letter to the group, released Friday, whether money is being spent on executive pay, travel and lobbying rather than on programs for needy children.
“The umbrella organization, which receives nearly 40 percent of its revenue from the federal government, stands to gain hundreds of millions of dollars more from a bill pending in the Senate. The organization posted a loss of more than $13 million, according to its 2008 tax return, the most recent one available.
"We find it hard to reconcile this loss given the amount spent on executive salaries, perks and lobbying expenses," the letter said. "We are especially concerned because it is our understanding that some independent clubs have closed or are on the cusp of closing because of a lack of funding."
“Roxanne Spillett, president and chief executive of the tax-exempt organization, based in Atlanta, earned nearly $1 million in compensation in 2008. That includes a base salary of nearly $361,000, a $150,000 incentive and nearly $478,000 in benefits, expenses and contributions to a deferred retirement plan, a spokesman for the organization said in a written statement Friday.
“Leaders of large nonprofits should earn competitive salaries, said Ken Berger, president and chief executive of Charity Navigator, a watchdog group.
“The average compensation for executives at groups with more than $100 million dollars in annual revenue is $460,000, including deferred compensation, according to Charity Navigator.”
That being said, this example reported by the Washington Post, might not be appropriate, but until all of the circumstances are reported it can’t be determined.
An excerpt.
“Several Republican senators are questioning expenses at the Boys & Girls Clubs of America, a national nonprofit organization that receives millions of dollars in federal funding.
“Sens. Charles E. Grassley (Iowa), Tom Coburn (Okla.), Jon Kyl (Ariz.) and John Cornyn (Tex.) asked in a letter to the group, released Friday, whether money is being spent on executive pay, travel and lobbying rather than on programs for needy children.
“The umbrella organization, which receives nearly 40 percent of its revenue from the federal government, stands to gain hundreds of millions of dollars more from a bill pending in the Senate. The organization posted a loss of more than $13 million, according to its 2008 tax return, the most recent one available.
"We find it hard to reconcile this loss given the amount spent on executive salaries, perks and lobbying expenses," the letter said. "We are especially concerned because it is our understanding that some independent clubs have closed or are on the cusp of closing because of a lack of funding."
“Roxanne Spillett, president and chief executive of the tax-exempt organization, based in Atlanta, earned nearly $1 million in compensation in 2008. That includes a base salary of nearly $361,000, a $150,000 incentive and nearly $478,000 in benefits, expenses and contributions to a deferred retirement plan, a spokesman for the organization said in a written statement Friday.
“Leaders of large nonprofits should earn competitive salaries, said Ken Berger, president and chief executive of Charity Navigator, a watchdog group.
“The average compensation for executives at groups with more than $100 million dollars in annual revenue is $460,000, including deferred compensation, according to Charity Navigator.”
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