For most of my life, I thought of nonprofits as charitable institutions. I learned I was wrong. Later, I stopped writing checks to most of them.
My eyes were first opened to the nonprofit world when, as CEO of a large corporation in Philadelphia, I served on a United Way committee. United Way is the conduit through which corporations and individuals fund local nonprofits, which are usually billed as charitable organizations (whether or not they truly are). That was my first glimpse behind the nonprofit world’s curtain. Here is what I found:
- Massive duplication of services.
- Massive inefficiencies and waste.
- A high percentage of donations going to support fundraising operations.
- Self-dealing, including organizations that exist principally as a vehicle for providing jobs and income to their founders and managers.
Still, I gave. Indeed, relative to my income and assets, Vera, your grandmother and I have given a lot over the years. I take no pride in that. Indeed, I now see that it was more of a testament to my naiveté than my generosity. And to satisfying my emotional needs.
But my peek behind the nonprofit curtain didn’t end in Philadelphia.
When I reached the point in my life when I decided to work for a mission — that is, a purpose that would benefit people — and not for income, ambition or acquisition, I chose higher ed. The reasons were simple. Education had opened many doors for me. It helped transform my life. I was a firm believer in the power of learning and education. While there was still time, I wanted to dedicate the remainder of my working days to help give the same opportunities to other people.
I applied and received an offer from a private nonprofit college. It wasn’t a wealthy college; in fact, it was in dire need of money. The list of deferred maintenance was long, and quite a few buildings needed complete renovation. Moreover, its students were taking on too much debt, so keeping costs down had to be a priority. The need for lower tuition and capital investment was clear. I knew all of this going in. I didn’t expect a large salary. Yet, when the offer was made, it was for a lot more than I would have been willing to accept (six-figures more).
By this time (after my United Way experience and subsequent cabinet experience, when I dealt quite often with nonprofit organizations), I had noticed that many nonprofits had followed the lead of the for-profit world when it came to executive salaries: Most paid more than they needed to pay.
It seemed to be an issue of prestige. They didn’t want to look inferior or poorer than the competition. I also think it’s a matter of the elite looking out for each other. Perhaps there were other factors that weren’t obvious to me. But it was clear that market demand wasn’t one of them. It was clear to me that organizations, both within the for-profit and nonprofit sectors, spend more on executive compensation than they would have to spend. I dawned on me: it’s easy spending other people’s money.
In the for-profit world, the people hurt by these practices are the shareholders and employees at the bottom of the corporate hierarchy. In the nonprofit world, it’s primarily the intended beneficiaries — the people for whom the organization was intended to serve.
I chose not to create a stir; I accepted the offer without insisting on a lower salary. Rather, I decided to give back a large chunk of what I considered to be the excess compensation via donations. And, indeed, I started writing checks from the get-go, made a six-figure pledge and was prepared to convert it to a seven-figure pledge if the college was prepared to make some of the changes I knew were necessary for long-term viability and to make it a better school. They weren’t, at least not then.
High administrator salaries is one of the reasons I’ve stopped giving to colleges and universities. These stories in The Chronicle of Higher Education and MarketWatch highlight the current state of affairs: Executive Compensation at Private and Public Colleges, 39 Private-College Leaders Earn More Than $1 Million and MarketWatch.
I want to support students and learning; I have no interest in supporting huge compensation packages for presidents, especially when the students are mortgaging their futures with mountains of debt. And I have to desire to make a gift when 40% or more of it goes to support the fundraising operation. And when the institution is doing practically nothing to address the rampant waste and inefficiencies within the organization.
The situation is even more grotesque among nonprofit corporations in the healthcare field, where it is not uncommon for executives to be granted immense compensation packages. Meanwhile, the amount we spend on health care in this country is eating our economy alive. And it remains unaffordable to many.
When I came to realize what was really going on in the nonprofit world, in the world that likes to project itself as charitable, I stopped giving to most. I came to realize that my donations essentially were funding extravagant administrator and executive compensation packages as well as gross inefficiencies and waste within the organizations — waste and extravagancies that were possible, in large part, by reason of the tax-deductible donations and massive public subsidies most of these organizations receive — and, in the case of higher ed, the insulation from real competition afforded by a protectionist accreditation system that is run by and for the incumbents (in effect, a cartel).
As a taxpayer, I’m already subsidizing colleges (even the private ones) and nearly all other nonprofits, whether or not they’re doing a good job or making a difference and whether or not they’re accomplishing anything beneficial to society. I decided that, if I wanted to help people–that is, people who need help–there are better ways.
Further, I decided it was time to follow the lead of a prospective donor who once told me, “I don’t support mediocrity.” Indeed. I decided it wasn’t a bad rule to follow.
Today, I give in more direct ways. And give to causes I want to support regardless of whether the gift is tax-deductible. In short, I’m more discriminating.
Life has taught me that, whether it’s an organization that was formed for-profit or not-for-profit, it’s hard for entrenched organizations to stay on course. In the nonprofit sector, it’s hard for the mission not to be diluted or undermined over time by other interests, most especially, the self-interests of the organization and those who govern or administer it. It’s hard to keep corrupting forces at bay.
With time, you end up with universities that prioritize sports and prestige over students and learning, and colleges that are glorified fundraising operations that educate on the side (often, quite poorly so). You end up with college and university administrators pulling down obscene compensation while students go deeply into debt (now roughly $1.4 trillion). You end up with tenured faculty collecting six-figure incomes (sometimes, hundreds of thousands of dollars) for part-time work (e.g., teaching one or two courses a year at some research universities or, at some small colleges, being on campus fewer than 75 days days a year). You end up with executives of nonprofit healthcare systems becoming incredibly wealthy. And you end up with charlatan Christian evangelists preaching the Gospel of Acquisition.
Something isn’t right about this.
So my days of blindly writing checks to nonprofits and feeling good about myself came to an end when I left the college four and a half years ago. Today:
- I look for hard-working kids who need a good education but can’t afford the luxury of attending a residential college (and sometimes can’t even afford to eat on a regular basis).
- I look for organizations that oppose people who threaten our liberties or who spread hatred and bigotry, and I look for political candidates who are competent and compassionate and who are likely to work for the betterment of our communities, country and world and are not merely servants for the rich and powerful.
- I look for ways of supporting hard working people who are struggling because of the inequities and injustices we allow to be embedded within our economy and society as the result of public policy choices we make.
- Conversely, I endeavor not to support organizations that are run poorly, embody mediocrity or pay exorbitant salaries to their presidents and other administrators. Or that have lost their raison d’être or souls. That means I no longer give to most nonprofits, including all the colleges and universities with which I have or have had a relationship.
To be clear, I’m under no illusion about my role in any of this. What I donate in time or money is a pittance in the overall scheme of things. It won’t make a difference to any organization, and may not even make a material difference in any person’s life. But it might.
I realize I may be deluding myself entirely. It may be that hoarding my excesses (even though I may not like to think of them as such) when there is so much need in the world is a far greater offense than the sins of commission and omission I’ve discovered within the nonprofit world. Yet these uncertainties do not inspire me to support organizations that have lost their way or that have come to embody values I abhor.
In the world of nonprofits, as with many areas of life, it’s easier living without knowing what’s behind the curtain. But once you look, there is no pretending you didn’t see.