7 ms·

Over the years my opinion of non-profits has become less, shall we say, “charitable”; society has a tendency to glorify non-profits because they “don’t have sha

Over the years my opinion of non-profits has become less, shall we say, “charitable”; society has a tendency to glorify non-profits because they “don’t have shareholders” but, in reality, a lot of non-profits give peanuts to those at the bottom (with some even working for free) while executives get far more than a living salary. And whether you’re an educational institution, an insurance provider, or an NGO, being an executive comes with lots of perks like travel, entertainment, lavish offices, etc. So while “no shareholders” is often a selling point for supporting a non-profit, there are still people getting an oversized benefit out of non-profits, who in some disturbing cases are the founders and their family members. If I wanted to donate a large amount of money to a non-profit, I would structure it as a zero-interest loan, and would just keep deferring the repayment of the loan as long as the org stays true to its mission, compensates executives in reasonable proportion to regular employees, etc. Brian Acton (who co-founded WhatsApp, and later left Facebook) is supporting the Signal Foundation with tens of millions in deferrable, interest-free loans. I think it’s absolutely genius, and wish more people would follow his example.

stephen_greet 6y ago
I think that's a really interesting middle ground. Do you think it can fall into the same trap as mentioned in the article, where it can become "sub-optimal" due to not being as expert as the non-profit?
- ralmidani 6y ago
  I think it’s less prone to that problem if you take a holistic approach when evaluating whether a loan should be repaid, rather than applying very narrow criteria such as “must be spent on a new building”.
- lazyasciiart 6y ago
  It's exactly the problem in the article, taken to a ludicrous extreme. If you want to be able to decide how a nonprofit should spend their money, go take a seat on the board (or staff).
elcomet 6y ago
But the non-profit is spending the money, and is not earning any money. If you decide to ask for repayment, how could they pay you back?
- ralmidani 6y ago
  I doubt someone who wants a pet foundation to succeed would ask for repayment unless they really dropped the ball. Of course, this assumes the person doesn’t anticipate needing the money, which in the case of the WhatsApp co-founder is true.
- Viliam1234 6y ago
  Invest the money with non-zero interest, return the original money, and use the extra to... realistically, pay the salary of the person who did the investing. Yeah, if I had a non-profit, I would just plainly refuse.
- a1369209993 6y ago
  Absent anyone else willing to pay for whatever it is they're doing, they can't and would go bankrupt. That's the point.
ernestipark 6y ago
Is there any way to do this easily from a legal and contractual perspective? The other piece here is that if it's a loan you miss out on tax deductions, thereby potentially reducing the total amount you could give. That also limits the more tax-advantaged ways you can give money (e.g. long term appreciated stock if you're in the US).
- jdavis703 6y ago
  I imagine someone donating millions is using a donor advised fund to do the lending. By using a fund, they can recognize the donation for tax purposes while lending the money to a separate non-profit.
  - lazyasciiart 6y ago
    I'd be surprised if any donor-advised fund could or would do this. You don't have control over that money once you donate it, you can only ask for it to be granted to a nonprofit.
brnt 6y ago
Anybody who's discussing the quite unique tax situation around charity in the US, should give Dark Money by Jane Mayer a read. This uniqueness isn't by accident, and only is called charity as a minor, inconvenient side effect.
- heliodor 6y ago
  What uniqueness would that be?
  - brnt 6y ago
    The role and scope of it, as well as its function in tax evasion and political control. The book is worth a read if you're interested.
notsureaboutpg 6y ago
There's a huge fallacy where people believe that non-profits are supposed to be inherently more equitable and nicer than for-profit companies. And people who believe this fallacy get upset by executive pay at non-profits and turn to sites like Charity Navigator to find charities where 99 cents of their dollar goes to charity. But the fact of the matter is that paying salaries to people who bring in more money than they make is a good strategy for everyone, that's why non-profits do it. Even if MegaCharity A only spends 60 cents of its income on charity but MiniCharity B spends 99 cents of its income on charity, MegaCharity A is still doing better for humanity if their annual income grows every year due to the strength of their marketing. MegaCharities can raise awareness exponentially and actually change the outcomes of some of the problems in our worlds because they have the power to raise enough money in one place with one cohesive plan to actually fight these things. I grew up next to St. Jude Children's Hospital. Everyone has heard of them. They bring in billions every year. They have an entire marketing wing and a well-compensated C-Suite (compared to other non-profits). They have way way way more impact because of all these things than most other medical charities for children. No other non-profit in the world can offer completely free medical care to children from anywhere in the world and fly their families to live near them while they're cared for without spending the kind of money they do on marketing and executives. Non-profits need executives, and people with the credentials to be executives have to choose between non-profit jobs that pay 1/8 of what for-profit jobs do. Sure they make more than a living salary while their employees struggle to make ends meet, but that's true of every type of organization. And in the end, they won't join non-profits at all if the money they sacrifice to do so is too high.
- namdnay 6y ago
  The money a charity raises doesn’t come out of thin air. It comes from the hard work of the people who donate. Charity A may do more, but it’s taking a lot more money from people to do it.
- bradleyjg 6y ago
  > can raise awareness exponentially Is there anyone left that isn’t aware of breast cancer? What is more awareness spending getting anyone at this point (aside from non profit executives)?
jseliger 6y ago
A lot of what you see in nonprofits and public agencies is about signaling: https://seliger.com/2012/03/25/why-fund-organizations-through-grant-applications-at-all https://seliger.com/2012/03/25/why-fund-organizations-throug...
coldtea 6y ago
>but, in reality, a lot of non-profits give peanuts to those at the bottom (with some even working for free) and more often than not, peanuts to those they supposedly help too -- when they're not directly tax scams, covert foreign influence operations, or merely scams...
furyofantares 6y ago
> If I wanted to donate a large amount of money to a non-profit, I would structure it as a zero-interest loan, and would just keep deferring the repayment of the loan as long as the org stays true to its mission, compensates executives in reasonable proportion to regular employees, etc. Not sure if I'm missing something, but this sounds totally ridiculous to me. You give 1M to someone you think is going to spend it well, and they do; why isn't that the end of the transaction? Why do you forever have a gun to their head? Maybe you've got all the best intentions about what would cause you to call the loan back. But after they've taken donations of this sort, why would anyone continue donating to them? They've built up liabilities to 3rd parties, I'm not interested in potentially paying off their loans instead of doing good work if some of those 3rd parties change their mind.
- ralmidani 6y ago
  There could be sunset provisions (e.g. if a loan is deferred for 10 consecutive years, it is cancelled), this would encourage continued giving rather than massive one-off donations.
  - cambalache 6y ago
    Year 5 the president embezzled 800k and ran away leaving the non-profit effectively broken, now you are pissed and want your 1 MM back. I think you should go for a walk and meditate this better.
- joshuamorton 6y ago
  No organization would accept a donation of this form. If the size of the donation was large enough to be compelling, it would also put the organization at risk. Having a looming loan of millions of dollars at risk if you upset someone isn't viable, especially given that the implication is that this would last indefinitely. A nonprofit that took loans like this over time would very quickly end up with potential debts much, much greater than they could ever hope to repay. Op mentions sunset provisions in a sibling, but at that point the difference between this and a recurring donation is marginal. Just donate a smaller amount on a recurring basis. You reduce your risk that the nonprofit will upset you, without making their existence tenuous.
deleted 6y ago
[deleted]
doktorhladnjak 6y ago
> If I wanted to donate a large amount of money to a non-profit, I would structure it as a zero-interest loan, and would just keep deferring the repayment of the loan as long as the org stays true to its mission This flies totally in the face of Paul's post. His point is to donate unrestricted to non-profits you _trust_. If you can't trust the organization or need to put controls in place to prevent them from doing something bad, you should find another organization to donate to or need to check your ego.
- ketamine__ 6y ago
  I don't think it's so black and white. The leaders at the organization could change and they certainly aren't going to give you your money back.
  - theptip 6y ago
    So plan to give $x/N per year for N years, and stop donating if you don’t get the results you want. I don’t see a reason to make things complicated; every bit of overhead reduces the net impact your dollars are going to have.
    - ALittleLight 6y ago
      What if the complication keeps them moving in the direction you want? That may make your dollars have additional impact rather than less.
      - theptip 6y ago
        Right, that is the exact line of thinking that TFA is arguing against. It's a pretty short piece as it is, but if you're looking for a TL;DR then this is as good a sentence as any: > If a nonprofit doesn't understand better than its donors where money needs to be spent, then it's incompetent and you shouldn't be donating to it at all. Though see TFA for some (corner-) cases where this might not apply. Open to your thoughts on why TFA is wrong on this point - but I think you need to flesh your case out a bit more to at least address the arguments presented therein.
closeparen 6y ago
Shareholder return and the wages of skilled labor/management are very different things! No one is getting rich off a nonprofit merely for putting capital into it, is the point. Nonprofits still buy things that are expensive, including the efforts of skilled and effective people.
- bar101 6y ago
  > efforts of skilled and effective people. This has been a truism for more than 100 years and has been mocked for as long it exists. There are entire "Yes Minister" episodes about "we use the usual formula: comparison with wages of industry leaders" (they use chairmen of BP and IBM for comic effect). Also highly recommended is the episode where Sir Arnold leaves the civil service and looks for a suitable successor who will put jobs his way ... sorry, ask him to undertake the jobs. Excerpt: Sir Arnold: Also, I would like to be chairman of the Anglo-Caribbean Association, which would give me an opportunity ... Sir Humphrey: ... to be of service. Sir Arnold: Precisely, especially during the winter months.
- bradleyjg 6y ago
  How do you understand law firm partnerships in this wages vs capital model?
  - closeparen 6y ago
    That’s a good question. I think it’s one of the few ways to convert labor to (meaningful) capital, comparable to being a founder or early employee. The CEO of a nonprofit may be a well paid associate, but he is still just an associate. The kind of excess revenue that would flow to a partner’s profit sharing check has to be reinvested in the mission instead of disbursed to somebody in cash just because.
    - bradleyjg 6y ago
      Does it? I know hospital system CEO’s get performance pay. Maybe if the numbers were sufficiently egregious and a newspaper (if a local one still exists) decided to do an expose the attorney general would intervene but I think in general some of these non profits are better modeled as perpetual partnerships run for the benefit of partners than they are as mission driven organizations.
lazyasciiart 6y ago
If I were any of the half dozen non-profits I've worked with, I would be unwilling to accept that loan because it is a completely unreasonable amount of risk to be beholden to some untrustworthy random person for any important sum of money, and a completely unreasonable amount of work to be beholden to some untrustworthy random person for any unimportant sum of money. Start your own foundation and manage your own money. This isn't genius, it's ignorance.
deleted 6y ago
[deleted]
rvnx 6y ago
55 million USD just in salaries at Wikipedia per year, that's plenty of money to swim into :)
- matheusmoreira 6y ago
  Yeah, and they keep asking for donations as if Wikipedia was in constant danger of being wiped out. Pretty screwed up.
chaseadam17 6y ago
This is even worse than a restricted donation. The nonprofit will live in fear of a loan being called and they'll respond to that risk by spending lots of time appeasing the donor at the expense of using their time helping people, which is likely the opposite of what everyone wants. On top of this, how could a nonprofit make commitments to people (often people in very vulnerable situations) knowing their funding might get called at any moment? If a donor wants this much control over a nonprofit, they should just start and fund one themselves. In terms of nonprofits taking too large of salaries, I'd trust beneficiaries to decide what's appropriate. I often feel like some donors care more about low salaries than they care about how much the people being paid are helping others. I'd happily pay a CEO $1M to create $100M in impact over paying a CEO $100k to create $500k in impact, the latter being much more common imo.
matheusmoreira 6y ago
Zero-interest deferrable loans are an amazing idea. I suppose you'd have to be a substantial investor in order to get the non-profit to accept such a deal.
- samspenc 6y ago
  Not so sure since as others have pointed out, the non-profit would have to repay the loan. Plus a lot of non-profits' "business models" aren't tailored around repaying donations. Think of some of the performing arts, dance and music programs in some of the largest cities that are structured as non-profits and charge $20 in ticket fees. If they lost their donors, they would have to charge $100 to $200 in ticket fees just to break even. And that would happen if they got zero-interest loans as well, since they would be on the hook for paying back the loans and have to cover those.
  - matheusmoreira 6y ago
    > the non-profit would have to repay the loan Only if they ever strayed from their mission. That ought to put a limit to how much corruption they think they can get away with.
    - cambalache 6y ago
      That means on their most difficult time? You are not thinking this well at all. Maybe the person corrupt was just one member who ran away, maybe the "corruption" was simply an unwise investment, maybe they were scammed by a third part, maybe they dont agree with you on the nature of the investment(say raising the minimum wage of their employees to 15 USD/h).
    - cortesoft 6y ago
      This is ridiculous. How would this even work in practice? Say I am a charity who feeds the homeless. You like that, so you I’ve me a $1 million dollar interest free loan to further my cause, but say you can demand repayment if we strayed from our mission. Ok... so what is the charity going to do with the money? They are going to spend it on stuff.. so they spend the million dollars either on things that are good for the charity mission or not, but either way they are spending the money. If afterward you say “that isn’t right, I demand you pay back the loan!”.... how are you going to collect? They already spent the money. The loan wasn’t backed by anything you can take back. You could take the charity over, I guess, but it will be a name with no assets. Even if a charity had assets to take, how do we know the DONOR won’t ‘stray from their mission’ and suddenly demand repayment years later after the money is spent? Who decides if the charity has strayed from their mission and the money is eligible to be taken back? What if the donor suddenly needs money and claims the charity drifted off mission even though they didn’t? This is one of those ideas that sounds good unless you think about it.
m463 6y ago
I'm uncertain of the reality of deferable interest free loans, but I agree for the need for checks and balances when it comes to non-profits. I think the key would be clarity of mission. It might be as simple as maintaining a letter-grade of B or above on charitywatch. I would hope it would be something with more teeth though, like requiring signal to be end-to-end encrypted (for real, not like zoom)
JMTQp8lwXL 6y ago
Giving an interest-free loan would not come with the tax benefits of a donation to a 501(c)(3). Often times, gifts are made with appreciated shares to reduce the giver's tax liability. I agree with the problem you point out, but I'm unsure of the practicality of the solution for high net worth individuals.
- texasbigdata 6y ago
  Perhaps donating 1.4x not tax free but structured in a way that meets the donors other goals offsets the net cash differential from the tax shield in their “evaluation function”.
1shooner 6y ago
>while executives get far more than a living salary. This is the trope that non-profits should essentially be run by volunteers. Which is fine to a degree, but does not scale well (that I've seen, anyway).
URSpider94 6y ago
People get very bent out of shape over execs at non-profits getting paid market-rate compensation. The issue is, if someone has a choice between running a 100-person non-profit and being a VP or even CEO at a company, they might be willing to take a 50% pay cut, but they’re probably not willing to take an 80% pay cut. Now scale that to something like the Red Cross or United Way, where you’re dealing with thousands of employees and millions in donations. Or Mozilla Foundation, where people were mad that the CEO was making a few hundred thousand dollars a year in SF, where that’s the same salary a mid-level manager at a tech company pulls down. If you want competent people to lead your nonprofit, you have to pay them.

stephen_greet 6y ago

I think that's a really interesting middle ground. Do you think it can fall into the same trap as mentioned in the article, where it can become "sub-optimal" due to not being as expert as the non-profit?

ralmidani 6y ago
I think it’s less prone to that problem if you take a holistic approach when evaluating whether a loan should be repaid, rather than applying very narrow criteria such as “must be spent on a new building”.
lazyasciiart 6y ago
It's exactly the problem in the article, taken to a ludicrous extreme. If you want to be able to decide how a nonprofit should spend their money, go take a seat on the board (or staff).

elcomet 6y ago

But the non-profit is spending the money, and is not earning any money. If you decide to ask for repayment, how could they pay you back?

ralmidani 6y ago
I doubt someone who wants a pet foundation to succeed would ask for repayment unless they really dropped the ball. Of course, this assumes the person doesn’t anticipate needing the money, which in the case of the WhatsApp co-founder is true.
Viliam1234 6y ago
Invest the money with non-zero interest, return the original money, and use the extra to... realistically, pay the salary of the person who did the investing. Yeah, if I had a non-profit, I would just plainly refuse.
a1369209993 6y ago
Absent anyone else willing to pay for whatever it is they're doing, they can't and would go bankrupt. That's the point.

ernestipark 6y ago

Is there any way to do this easily from a legal and contractual perspective? The other piece here is that if it's a loan you miss out on tax deductions, thereby potentially reducing the total amount you could give. That also limits the more tax-advantaged ways you can give money (e.g. long term appreciated stock if you're in the US).

jdavis703 6y ago
I imagine someone donating millions is using a donor advised fund to do the lending. By using a fund, they can recognize the donation for tax purposes while lending the money to a separate non-profit.
- lazyasciiart 6y ago
  I'd be surprised if any donor-advised fund could or would do this. You don't have control over that money once you donate it, you can only ask for it to be granted to a nonprofit.

brnt 6y ago

Anybody who's discussing the quite unique tax situation around charity in the US, should give Dark Money by Jane Mayer a read. This uniqueness isn't by accident, and only is called charity as a minor, inconvenient side effect.

heliodor 6y ago
What uniqueness would that be?
- brnt 6y ago
  The role and scope of it, as well as its function in tax evasion and political control. The book is worth a read if you're interested.

notsureaboutpg 6y ago

There's a huge fallacy where people believe that non-profits are supposed to be inherently more equitable and nicer than for-profit companies. And people who believe this fallacy get upset by executive pay at non-profits and turn to sites like Charity Navigator to find charities where 99 cents of their dollar goes to charity. But the fact of the matter is that paying salaries to people who bring in more money than they make is a good strategy for everyone, that's why non-profits do it. Even if MegaCharity A only spends 60 cents of its income on charity but MiniCharity B spends 99 cents of its income on charity, MegaCharity A is still doing better for humanity if their annual income grows every year due to the strength of their marketing. MegaCharities can raise awareness exponentially and actually change the outcomes of some of the problems in our worlds because they have the power to raise enough money in one place with one cohesive plan to actually fight these things. I grew up next to St. Jude Children's Hospital. Everyone has heard of them. They bring in billions every year. They have an entire marketing wing and a well-compensated C-Suite (compared to other non-profits). They have way way way more impact because of all these things than most other medical charities for children. No other non-profit in the world can offer completely free medical care to children from anywhere in the world and fly their families to live near them while they're cared for without spending the kind of money they do on marketing and executives. Non-profits need executives, and people with the credentials to be executives have to choose between non-profit jobs that pay 1/8 of what for-profit jobs do. Sure they make more than a living salary while their employees struggle to make ends meet, but that's true of every type of organization. And in the end, they won't join non-profits at all if the money they sacrifice to do so is too high.

namdnay 6y ago
The money a charity raises doesn’t come out of thin air. It comes from the hard work of the people who donate. Charity A may do more, but it’s taking a lot more money from people to do it.
bradleyjg 6y ago
> can raise awareness exponentially Is there anyone left that isn’t aware of breast cancer? What is more awareness spending getting anyone at this point (aside from non profit executives)?

jseliger 6y ago

A lot of what you see in nonprofits and public agencies is about signaling: https://seliger.com/2012/03/25/why-fund-organizations-through-grant-applications-at-all https://seliger.com/2012/03/25/why-fund-organizations-throug...

coldtea 6y ago

>but, in reality, a lot of non-profits give peanuts to those at the bottom (with some even working for free) and more often than not, peanuts to those they supposedly help too -- when they're not directly tax scams, covert foreign influence operations, or merely scams...

furyofantares 6y ago

> If I wanted to donate a large amount of money to a non-profit, I would structure it as a zero-interest loan, and would just keep deferring the repayment of the loan as long as the org stays true to its mission, compensates executives in reasonable proportion to regular employees, etc. Not sure if I'm missing something, but this sounds totally ridiculous to me. You give 1M to someone you think is going to spend it well, and they do; why isn't that the end of the transaction? Why do you forever have a gun to their head? Maybe you've got all the best intentions about what would cause you to call the loan back. But after they've taken donations of this sort, why would anyone continue donating to them? They've built up liabilities to 3rd parties, I'm not interested in potentially paying off their loans instead of doing good work if some of those 3rd parties change their mind.

ralmidani 6y ago
There could be sunset provisions (e.g. if a loan is deferred for 10 consecutive years, it is cancelled), this would encourage continued giving rather than massive one-off donations.
- cambalache 6y ago
  Year 5 the president embezzled 800k and ran away leaving the non-profit effectively broken, now you are pissed and want your 1 MM back. I think you should go for a walk and meditate this better.
joshuamorton 6y ago
No organization would accept a donation of this form. If the size of the donation was large enough to be compelling, it would also put the organization at risk. Having a looming loan of millions of dollars at risk if you upset someone isn't viable, especially given that the implication is that this would last indefinitely. A nonprofit that took loans like this over time would very quickly end up with potential debts much, much greater than they could ever hope to repay. Op mentions sunset provisions in a sibling, but at that point the difference between this and a recurring donation is marginal. Just donate a smaller amount on a recurring basis. You reduce your risk that the nonprofit will upset you, without making their existence tenuous.

deleted 6y ago

[deleted]

doktorhladnjak 6y ago

> If I wanted to donate a large amount of money to a non-profit, I would structure it as a zero-interest loan, and would just keep deferring the repayment of the loan as long as the org stays true to its mission This flies totally in the face of Paul's post. His point is to donate unrestricted to non-profits you _trust_. If you can't trust the organization or need to put controls in place to prevent them from doing something bad, you should find another organization to donate to or need to check your ego.

ketamine__ 6y ago
I don't think it's so black and white. The leaders at the organization could change and they certainly aren't going to give you your money back.
- theptip 6y ago
  So plan to give $x/N per year for N years, and stop donating if you don’t get the results you want. I don’t see a reason to make things complicated; every bit of overhead reduces the net impact your dollars are going to have.
  - ALittleLight 6y ago
    What if the complication keeps them moving in the direction you want? That may make your dollars have additional impact rather than less.
    - theptip 6y ago
      Right, that is the exact line of thinking that TFA is arguing against. It's a pretty short piece as it is, but if you're looking for a TL;DR then this is as good a sentence as any: > If a nonprofit doesn't understand better than its donors where money needs to be spent, then it's incompetent and you shouldn't be donating to it at all. Though see TFA for some (corner-) cases where this might not apply. Open to your thoughts on why TFA is wrong on this point - but I think you need to flesh your case out a bit more to at least address the arguments presented therein.

closeparen 6y ago

Shareholder return and the wages of skilled labor/management are very different things! No one is getting rich off a nonprofit merely for putting capital into it, is the point. Nonprofits still buy things that are expensive, including the efforts of skilled and effective people.

bar101 6y ago
> efforts of skilled and effective people. This has been a truism for more than 100 years and has been mocked for as long it exists. There are entire "Yes Minister" episodes about "we use the usual formula: comparison with wages of industry leaders" (they use chairmen of BP and IBM for comic effect). Also highly recommended is the episode where Sir Arnold leaves the civil service and looks for a suitable successor who will put jobs his way ... sorry, ask him to undertake the jobs. Excerpt: Sir Arnold: Also, I would like to be chairman of the Anglo-Caribbean Association, which would give me an opportunity ... Sir Humphrey: ... to be of service. Sir Arnold: Precisely, especially during the winter months.
bradleyjg 6y ago
How do you understand law firm partnerships in this wages vs capital model?
- closeparen 6y ago
  That’s a good question. I think it’s one of the few ways to convert labor to (meaningful) capital, comparable to being a founder or early employee. The CEO of a nonprofit may be a well paid associate, but he is still just an associate. The kind of excess revenue that would flow to a partner’s profit sharing check has to be reinvested in the mission instead of disbursed to somebody in cash just because.
  - bradleyjg 6y ago
    Does it? I know hospital system CEO’s get performance pay. Maybe if the numbers were sufficiently egregious and a newspaper (if a local one still exists) decided to do an expose the attorney general would intervene but I think in general some of these non profits are better modeled as perpetual partnerships run for the benefit of partners than they are as mission driven organizations.

lazyasciiart 6y ago

If I were any of the half dozen non-profits I've worked with, I would be unwilling to accept that loan because it is a completely unreasonable amount of risk to be beholden to some untrustworthy random person for any important sum of money, and a completely unreasonable amount of work to be beholden to some untrustworthy random person for any unimportant sum of money. Start your own foundation and manage your own money. This isn't genius, it's ignorance.

deleted 6y ago

[deleted]

rvnx 6y ago

55 million USD just in salaries at Wikipedia per year, that's plenty of money to swim into :)

matheusmoreira 6y ago
Yeah, and they keep asking for donations as if Wikipedia was in constant danger of being wiped out. Pretty screwed up.

chaseadam17 6y ago

This is even worse than a restricted donation. The nonprofit will live in fear of a loan being called and they'll respond to that risk by spending lots of time appeasing the donor at the expense of using their time helping people, which is likely the opposite of what everyone wants. On top of this, how could a nonprofit make commitments to people (often people in very vulnerable situations) knowing their funding might get called at any moment? If a donor wants this much control over a nonprofit, they should just start and fund one themselves. In terms of nonprofits taking too large of salaries, I'd trust beneficiaries to decide what's appropriate. I often feel like some donors care more about low salaries than they care about how much the people being paid are helping others. I'd happily pay a CEO $1M to create $100M in impact over paying a CEO $100k to create $500k in impact, the latter being much more common imo.

matheusmoreira 6y ago

Zero-interest deferrable loans are an amazing idea. I suppose you'd have to be a substantial investor in order to get the non-profit to accept such a deal.

samspenc 6y ago
Not so sure since as others have pointed out, the non-profit would have to repay the loan. Plus a lot of non-profits' "business models" aren't tailored around repaying donations. Think of some of the performing arts, dance and music programs in some of the largest cities that are structured as non-profits and charge $20 in ticket fees. If they lost their donors, they would have to charge $100 to $200 in ticket fees just to break even. And that would happen if they got zero-interest loans as well, since they would be on the hook for paying back the loans and have to cover those.
- matheusmoreira 6y ago
  > the non-profit would have to repay the loan Only if they ever strayed from their mission. That ought to put a limit to how much corruption they think they can get away with.
  - cambalache 6y ago
    That means on their most difficult time? You are not thinking this well at all. Maybe the person corrupt was just one member who ran away, maybe the "corruption" was simply an unwise investment, maybe they were scammed by a third part, maybe they dont agree with you on the nature of the investment(say raising the minimum wage of their employees to 15 USD/h).
  - cortesoft 6y ago
    This is ridiculous. How would this even work in practice? Say I am a charity who feeds the homeless. You like that, so you I’ve me a $1 million dollar interest free loan to further my cause, but say you can demand repayment if we strayed from our mission. Ok... so what is the charity going to do with the money? They are going to spend it on stuff.. so they spend the million dollars either on things that are good for the charity mission or not, but either way they are spending the money. If afterward you say “that isn’t right, I demand you pay back the loan!”.... how are you going to collect? They already spent the money. The loan wasn’t backed by anything you can take back. You could take the charity over, I guess, but it will be a name with no assets. Even if a charity had assets to take, how do we know the DONOR won’t ‘stray from their mission’ and suddenly demand repayment years later after the money is spent? Who decides if the charity has strayed from their mission and the money is eligible to be taken back? What if the donor suddenly needs money and claims the charity drifted off mission even though they didn’t? This is one of those ideas that sounds good unless you think about it.

m463 6y ago

I'm uncertain of the reality of deferable interest free loans, but I agree for the need for checks and balances when it comes to non-profits. I think the key would be clarity of mission. It might be as simple as maintaining a letter-grade of B or above on charitywatch. I would hope it would be something with more teeth though, like requiring signal to be end-to-end encrypted (for real, not like zoom)

JMTQp8lwXL 6y ago

Giving an interest-free loan would not come with the tax benefits of a donation to a 501(c)(3). Often times, gifts are made with appreciated shares to reduce the giver's tax liability. I agree with the problem you point out, but I'm unsure of the practicality of the solution for high net worth individuals.

texasbigdata 6y ago
Perhaps donating 1.4x not tax free but structured in a way that meets the donors other goals offsets the net cash differential from the tax shield in their “evaluation function”.

1shooner 6y ago

>while executives get far more than a living salary. This is the trope that non-profits should essentially be run by volunteers. Which is fine to a degree, but does not scale well (that I've seen, anyway).

URSpider94 6y ago

People get very bent out of shape over execs at non-profits getting paid market-rate compensation. The issue is, if someone has a choice between running a 100-person non-profit and being a VP or even CEO at a company, they might be willing to take a 50% pay cut, but they’re probably not willing to take an 80% pay cut. Now scale that to something like the Red Cross or United Way, where you’re dealing with thousands of employees and millions in donations. Or Mozilla Foundation, where people were mad that the CEO was making a few hundred thousand dollars a year in SF, where that’s the same salary a mid-level manager at a tech company pulls down. If you want competent people to lead your nonprofit, you have to pay them.