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> Non-profits can't funnel profits directly back to owners, the way other corporations can (such as when dividends are distributed). But they still make profits
by vel0city 3y ago
> Non-profits can't funnel profits directly back to owners, the way other corporations can (such as when dividends are distributed). But they still make profits.
Then where do these profits go?
- jfim 3y agoSome non profits have very well remunerated CEOs.
- username332211 3y agoOne of the reason why companies distribute dividends is that when a big pot of cash starts to accumulate, there end up being a lot of people who feel entitled to it. Employees might suddenly feel they deserve to be paid a lot more. Suppliers will play a lot more hardball in negotiations. A middle manager may give a sinecure to their cousin. And upper managers can extract absolutely everything trough lucrative contracts to their friends and relatives. (Of course the IRS would clamp down on obvious self-dealings, but that wouldn't make such schemes disappear. It'll make them far more complicated and expensive instead.)
- guhcampos 3y agoIf you don't have to turn a profit to investors, you suddenly can pay yourself an (even much more astronomically high) salary.
- s1artibartfast 3y agoThey usually pile up in a bank account of stocks and bonds or real estate assets held by the non-profit.
- icedchai 3y agoThey call it "budget surplus" and often it gets allocated to overhead. This eventually results in layers of excess employees, often "administrators" that don't do much.
- s1artibartfast 3y agoOr it just piles up in an endowment, which becomes a measure of the non-profit's success, in a you make what you measure, numbers go up sort of way. "grow our endowment by x billion becomes the goal" instead of questioning why they are growing the endowment instead of charging patients less.