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About Bob

Bob serves as President and CEO of GuideStar and serves on the boards of Vision TV, Grameen Foundation USA, and the AAFRC Trust for Philanthropy. More...

About GuideStar

GuideStar gathers and publicizes information about nonprofits. We advocate that nonprofits share information openly and completely. Any nonprofit we track can update its report for free. More...

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Should the American Economy Follow in Public Radio’s Footsteps?

Posted By on October 26th, 2010, in these categories: Economy | Fundraising | GuideStar | Nonprofit Practice

When I first started writing this blog about the BBC, I had the world’s economy on my mind.  But then a controversy over Juan Williams erupted adding a new twist. 

With our economy stuck in neutral, it’s been interesting to follow the policy debate raging over what to do about it.  Some pundits are encouraging another government stimulus plan in order to help prime the pump of development; others think the last plan was a horrible mistake and have turned it into a potent campaign target. It seems likely that gridlock will prevail and we’ll get neither more stimulus spending nor any significant changes in government spending. 

Meanwhile, in the United Kingdom, the Conservative party leadership has proposed a massive cut in government spending of $127 billion over four years.  The Wall Street Journal termed the U.K. a “global test case in the argument of choosing austerity over stimulus to repair the economy.”

One of the cuts that caught my eye is the one to the British Broadcasting Corporation (BBC). In return for a deal that guarantees a continued  license fee for the next six years, the BBC agreed (or caved to government pressure, as the New York Times put it) to a freeze on its income and the assumption of  new expense obligations previously handled by the government. The license fee obligates TV watchers to pay nearly $230 for every household with a color television set. The New York Times estimates that the license fee brings in $5 billion per year, and makes up nearly all of the BBC’s budget. The Guardian estimates that new additional costs and the license freeze will mean in effect that the BBC will experience a 16 percent cut in real terms.

The guaranteed revenue stream has helped the BBC become the best public broadcaster in the world and one of the world’s most powerful media companies, public or private. So although any cut is painful, the BBC has successfully fought off commercial competitors and critics who wanted to see the fee reduced or eliminated, as well as ensured itself six years of predictable revenue─not a small feat in a world of financial chaos.

Unlike the BBC, American public broadcasters rely primarily on voluntary contributions and local support for the bulk of its revenue. Our federal government contributes a measly $400 million or so for the entire system of over 1,000 public radio and TV stations. Most state governments provide some type of support, although these appropriations are under fierce attack at the moment in many places.  

Last week’s firing of Juan Williams has brought some angry calls by politicians urging the elimination of federal government support. What these critics fail to understand is that American public broadcasting is primarily a collection of locally controlled and financed institutions, with relatively weak national organizations. This is both a strength and weakness. It is nearly impossible to destroy public radio because of its de-centralized nature. But the challenges in cobbling together funding from many local sources within a membership organization context─unlike the BBC’s license fee─means it will never have the domestic or international influence that the BBC enjoys.

Since there is no chance of a national license fee, the decentralized approach is not our only alternative─it may indeed be the best way to serve a country as diverse as ours.

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The Sad Demise of ShoreBank

Posted By on August 31st, 2010, in these categories: Banking | Economy | Nonprofit Practice

It was sad to read about ShoreBank’s demise. According to the Wall Street Journal, “Regulators seized ShoreBank Corp. on Friday and agreed to sell assets to a team led by the community lender’s executives and backed by several large U.S. financial firms.”Piggy Bank

I’ve always admired the work of the bank and its efforts to provide mortgages and loans to people from low and moderate income levels, and the bank’s pioneering work in re-developing and stabilizing neighborhoods. They seemed to be a great example of “doing well by doing good,” in the model of what Mohammed Yunus calls “social businesses” similar to his Grameen enterprises.  And while doing my own research and planning for building GuideStar’s business model of sustainability, I benefitted from my discussions with leaders at ShoreBank as well as my own reading about their work.

But the news is not all bad. The bank is being re-organized and the FDIC has sold the company to a new institution that will be known as Urban Partnership Bank and led by William Farrow, a former First Chicago Corp. executive who was ShoreBank’s president and chief operating officer at the time of its failure.

According to the Journal: “Urban Partnership Bank is buying almost all assets of ShoreBank’s Midwest bank and assuming $1.54 billion in deposits. The FDIC and Urban Partnership also agreed to share losses on $1.4 billion in assets. The holding company will remain intact, according to a person familiar with the deal. Urban Partnership is backed by a consortium of large U.S. financial institutions, including Bank of America Corp., Goldman Sachs Group Inc. and Morgan Stanley. Philanthropic groups and individuals in the Chicago area are also part of the effort. The group is investing between $140 million to $150 million, said a person familiar with the deal.”

Rick Cohen of Nonprofit Quarterly’s “The Cohen Report” has an excellent analysis of ShoreBank and the history of community development banking here.

Cohen ends his piece with the interesting observation that ShoreBank may have gone too far in trying to achieve its mission. It is a cautionary tale for all of us who believe strongly that to have a strong mission we also need to be strong and reliable financially─in other words sustainable. Finding that balance is never easy and always a work in progress.

One long-time advisor suggested that ShoreBank suffered from an “overly zealous commitment to its original mission.” In a world, and sometimes even a sector, which is all too ready to toss mission to the curb in favor of demonstrating free market profitability, ShoreBank dove into solving seemingly intractable domestic and international community finance challenges.

As Cohen so eloquently put it, “Maybe in a recession, with major investments in two cities whose housing markets were virtually destroyed by the subprime implement, ShoreBank found itself stretched beyond the limits of its capitalization. Helping ShoreBank back to health seems to be far more attractive and socially useful than putting billions of TARP money into big banks, Wall Street investment houses, and AIG where the prime beneficiaries seem to have been the highly paid executives, not the poor communities in urban and rural areas that still starve for access to bank capital.”

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Multitasking Philanthropy and Shopping

Posted By on February 5th, 2010, in these categories: Donors | General | Giving Wisely

I went to the supermarket the other day to do the weekly family food shopping and, while I was paying my bill, the checkout clerk asked me if I wanted to make a contribution to a charity. I said no, but I felt a little guilty about it. When I left the supermarket with my bags of groceries, there were kids on the curb asking for contributions to local charities, all of them good causes. When I got home I paid my bills, and my insurance company asked me if I wanted to make a contribution to their nonprofit. I’m not sure what it does. That one was easy to reject; I just didn’t click the box. No human interaction required.

What’s going on here? Eric Felton wrote about this growing trend in the Wall Street Journal last month. He thinks these requests are annoying at the very least—and ultimately bad for charities:

My guess is that putting the touch on people in semicaptive situations such as the grocery-store checkout line isn’t necessarily a good thing for charity. Perhaps I’m wrong, and quotidian solicitations will make us more mindful of the plight of others and more open to helping the sick and the needy. But I suspect that the growing number of stores asking customers to chip in may end up creating a backlash. There was a time when telephone solicitations for charity worked—and so they proliferated. But after a while, people became ever more practiced at saying no.

I wonder how committed to promoting charity the retailers will be if they find shoppers have started to look at their storefronts with the same dread that greets the phone ringing at dinnertime.

I personally am not offended by this approach. There are probably some people who donate very little to charity, and this may be one of the few times they think about making a contribution. I personally won’t give to these requests, however, because I have my doubts about how much money actually ends up in the hands of charities after it has gone through all the corporate processing. And these are usually not causes that are of primary interest to me. More important, I’m concerned about whether this approach underscores the stereotype that suggests that charities are nice people doing nice work but not really that important or serious.

For me it boils down to the head/heart dichotomy again. Giving spontaneously from the heart is a good thing to do occasionally. I personally go out of my way to support street musicians, because many of them are really good and I appreciate their effort to make my world a little more enjoyable. We can all afford a few dollars here and there, and there are lots of good causes. But let’s not kid ourselves: if we’re really serious about tackling an issue, it’s going to take some solid research about organizational effectiveness and impact—as well as some serious money—to make a difference.

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