September 2006

Dear Friend:

What obligations do we as leaders in the nonprofit sector have to society?

I am constantly amazed at the enormous amount of money Americans contribute to nonprofit organizations every year and the extraordinary number of hours they volunteer to help those organizations provide services. What do we owe them for this generosity and the trust that they place in us?

What got me thinking about this was a speech by Bernadine Joselyn from the Blandin Foundation at this year's Council on Foundations conference. Although she was speaking to the foundation leaders in the room, her comments apply to all nonprofit organizations:

Philanthropy's special role in society is formalized in a social contract that exempts it from paying taxes but in return, expects good works. Because we don't have to sell product, get elected, or pay shareholders, foundations are uniquely positioned to initiate thought and action, experiment with new and untried ventures, dissent from prevailing attitudes, and act quickly, flexibly, and fearlessly.

Another speaker at this year's COF conference, George Soros, came at this issue from a very different perspective. As he notes in his new book, "Originally, I did not want my foundations to survive me. I had grave reservations about philanthropy because it goes against the grain of the human character. We are selfish by nature, but philanthropists are supposed to act selflessly; this gives rise to all kinds of contradictions as well as a tendency toward hypocrisy."

These comments reminded me that donors are motivated by many factors—matters of both the heart and the head. From an economic viewpoint, philanthropy is a set of transactions between donors (individuals, foundations, government agencies, etc.) and nonprofit institutions. Donors have philanthropic objectives as well as resource constraints. Sometimes they even choose among competing nonprofit organizations to maximize results and achieve objectives.

At the same time, group norms—expectations and opinions that shape the behavior of donors and nonprofit institutions alike—often motivate giving. Many donors have relationships with people and groups and see philanthropy as a means of enhancing their own status and recognition.

For others, philanthropy creates meaning and value for themselves as donors while validating the missions of nonprofit institutions. These donors have a moral biography that shapes their giving within cultural paradigms such as institutional loyalty, giving back, helping the less fortunate, and addressing critical problems.

Regardless of what motivates specific donors, every nonprofit has a responsibility to them. I've always liked the term "social contract." When political theorists first introduced this concept, they were referring to the role of the individual within a society. But it's a nice term to describe the relationship between nonprofits and our donors. The relationship implies a contract, a quid pro quo: we'll provide public services if you agree to support us. Today, however, I think society expects more of us: donors of all types want assurance not only that we are taking action but that we'll be forthright in reporting how we spend their money and whether we're using it effectively.

What do you think?

Sincerely,

Bob Ottenhoff
President and CEO
president@guidestar.org