Debunking “Accountability to Donors” Part 5

As I have noted throughout this series, the notion that organizations are primarily accountable to their donors not only misdirects organizational focus, but it is fraught with logic holes large enough to comfortably house a family of four.

In my posts today and tomorrow – the last posts before I wrap this up – I will move away from the absurdity of that logic. Instead, I will aim these remaining posts at the faulty assumptions at the root of this whole argument.

(If you have not read the posts leading up to this one, you can start at the beginning here.)

Faulty Assumption: The Corporate Comparison
Both Corporate and Nonprofit Accountability are about the fiduciary obligation to represent the interests of others.

When we state that a nonprofit organization is primarily accountable to its donors, therefore, we are stating that the organization’s primary allegiance is to represent the interests of those donors.

If that is not enough to make one stop in one’s tracks, we must ask the next question:

What factors determine whose interests those organizations should be representing?

The most commonly cited factors in the “donor accountability” argument look something like this:
1) In a for-profit corporation, shareholders invest the dollars that allow that corporation to do its work.
2) In a Community Benefit Organization*, donors provide the dollars that allow the organization to do its work.
3) Therefore, because for-profit corporations are accountable to their shareholders, “nonprofit” corporations are accountable to the donors.

Seems airtight, doesn’t it? Unfortunately, it is not true.

Here is the reality:

1) One can only be held accountable for one’s own actions. Therefore, a corporation can and should be held accountable for the actions it takes.

2) The purpose of a for-profit corporation is to generate profits. The actions for which the corporation will be held accountable will therefore be aimed at that end goal – generating profits.

3) The shareholders will receive those profits. That is their return on their investment.

4) For-profit corporations are therefore accountable TO their shareholders, and accountable FOR taking actions that will provide the very most benefit / reward possible – the highest return on the shareholders’ investment.

5) Corporate accountability to shareholders, therefore, is NOT due to the fact that the shareholders provided the funds. The corporation is accountable to those shareholders because the shareholders will reap the benefit that derives from the corporation’s actions – the actions for which the corporation is accountable!

This is not a difference of semantics. It is, in fact, everything. Corporations are not accountable because their investors put the money in, but because the investors are the ones that will reap the rewards.

Which begs the question, “In the world of Community Benefit Organizations*, who will reap the benefit of what the organization does?”

Yes, it is the community – everyone, including the donors, but also including you and me and our neighbors and friends.

Therefore, the “shareholder / investor” argument does more than simply fail to prove that community organizations are accountable first and foremost to their donors.

The corporate analogy actually proves instead that community organizations are primarily accountable to the community they have promised to benefit.

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Tomorrow, in Post #6, I will provide the last argument in this series – rooted in the biggest and most dangerous of all faulty assumptions. And then, on Friday, I will wrap up this thread with the moral of the tale, and suggestions for change. And I’ll do that all in time for Monday’s Rock-Out (which we will all sorely need by then!).

So stay tuned!

Curious about our use of the term “Community Benefit Organization?”

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