The charity industry


My epiphany about non—profit organizations took place when I was a second—year Harvard Business School student, talking with my classmates about job—hunting. One of them, a cynical fellow, told me he intended to make his career in the non—profit sector. As I began to compliment him on his selflessness, he cut me off.

He cited a couple of nonprofits of which you have undoubtedly heard, and told me about the pay and especially the perks enjoyed by top management. He noted how advantageous it can be to enjoy nonprofit status, and how certain lines of business pursued by "charities" are indeed businesses. Tax—free status builds—in a huge cost advantage. Try runing a for—profit health club near a brand new YMCA which pays no taxes.

Best of all, he enthused, they end up making profits, sometimes really big profits. But since they're nonprofits, they have to spend it or write it off one way or another. Thus one finds lavish offices, health clubs, and many other perks which make the work more fun. He was making a lifestyle choice to work in a possiblyh less—demanding work atmosphere with superior non—cash compensation.

The lesson took. While the vast majority of non—profits and charities are undoubtedly honest, I am never unwilling to consider crass motivations as part of the mix in explainig the behavior of poeple in the charitable sector.

Today, Don Surber takes a step back from the Air America scandal and looks at the underlying condition which enabled it: the large amounts of money which seem to be lying around at charities which receive government contracts.

The facts aren't out yet, but Eliott Spitzer is on the case. We will be watching.

Thomas Lifson   8 08 05