TED Conversations

Michael Williams

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Why do we allow Non-Profits to Profit?

Why do we allow Non-Profits / charities to Profit? What is the incentive to ever achieve a non-profit's/charities goal?

The American cancer society, has been a charity for around 100 years, has made around 1 billion in donations in 2012 alone, and a CEO makes 2.5 million as a salary, with such a track record, why would a company want to find a cure when that would end their funding and therefor salary.

This is only one of many charities and non profits, how can such a practice go unregulated and even applauded?


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    Jun 16 2013: So you are fine with people profiting in not-so-noble ventures, but not in noble ones?
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      Jun 16 2013: Perhaps he is concerned with the amount of the funds NOT going to the cause. Several have a record of high saleries and perks to administrators with only a few cents on the dollar going to the cause.

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        Jun 16 2013: That is certainly true for several, but the original question was a blanket statement about ANY non-profit. If a non-profit contributes great value and it's CEO makes a million dollar profit, is that bad?

        As Guido Gambetti mentioned, I would suggest looking at the TED talk by Dan Pallotta. http://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is_dead_wrong.html
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          Jun 17 2013: Drew, Yeah he gave a great speech to TED. Before I buy into all anyone says I like to look them up. Have you read up on Dan Pallotta. I suggest reading up on the many lawsuits Dan is involved in. His company took 79% of the 19 million raised for charity. He pocketed 15,010,000 of the 19 million. All of his sponsors bailed on him and the company is gone. Call me old fashioned ... but Dan may have been a little greedy .... naw ... a lot greedy ... the word obscene comes to mind.

          "If a non-profit contributes great value and it's CEO makes a million dollar profit, is that bad?" Yeah Drew it is bad ... The rules of the IRS is that no profits are made .... so it is not only bad it is illegal.

          Drew, I understand what your saying. I am not against a CEO getting compensated. However, I do think it should be reasonable and in line with the contributions he makes to the effort. When debits exceed the income the executive should be fired. When there is no growth he should be fired. Non-profit or for profit it is still a business. When the charity brings in 5 million and the CEO takes half is that really fair?

          You made a valid point that blanket statements and generalizations are not a good thing and exceptions can be found.

          Thanks for the reply. I wish you well. Bob.
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        Jun 17 2013: In reply to your earlier comment "When the charity brings in 5 million and the CEO takes half is that really fair?"

        Is it better if the charity only makes $100,000 and the CEO makes $20,000?

        Your assumption is that the charity would somehow get the $10 million with or without the CEO. There is a saying with entrepreneurs, "I would rather own 10% of a $10 million company than 100% of a $10 thousand dollar company."
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          Jun 17 2013: The ratio would be 100,000 to the CEOs 50,000 to remain at 50%. I still have the same problem.

          I have heard the statement; The reply was which direction are the two companies going? What is the potential? Etc...

          Did you read up on Dan Pottela? Do you think it was ok that he took 79% as payment for his efforts?

          Again I am not against a CEO making a paycheck ... Somewhere in this the term "Charity" should be considered.

          How much would I be willing to give if I know the firm my charity hired will take 79% and that the operating costs of the charity itself has not even taken its cut from the 21% remaining. Drew I don't know about you but I am concerned that there may be a management problem and the "intent" of the charity has been violated.

          We are seperated at what point greed and earned income stop and start. Some charity CEOs get houses, cars, perks, and BIG salaries and the cause gets pennies on the dollar and that is my concern. However, as you have pointed out that is what the market bears / allows .... does that make it right?

          Enjoyed the discussion. Bob.

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