Tuesday, April 12, 2011
On April 3 the Boston Globe published an interview with Dan Pallotta, founder of Pallotta TeamWorks and author of "Uncharitable." Pallotta TeamWorks was a fund-raising company that raised money for charities. The company went under in 2003 after concerns about the profits earned by the company. In his book, Pallotta argues that charities - and the for-profit companies they employ - should be able to compete the way they would in the free market. If executives make huge salaries, that's ok if the end result is money raised for charity.
Pallotta opposes reliance on overhead and expense ratios or says that information about costs is less relevant than that services being provided. He argues that charities should be able to pay their executives more in order to attract talented people.
The interview concluded with the following exchange: "Many people take a more traditional view - that you shouldn't be driving a BMW if you run a charity. What do you say to that?" Pallotta responded: "My whole motivation for this is that we're not solving any problems. One billion people are hungry in the world; it was 890 million 10 years ago. We have the same old statistics every year . . . . Who cares if people get BMWs if we solve breast cancer?
A letter published on April 10 challenged Pallatto's approach. Bruce Horwitz wrote, "We do not donate to a charity based on the quid pro quo of received value, as we do with a business. I don't care how much the CEO of Ford makes; I only care if the car I buy delivers the value I expected for my money. But if I'm donating to find a cure for cancer, I am turning my money over to a conduit with the expectation that my money will go to pay for research, not to help Pallotta buy a fancy car."
I'll post separately information about the Oregon Attorney General's concerns that charitable fundraisers take too much of the money they raise for charity.