Thursday, April 19, 2012

Issuance of Shares by "Participation Nonprofits"

In his new book, Finance and the Good Society (Princeton),Yale economist Robert Shiller specifically addresses societal philanthropy and the role of the nonprofit sector.  In particular, he proposes the concept of "nonprofit stock."  Here is the explanation is his Huffington Post blog entry entitled "Ten Ways Finance Can Be a Force for Good in Society:"

2.  Create what I am calling, in my new book, participation nonprofits, nonprofits that might run schools or hospitals or the like, but that raise money by selling shares to the public.  Such a firm pays dividends from its profits into a special account in the name of the shareholder. The shareholders get a charitable tax deduction for making the investment, but can use the dividends in the account only for further charitable contributions, including purchasing shares in participation nonprofits, or can spend them on themselves in some predefined emergency situations such as a medical crisis. With participation nonprofits, charitable giving will be more fun for the donors, for they could watch their money grow and feel their influence grow with it, if they invest wisely, fulfilling a natural human need for stimulation and appreciation. For example, the Wikipedia Foundation might have been even more successful if it had been set up as a participation nonprofit, and found some revenue opportunity associated with their mission. Instead of operating on a shoestring of the mere 75 employees it has today, I'll bet it would have received many billions in donations by now, which it probably could use for a much expanded social purpose.

(Hat tip:  Nonprofit Quarterly)


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