Tuesday, December 4, 2018
Apparently in response to increasing use of "gagging clauses" in grants that forbid public commentary on public grants, the United Kingdom's Cabinet Office recently urged charities to report improper behavior and wasteful government grants "without fear of consequences." From the full story at Third Sector, "The new rules have been prompted by concerns in the media that charities working on the Department for Work and Pensions’ universal credit programme were unable to speak about their concerns with how the programme was being delivered because of clauses in government contracts."
It will be interesting to see if this move actually emboldens charity whistleblowing, or if more concrete protections are needed.
Friday, November 2, 2018
According to BBC News, early last month the Pakistani government ordered eighteen international nongovernmental organizations to end their operations and leave the country within 60 days. Among those charities are ActionAid UK, a development organization that works with women and girls living in poverty, and Plan International USA, a development organization that focuses on communities. While previous attempts to force ActionAid and other organizations to leave Pakistan failed in the face of diplomatic pressure from Western government, the most recent report indicates that this attempt is still proceeding.
Tuesday, October 23, 2018
The Nonprofit Management Program at Columbia University’s School of Professional Studies is presenting its next Master Class in the program's Professional Development Series on November 15, 2018: "Charities Regulation on the International Front: Emerging Issues in Globalization."
A description of the program:
Regulation and enforcement in the charitable sector are increasingly global in scope. Whether addressing cross-border charitable solicitation, oversight issues within religiously based organizations, terrorism concerns, money laundering, or the burgeoning technological platforms that enable new and expanded reach for these activities internationally, charities regulators are on the front lines of some of the most cutting-edge international legal issues. Join us for a deep-dive discussion with our panel of experts discussing the new globalized context of charities regulation.
James G. Sheehan, Chief, Charities Bureau, New York State Attorney General's Office
Marcus S. Owens Partner, Loeb & Loeb, Former Director, Exempt Organizations Division of the Internal Revenue Service
Moderator: Cindy M. Lott, Esq., Academic Director, Nonprofit Management Programs and Senior Lecturer'
Tuesday, May 8, 2018
New Zealand Denies Greenpeace Charitable Status because its Views on Environment Wouldn't Benefit the Public
Earlier this year, New Zealand denied charity status to Greenpeace because it found its policy positions to be contrary to the public interest. Under New Zealand law, charitable activities may involve seeking policy changes, but the purpose must be in furtherance of the public benefit. (For thorough coverage of New Zealand charity law, see this book by Poirier.) The registration board rejected Greenpeace's application on two grounds:
- Greenpeace promotes its points of view on the environment and other issues in ways that cannot be found to be for the benefit of the public.
- Greenpeace and its members’ involvement in illegal activities amounts to an illegal purpose which disqualifies it from registration.
On the first point, the Charities Registration Board reasoned:
Although the Supreme Court in Greenpeace held that advocacy can be charitable, it indicated that promoting a cause or advocating a particular viewpoint will not often be charitable. This is because it is not possible to say whether the views promoted are for the public benefit in the way the law recognises as charitable.
The Board considers that Greenpeace’s focus is on advocating its point of view on environmental issues such fossil fuel exploration and the expansion of intensive dairy farming. Most of Greenpeace’s environmental advocacy cannot be determined to be in the public benefit when all the potential consequences of adopting its views are taken into account.
The Board noted that advocacy for protection of the environment could be considered charitable, but Greenpeace's positions were simply too extreme to be considered in the public benefit. For example, the Board acknowledged that "in general" advocacy for sustainability is charitable, Greenpeace's concern about climate change and advocacy for specific policies such as the role of fossil fuels "is a complex issue that requires in-depth consideration of the potential consequences of New Zealand's international obligations and interests, environmental risks, the importance of fossil fuels in New Zealand's economy, the competing interests of industries, economic costs, and New Zealand's dealings with other nations." Finding Greenpeace's position on policy to not consider the other criteria, the Board couldn't find that "the views promoted by Greenpeace on climate change are of a benefit in the way that the law recognises as charitable."
The rejection of Greenpeace's application on the first ground may seem surprising to those in the US. Although there was once a time when governments in the US weighed whether an organization's policy viewpoints were in the public interest (and while some who dislike the NRA, the ACLU, or other advocacy grounds have urged a return to the discretionary denial of yesteryear), those days have largely passed, in no small part to Constitutional/First Amendment concerns.
Back to New Zealand, Greenpeace appealed an earlier board decision against it, so it will be interesting to see if this is heading up the courts again.
Monday, February 26, 2018
Merryn Somerset Webb penned an op-ed in The Financial Times entitled The charitable giving model is an undemocratic use of funds. Focused on the UK, the piece proposes that "99 per cent of the organisations with charitable status in the UK should have it removed." Instead, tax subsidies would apply to a limited number of official charities that would be tightly regulated. Read the entire piece at: https://www.ft.com/content/1093fcec-187a-11e8-9376-4a6390addb44
Monday, February 19, 2018
- According to NPR, the General Counsel and Chief International Officer of the American Red Cross resigned in the wake of a report from ProPublica that several years ago ARC had forced a senior official to resign amid sexual harassment and assault allegations but still provided a positive review of his performance to another nonprofit interested in hiring him.
- Doctors Without Borders (Medecins Sans Frontieres) announced that in 2017 it had dealt with 24 cases of alleged sexual harassment, resulting in the dismissal of 19 people, in an attempt to distinguish itself from the Oxfam and the scandal enveloping that organization (see below), according to Reuters.
- The CEO of the Humane Society of the United States resigned in the wake of sexual harassment allegations, after fighting the allegations for weeks and even though a majority of the organization's board voted to immediately end an investigation into his behavior, according to the N.Y. Times. Additional coverage: NPR.
- The Times of London reported that in 2011 Oxfam International covered up the use of prostitutes by senior aid workers in Haiti. Trying to get ahead of the growing scandal, Oxfam has promised to appoint an independent commission to investigate claims of sexual exploitation, according to The Guardian.
- The Presidents Club, a prominent United Kingdom charity that raised money from the British elite to fund grants to other charitable organizations, closed after The Guardian conducted an undercover investigation that revealed alleged groping and sexual harassment at the charity's most recent men-only fundraising dinner. Additional coverage: CNN.
In a Monkey Cage column in today's Washington Post, Nives Dolsak, Sirindah (Christianna) Parr, and Aseem Prakash, all at the University of Washington at Seattle, argue the presumption of virtue for nonprofits often leads to regulators and stakeholders neglecting issues of accountability and governance. (UPDATE: For a contrary perspective, see this Nonprofit Quarterly column by Ruth McCambridge and Steve Dubb.) At the same time, even the above examples illustrate everything from an apparently robust response to allegations of sexual harassment in the case of Doctors Without Borders to the alleged creation of an environment that encouraged such harassment in the case of the Presidents Club. What appears inescapable, however, is that nonprofits, like for-profits, have to invest in developing procedures to properly handle such complaints and deal with alleged harassers.
Sunday, November 19, 2017
Marina Nehme (UNSW Australia) has written Australian Charities and Not-for-Profit Commission: Enforcement Tools and Regulatory Approaches, 45 Australian Business Law Review 79 (2017). Here is the abstract:
The Australian Charities and Not-for-profits Commission (ACNC) commenced operation on 3 December 2012 after a decade of inquiries and recommendations about the establishment of an independent “one-stop-shop” regulator for the charity sector. The introduction of this regulator is a move that recognises the unique and distinctive role that charities play in Australia. This article reviews the sanctions available to the ACNC. It considers some key aspects of the ACNC’s regulatory approach to date and discusses the benefits arising from this approach. The article then assesses whether the current enforcement regime available to the regulator supports the continued implementation of such a regulatory approach and empowers the ACNC to enforce the provisions in the legislation or whether some changes may be needed.
Thursday, August 17, 2017
The N.Y. Times reports that the Cambodian Prime Minister has ordered U.S.-based Agape International Missions to end its operations in that country after it was featured in a CNN report on the sex trade there. As detailed in the story, the Prime Minister accused the NGO of possibly misleading CNN regarding the extent of the sex trade in Cambodia and thereby violating the terms of its operating agreement with the government. At this time it is not clear how Agape will respond or whether the Prime Minister's statements have in fact led to the expulsion of the group from that country.
Regardless of the details of this particular situation, there is a growing trend of foreign NGOs, domestic NGOs with foreign support, and sometimes domestic NGOs more generally being targeted for burdensome regulation or worse by the governments of many countries, as I have detailed in this space previously. These concerns have led Helmut K. Anheier (President of the Hertie School of Governance in Germany) to call on the G20 to address this issue in a recent G20 Policy Paper. Here is the abstract:
The roles of non-governmental or civil society organizations have become more complex, especially in the context of changing relationships with nation states and the international community. In many instances, state–civil society relations have worsened, leading experts to speak of a “shrinking space” for civil society nationally as well as internationally. The author proposes to initiate a process for the establishment of an independent high-level commission of eminent persons (i) to examine the changing policy environment for civil society organizations in many countries as well as internationally, (ii) to review the reasons behind the shrinking space civil society encounters in some parts of the world and its steady development in others, and (iii) to make concrete proposals for how the state and the international system on the one hand and civil society on the other hand can relate in productive ways in national and multilateral contexts.
Friday, June 23, 2017
This may be because I have been writing in this area (shameless plug), but there seem to be numerous recent stories about various countries increasing the legal restrictions on nonprofits and especially nonprofits with foreign connections. Here are several examples:
In India, the government refused a license to receive foreign funds to Compassion International, a Christian child sponsorship group, forcing the nonprofit to abandon its services to 145,000 children in India after 48 years in the country. If this had been an isolated incident the government's concerns about proselytization might have been plausible, but the N.Y. Times noted that Compassion was only the most recent of 11,000 nonprofits that had similarly lost such licenses since 2014.
In Turkey, the government revoked the registration of Mercy Corps, forcing that nonprofit to abandon its efforts based on Turkey to aid Syrian refugees, according to reports from the Washington Post and other news outlets.
In Hungary, the government enacted laws to require nongovernmental organizations that receive foreign financing to publicly identify themselves and their donors in what some observers believed was an attempt to shut down nonprofits supported by George Soros, including the Central European University, as reported by the N.Y. Times.
In perhaps the most dramatic action, the President of Egypt signed a new law that imposes restrictions on all domestic nongovernmental organizations, regardless of their sources of funding, by making their work subject to approval by a new regulatory body that may be a front for interference by the country's security agencies, also as reported by the N.Y. Times.
Unfortunately there appear to be few viable ways for affected nonprofits to counter these new rules in most of the countries involved, as detailed in my forthcoming article linked to above.
Mark Blumberg (Blumberg Segal LLP) has put together a list, with relevant links, of all 447 Canadian registered charities that have had their charity status revoked by the Charities Directorate of the Canada Revenue Service over the past 25 years. For anyone interested in seeing what types of activities get Canadian charities into trouble with the federal tax authorities, this list could be invaluable. I am not aware of a similar compilation with respect to the IRS in the United States, although Terri Lynn Helge (Texas A&M) has an article in the Pittsburgh Tax Review (Rejecting Charity: Why the IRS Denies Tax Exemption to 501(c)93) Applicants) that looks at IRS denials of applications for recognition of exemption as a charity under section 501(c)(3).
Hat tip: globalphilanthropy.ca.
The study of nonprofits goes well beyond the laws governing them, and there are a number of publications and organizations dedicated to that study. Here is a sampling of both recent articles and upcoming conferences from this broader academic space (the logo shown here is from the Indiana University-Purdue University Lilly Family School of Philanthropy, which is hosting the first conference listed):
RECENT ARTICLES (click through to see tables of contents for these publications)
Nonprofit Academic Centers Council Biennial Conference, Indianapolis, July 31-August 2
Science of Philanthropy Initiative, Chicago, September 6-7, 2017
Comparing Third Sector Expansions Workshop, New York, October 4-7, 2017
ARNOVA Annual Conference, Grand Rapids, November 16-18, 2017
International Society for Third-Sector Research Conference, Amsterdam, July 10-13, 2018
Friday, March 17, 2017
I have posted Globalization Without a Safety Net: The Challenge of Protecting Cross-Border Funding of NGOs, 102 Minnesota Law Review (forthcoming). Here is the abstract:
More than 50 countries around the world have sharply increased legal restrictions on both domestic non-governmental organizations (“NGOs”) that receive funding from outside their home country and the foreign NGOs that provide such funding and other support. These restrictions include requiring advance government approval before a domestic NGO can accept cross-border funding, requiring such funding to be routed through government agencies, and prohibiting such funding for NGOs engaged in certain activities. Publicly justified by national security, accountability, and other concerns, these measures often go well beyond what is reasonably supported by such legitimate interests. These restrictions therefore violate international law, which provides that the right to receive such funding is an essential aspect of freedom of association. Yet affected NGOs cannot rely on the international human rights treaties that codify this right because those treaties have limited reach and lack effective avenues for remedying these violations.
There is, however, a growing web of international investment treaties designed to protect cross-border flows of funds, leading some supporters of cross-border funding for NGOs to argue that NGOs can instead use these investment treaties to protect such funding. In this Article, I provide the most thorough consideration of this proposal to date, including taking into account not only the legal hurdles to invoking investment treaty protections in this context but also the practical hurdles based on recently gathered information regarding the costs to parties who pursue claims under these treaties. I conclude that while it may be possible to overcome both sets of hurdles in some situations, these hurdles are higher than previous commentators have acknowledged. In particular, overcoming the high costs of bringing claims under these treaties would at a minimum require a concerted effort to fund or reduce such costs through either securing substantial third party financing or recruiting significant pro bono assistance.
Given these obstacles to invoking the protections of international investment treaties, I then explore the insights that the remarkable growth in such treaties provide regarding the conditions that would need to exist for countries to be convinced to enact a similar set of agreements to protect cross-border funding of NGOs. I conclude that such conditions are currently absent and that it will take many years to see if they could develop, even assuming that many countries continue to increasingly restrict or effectively prohibit such funding. In the meantime, both recipients and providers of cross-border funding for NGOs will need to consider alternate strategies that do not rely on international law to counter such restrictions.
Thursday, March 16, 2017
Recent events and news stories highlight the uncertain future of global philanthropy. On one hand, the Hudson Institute recently celebrated global philanthropy as it transferred its Index of Global Philanthropy and Remittances and its Index of Philanthropy Freedom to the Indiana University Lilly Family School of Philanthropy, and the Christian Science Monitor reported late last year that China is encouraging domestic philanthropy by its growing number of billionaires. On the other hand, various news outlets have reported on numerous countries cracking down on foreign charities and foreign-funded domestics charities, including:
- China, where the Wall Street Journal reported late last year that a new law "puts foreign nonprofits in limbo" (subscription required).
- Hungary, where the Budapest Beacon reported earlier this year that the government is attacking allegedly "fake civil organizations," including the Hungarian Helsinki Committee, the Hungarian Civil Liberties Union, and Transparency International.
- India, where the N.Y. Times reported last week that the child-sponsorship organization Compassion International is ending its support of 145,000 children in that country, joining more than 11,000 non-governmental organizations (NGOs) that have lost their licenses to accept foreign funds since 2014. According to an earlier L.A. Times story from earlier this year, those NGOs include a domestic charity that fought caste-based discrimination for decades. (The N.Y. Times also reported that U.S. officials are trying to resolve the Compassion International case through diplomatic channels.)
- Kenya, where a watchdog group reported late last year that government authorities froze the bank accounts of a U.S. NGO carrying out an electoral assistance program ahead of this year's general elections.
- Turkey, where the Washington Post reported last week on the shutting down of U.S.-based Mercy Corps that was delivering aid to Syria, and Voice of America reported that Western aid groups now fear a broader crackdown on their efforts.
Tomorrow I will do a post about my recent article addressing these trends and the limited legal options NGOs currently have for countering them.
Tuesday, November 15, 2016
Volume 27, Issue 6 (December 2016) of VOLUNTAS: International Journal of Voluntary and Nonprofit Organizations is now available. Here is the table of contents:
- Disentangling the Financial Vulnerability of Nonprofits
Pablo de Andres-Alonso, Inigo Garcia-Rodriguez & M. Elena Romero-Merino
- Exploring the Nexus of Nonprofit Financial Stability and Financial Growth
Grace L. Chikoto-Schultz & Daniel Gordon Neely
- Doing Well by Returning to the Origin. Mission Drift, Outreach and Financial Performance of Microfinance Institutions
Matteo Pedrini & Laura Maria Ferri
- Funding and Financial Regulation for Third Sector Broadcasters: What Can Be Learned From the Australian and Canadian Experiences?
Fernando Méndez Powell
- Funding Civil Society? Bilateral Government Support for Development NGOs
David Suárez & Mary Kay Gugerty
- Resource Dependence In Non-profit Organizations: Is It Harder To Fundraise If You Diversify Your Revenue Structure?
Ignacio Sacristán López de los Mozos, Antonio Rodríguez Duarte & Óscar Rodríguez Ruiz
- Resisting Hybridity in Community-Based Third Sector Organisations in Aotearoa New Zealand
Jenny Aimers & Peter Walker
- NPO Financial Statement Quality: An Empirical Analysis Based on Benford’s Law
Tom Van Caneghem
- A Review of Research on Nonprofit Communications from Mission Statements to Annual Reports
- NGOs in the News: The Road to Taken-for-Grantedness
Angela Marberg, Hans van Kranenburg & Hubert Korzilius
- Understanding Contemporary Challenges to INGO Legitimacy: Integrating Top-Down and Bottom-Up Perspectives
Oliver Edward Walton, Thomas Davies, Erla Thrandardottir & Vincent Charles Keating
- Sensegiving, Leadership, and Nonprofit Crises: How Nonprofit Leaders Make and Give Sense to Organizational Crisis
Curt A. Gilstrap, Cristina M. Gilstrap, Kendra Nigel Holderby & Katrina Maria Valera
- Organizational Crisis Resistance: Examining Leadership Mental Models of Necessary Practices to Resist Crises and the Role of Organizational Context
- Ideology, Practice, and Process? A Review of the Concept of Managerialism in Civil Society Studies
- Toward More Targeted Capacity Building: Diagnosing Capacity Needs Across Organizational Life Stages
Fredrik O. Andersson, Lewis Faulk & Amanda J. Stewart
- Dimensions of Capacity in Nonprofit Human Service Organizations
William A. Brown, Fredrik O. Andersson & Suyeon Jo
- The Effect of Attitudinal and Behavioral Commitment on the Internal Assessment of Organizational Effectiveness: A Multilevel Analysis
Patrick Valeau, Jurgen Willems & Hassen Parak
- Testing an Economic Model of Nonprofit Growth: Analyzing the Behaviors and Decisions of Nonprofit Organizations, Private Donors, and Governments
You Hyun Kim & Seok Eun Kim
- Book Review, David Fishel: The Book of the Board: Effective Governance for Non-profit Organisations (3rd edition)
- Book Review, Block, Stephen R.: Social Work and Boards of Directors: The Relationship Model
- Book Review, Judith McMorland, Ljiljana Eraković, Stepping Through Transitions: Management, Leadership & Governance in Not-for-Profit Organisations
Dyana P. Mason
- Erratum to: Dependent Interdependence: The Complicated Dance of Government–Nonprofit Relations in China
- Erratum to: Institutional Variation Among Russian Regional Regimes: Implications for Social Policy and the Development of Non-governmental Organizations
Thomas F. Remington
- Erratum to: Modernizing State Support of Nonprofit Service Provision: The Case of Kyrgyzstan
- Erratum to: France: A Late-Comer to Government–Nonprofit Partnership
- Erratum to: New Winds of Social Policy in the East
Linda J. Cook
- Erratum to: The Long-Term Evolution of the Government–Third Sector Partnership in Italy: Old Wine in a New Bottle?
- Erratum to: Poland: A New Model of Government–Nonprofit Relations for the East?
Sławomir Nałęcz, Ewa Leś & Bartosz Pieliński
Larry Catá Backer (Pennsylvania State University) has posted Commentary on the New Charity Undertakings Law: Socialist Modernization Through Collective Organizations, The China Non Profit Law Review (Tsinghua University) (forthcoming 2016). Here is the abstract:
China’s new Charity Law represents the culmination of over a decade of planning for the appropriate development of the productive forces of the charity sector in aid of socialist modernization. Together with the related Foreign NGO Management Law, it represents an important advance in the organization of the civil society sector within emerging structures of Socialist Rule of Law principles. While both Charity and Foreign NGO Management Laws could profitably be considered as parts of a whole, each merits discussion for its own unique contribution to national development. One can understand, both the need to manage Chinese civil society within the context of charity ideals, and the need to constrain foreign non-governmental organizations to ensure national control over its own development. Moreover, the decision to invite global comment also evidenced Chinese understanding of the global ramifications of its approach to the management of its civil society, and its importance in the global discourse about consensus standards for that management among states. This becomes more important as Chinese civil society try to emerge onto the world stage. This essay considers the role of the Charity Law in advancing Socialist Modernization through the realization of the Chinese Communist Party(CCP) Basic Line. The essay is organized as follows: Section II considers the specific provisions of the Charity Law, with some reference to changes between the first draft and the final version of the Charity Law. Section III then considers some of the more theoretical considerations that suggest a framework for understanding the great contribution of the Charity Law as well as the challenges that remain for the development of the productive forces of the civil society sector at this historical stage of China’s development.
Kathryn Chan (University of Victoria) has posted (on SSRN) The Function (or Malfunction) of Equity in the Charity Law of Canada's Federal Courts, 2 Canadian Journal of Comparative and Contemporary Law 33 (2016). Here is the abstract:
This essay explores what, if anything, it means for the Federal Court of Appeal to be a “court of equity” in the exercise of its jurisdiction over matters related to charitable registration under the Income Tax Act. The equitable jurisdiction over charities encompasses a number of curative principles, which the Court of Chancery traditionally invoked to save indefinite or otherwise defective charitable gifts. The author identifies some of these equitable principles and contemplates how their invocation might have altered the course of certain unsuccessful charitable registration appeals. She then considers the principal arguments for and against the Federal Court of Appeal applying these equitable principles when adjudicating matters related to registered charity status.
Matthew S. Erie (Oxford) has posted (on SSRN) Sharia, Charity, and Minjian Autonomy in Muslim China: Gift Giving in a Plural World, 43 American Ethnologist 311 (2016). Here is the abstract:
In Marcel Mauss's analysis, the gift exists in the context of a homogenous system of values. But in fact, different types of normative systems can inhabit the same social field. This is the case among Hui, the largest Muslim minority group in China, for whom the “freedom” of the gift resides in the giver's capacity to follow the rules underlying gifting, in this case, the rules of sharia. I call this capacity “minjian (unofficial, popular) autonomy.” Hui follow sharia in pursuit of a good life, but their practices are also informed by mainstream Han Chinese gift practices and by the anxieties of the security state. In their gifting practices, Hui thus endeavor to reconcile the demands of Islamic, postsocialist, and gift economies.
Friday, August 12, 2016
Oonagh Breen (Dublin) has posted European Non-Profit Oversight: The Case for Regulating from the Outside In, 91 Chicago-Kent Law Review (forthcoming 2016). Here is the abstract:
When it comes to the regulation of non-profits, the European Commission experiences many of the same pressures and constraints faced by national charity regulators. It suffers, however, from an added disadvantage in that, arguably, it lacks jurisdictional competence to regulate non-profits qua non-profits. This article explores the consequences of the Commission’s unsuccessful attempt to secure the passage of its proposal for a European Foundation Statute (‘EFS’). Notwithstanding the European Council’s inability to muster the necessary Member State unanimity required to pass the proposal and its subsequent demise, the Commission is still dogged by the problems it identified as giving rise to the need for the EFS in the first instance. Against this background, Part I reviews the rationale for the EFS proposal, the political concerns that left it vulnerable to veto and the structural challenges faced by the Commission in legislating for non-profits at a European level. The argument is advanced that extant a purely functional approach, European regulation of nonprofits from ‘the inside out’ is difficult in the absence of a valid treaty basis.
Part II proceeds to examine recent NGO attempts to influence the Financial Action Task Force (‘FATF’) reform process (supported by the European Commission) and to demand a fairer process under FATF Recommendation 8 for dealing with NGOs. The European Commission’s role in assisting NGOs to bring pressure on the FATF to be more accountable and transparent in its dealings presents an interesting vignette of one regulator laying siege to another for the greater good of better non-profit oversight. Arguably, the Commission’s attempts at ‘regulating from the outside in’ has led to it demanding a higher level of transparency of the FATF than it has been willing to provide to NGOs itself in the past, while simultaneously enhancing Commission-NGO relations. The article concludes that it is now timely for the European Commission to be alert to the possibilities of regulating from the outside in on occasions when it may not be so possible to regulate from the inside out.
Górski: The Case for Research on Regulatory Neutrality Toward Various Shades of Social Entrepreneurship
Jędrzej Górski (The Chinese University of Hong Kong) has posted The Case for Research on Regulatory Neutrality Toward Various Shades of Social Entrepreneurship on SSRN. Here is the abstract:
This working paper discusses the case for research on regulatory policy toward social entrepreneurship and specifically pertains to regulatory policy toward social ventures. The main theme of this working paper is the regulatory neutrality toward various shades of social entrepreneurship and its secondary subject is the convergence of policies toward THE private and public sectors. As such, this working paper touches upon company law, tax law and commercial aspects of the regulation of activities conducted by charities, NGOs, etc.
In recent decades, the charitable landscape worldwide has undergone a significant transformation first with respect to using business methods in support of social missions (social enterprises) and, second, with regard to combining social missions with make-money paradigm (social ventures). The austerity measures in the Western hemisphere, commercialisation/privatisation of state-owned enterprises in post-communist countries and an economic slowdown in Asian “tiger” nations all necessitated a rise of private charity self-supported by social entrepreneurship as a substitute for governmental action. Social ventures have been proliferating in this environment, yet have suffered from public-policies (fiscal environment, inflexibility of the design of business organisations) confined to not-for-profit social enterprises, and lawmakers everywhere have largely failed to address this problem.
The time is therefore ripe for revisiting representative policy models, and to defend the claim that efficient regulatory policies can be neutral toward various shades of social entrepreneurship and well integrate social ventures to the overall benefit of society. A dogma (that not-for-profit social enterprises can better substitute for governmental action than their for-profit counterparts because only the former can enjoy specific governmental supports and receive private donations) shall be dispelled by offering a number of flexible mechanism allowing rewarding private mission-driven business organisations according to the scope of their mission and regardless of their not-for-profit status.
Such research essentially demands perusal of policy and legislative documents produced roughly in the post-2005 period in a number of jurisdictions (mostly Anglo-Saxon like the UK, Vermont followed by other states, British Columbia, but also South Korea) where lawmakers took on the issue of social ventures but, all as one, adopted only fragmentary solutions which did not disenchant the for-profit or not-for profit binary mindset. Identified problems (definition of charity, limits of the scope of business operations of social enterprises, non-distribution constraint etc. on the side of not-for-profits and non-deductibility of mission-related expenses etc. by for-profits) need to be deconstructed one by one toward a complex system reflecting the entire spectrum of social entrepreneurs and based on the principle that the more mission the more governmental privileges, yet more supervision.
Such a complex system would include a number of novel solutions. The commonly accepted general profit-tax exemption for not-for-profits shall be discarded in favour of wider deductibility of charitable expenses combined with exemption of donations (including charitable price premiums in excess of market prices paid by donors for commercial goods or services). The non-distribution constraint (banning dividends or equity rights in dissolution) shall strictly reflect paid-in donations thereby balancing the interests of investors and donors. Finally, a simplistic supervision system requiring periodical reporting to public authorities shall be discarded in favour of a system balancing interests of public and private (donors) stakeholders in the fashion of corporate governance in public companies.
Such solutions could be universally applicable and could be used not only for private social entrepreneurship but also for preserving the social functions of gradually privatised state-owned enterprises.