David La Piana

The New York Times on March 16 carried an article on New York state nonprofits that have regularly given political contributions to state-level politicians. Somehow at least 81 nonprofits, and scores of legislators, did not know this has been illegal for half a century. Some offered the excuse that they were only buying tickets to fundraisers. Of course, the point of a fundraiser is to raise money for the politician. I sometimes think I have been around too long to be shocked, but here is proof once again that you just never know.

The IRS ban on 501c3 organizations making political contributions or working on political campaigns is absolute. It was one of the first lessons I learned in the sector. Several wise mentors told me at various times early in my career as an executive director: “It is ok for you to make personal contributions to politicians,” they said, “but don’t put them on your expense reimbursement form. These have to come from you.” I guess they could have used some of those folks in New York.

This is just the kind of bonehead move that gives critics of the sector unnecessary fodder. Forget the fact that it is actually legal for businesses to make political contributions, and that this law puts nonprofits at a disadvantage. Forget also the obvious truth that money buys access, and that several of these New York nonprofits received nice state contracts after making their mostly modest contributions. It is still illegal.

I would like to offer a modest proposal for how to deal with one part of the current financial mess we find ourselves in. It is simple, follows the dictates of common sense, and no one other than a few thousand fat cats will disagree with it.

The proposal is this: the top leadership of every bank, insurance company, automaker and other corporation seeking a taxpayer bailout should not be given a bonus, period. In fact, they should be fired. Now, call me heartless, but how many of us could take a multi-billion dollar enterprise from years of profitability, turn it on its head, cause the loss of millions of jobs and the destabilization of our entire global economy, and not only keep our jobs, but get a six- or seven-figure bonus?

The arguments for paying bonuses come from the likes the AIG board and fall into two pathetic categories.

First, is the argument that they were promised a year ago and so are legally binding. The solution to the first barrier is pretty clear. The same lawyers who figured out how entire industries can cancel their retirement programs can certainly find a legal way to take back these bonus promises. Were they promised without any strings? No clauses stating: “If we don’t remain profitable, or if our stock price goes below $1, all bonuses are off?”

Second, without these bonuses the corporation will not be able to retain its top talent. As to the talent retention question, I fear I will risk insulting the reader’s intelligence when I ask: “Is this group of incompetents who drove the corporation into the ground really irreplaceable?”

President Obama likes to talk about a new era of responsibility. I say let it begin with those who benefited most from the run-up of the last few years, those who engineered credit default swaps, and those who insured them. Let the responsibility begin with those who got us into this mess. The homeowners who bought what they could not afford are now feeling the weight of responsibility, without anyone offering them a bonus. Yet the bankers and financiers who played upon the weaknesses of homeowners still get bonuses. I would modestly suggest otherwise.

A recent article in the Chronicle of Philanthropy reported that a significant portion of foundations plan to reduce their grant contributions in the face of falling endowments. Their primary motivation in doing so is to preserve their corpus.

If they previously gave away 5% of a billion dollars (= $50M) and that corpus is now worth, say, only $600M, they will still give away 5% (= $30M). The point is that their highest priority must be to maintain their size, not necessarily to make a difference in the world during these challenging times.

Are major foundations really worried they will go out of business if they continue to award grants at their pre-recession levels? That seems unlikely. They would have to give away a lot more than 5% to risk that danger. In the example above, a difference of $20M in grantmaking would not endanger a $600M foundation.

Then why reduce grantmaking? The only reason I can come up with is scorekeeping. Major foundations must look at their relative size in annual compilations and decide that their goal is to maintain their ranking, maybe even to improve it. If this is true, a foundation prioritizes its relative size or ranking over its stated mission. This is not only a shame but a missed opportunity.

The foundation community could collectively provide its own 2009 stimulus package to the nonprofit sector by increasing its giving to, say, 10% of its 2008 levels for one year. This would not endanger a foundation’s long-term health, and in fact, if foundations work collaboratively they could maintain their relative rankings, like race car drivers doing laps during an accident clean-up under the yellow flag.

With no harm to the foundations’ sustainability, think what good a doubling of 2008’s foundation giving would do for the world.