Orals for a Gift Horse

A hypothetical:

You get a call from someone who’s never donated to your agency before.  S/he wants to join your Board and make a very generous gift, one that will dwarf any previous donation you’ve received, on two conditions: first, that you let her add other, equally generous, people to your Board; second, that you set up for-profit subsidiaries.  What questions do you ask?

1. "How soon?" and "Where do I sign?" OR

2. "How many new Board members?" and "What kind of for-profit subsidiaries?"

I recommend #2 (even over the blunter third possibility, "What’s in it for you?"), because:

a. you don’t want to give a stranger control over the governing body of your agency.  If s/he really has the money, s/he’ll already be the most influential member of the Board from Day 1; giving her majority power (through cronies she designates) is overkill.  If s/he insists on it, you’re facing a takeover offer, and then you have to decide whether you’re prepared to abandon everything you and your Board have worked for to date.  The new Board may be equally committed to the cause but it will be committed in a new way, so be sure you understand that s/he’s asking you to hand over the keys in return for the donation.

b. "social entrepreneurship" enthusiasts notwithstanding, for most nonprofits there are only two possible results from starting a for-profit subsidiary: that the for-profit, being the source of capital, rapidly attracts most of the agency’s time and attention, leading to neglect of mission; or that the for-profit fails.  Running a business is not something anyone does in his/her spare time, even if nonprofit executives had any. 

A donor who’s gung-ho for the for-profit subsidiary idea is one of two things: someone who doesn’t understand enough about the nonprofit world to appreciate how inapplicable most for-profit principles are, or someone who has a hidden agenda.  It would take a forensic accountant to figure out the precise nature of that agenda, but the words "money laundering" come to mind.

So beware of geeks bearing gifts.

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