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Email ThisLucy at Philanthropy 2173 has started an interesting discussion regarding cross-platform philanthropy:
“Just as a radio program or tv show must now be developed with an eye toward its other media platforms and outlets, our public/philanthropic financing of these ventures need to be considered within these “cross sector” financing opportunities. We need to think of philanthropic funding strategies - and the public goods they support - as cross-platform. Public goods are now provided by private firms, public agencies, nonprofit organizations, and social enterprises. They are funded by public dollars, charitable donations, fees for service, corporate sponsorship, licenses, social investments, sales, and search engine/ad revenue. Oh, I like this metaphor - I’m gonna have to expand on it — next post.”
Taking the idea further, I started thinking about changes that might take place if non-profits were traded on the stock market like for-profit enterprises.
1. More secure and steady source of funding
Currently, non-profits compete for a limited set of funds among possible donors. A donor’s choice of the beneficiary may be influenced by media coverage of the cause the organization supports. Because there is a finite source of funds, prevailing priorities determine which causes and organizations gain the most. Reliance on quarterly fundraising totals can swing between feast and famine with any number of factors affecting donors: economic conditions, other pressing events, etc. Companies participating in stock exchanges generate profit from the value they offer through goods and services. Generating profit is not a zero sum game in the market; all organizations have the opportunity to show the value that their organization brings about and earn profit.
2. Changes in the organizational governance structure
Trading non-profits on the stock market also democratizes the governance structure of the organization. Shareholders have a financial stake and hopefully a personal interest in effective programming. Members of the community can share their insight about how the organization can be most effective directly with management. Involving more opinions in the direction and governance of the organization diversifies perspectives and strategic direction, much like some organizations hope to do by recruiting millennials to non-profit boards.
3. Altered definition of organizational accountability and responsibility
Non-profits would have an external measure to determine how well they are at doing good. Right now, most accountability for evaluation and demonstration of effectiveness is less of a requirement for continued donor support. Within the market, organizations that could prove they actually accomplish what they set out to accomplish will see the dividends literally in the stock dividends. Developing and maintaining effective and sustainable programs would affect the bottom line, promoting evaluation and the incorporation of best practices.
What do you think about the idea of nonprofits on the stock market? Worthless adaptation from for profit enterprises or the future of nonprofit fundraising? Let me know what you think in the comment section below. 
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I love these “out of the box” ideas, and I see where you are coming from in terms of governance, responsibility, etc. But the whole idea of purchasing stock in a company is that you have expectations of getting a return on that investment. Non-profits are set up specifically in opposition to that idea - once the check is written, you don’t ever see that money again.
I’m just struggling to see how this would be accomplished financially. How would you value the stock without expected future cash flows?
@Kenneth I am not a huge finance person so I can’t answer all of your questions. As far as the return on investment question, I think that it might be possible to create a stock exchange for non-profits. You would buy the shares of your non-profit and they would grow in value over time. I think that you could sell your shares at their new value but only use the “profits” to buy new shares in the nonprofit exchange. You still wouldn’t generate personal profit, but you would have philanthropic profit.
Valuing the stock would use the same standards to value a for-profit enterprise. How good is the organization expected to be in the future at providing their service: doing good.
Perhaps you’d value stocks based on the achievement of intended impact as well as overhead v. programm budget split.
If an organization works with underserved youth to prepare them for college — maybe their focus is to get x percent to enroll in a post secondary training program of some sort — vocational, community college, university. Their achievement of annual targets could be a measure of success.
If you’re a donor to that organization, you should expect a “return” on that investment via impact in the community.
Also, one of the current measures of a strong non-profit is looking at what % of its funds are used for administrative costs. The organization I work with rolls 90% of funds back into programming; sadly, some non-profits see half the funding chomped up by staff, which limits their community impact.
Might make for a cool trading game — like hsx.com
This is truly a novel idea. The University of Iowa has created a futures market for presidential elections >> http://www.biz.uiowa.edu/iem/
The Chicago Mercantile Exchange has financial contracts for weather…I don’t think that devising something similar for non-profits would be impossible.
@Kenneth -
I think the idea of non-profits would stay the same, any investor would have to see the value of their investment as as an “intangible” profit of sorts.
For example, let’s say you love opera, you donate to a non-profit opera company. Your reward? Better performances, opera education in your community.
Make sense??
@Kenneth - I meant “Return on Investment” in the first sentence. Yeesh. I’m so excited about this idea I can barely type.
@zak I do think it would be good to include metrics like that. After all, if you are talking about the typical small business which is what most nonprofits are anyway, you are expected to reinvest the majority of your profits back into the business.
@Keith I had no idea people made money based on the weather. Surely it wouldn´t be that hard to develop something similar for nonprofits.
@Milena I am glad that you are so excited. I would be cool to actually see this happen. Interested?
Vanessa:
Social stock exchanges exist - London, South Africa, Brasil, and India. Search philanthropy2173 for “social stock exchange” or check out xchangexchange.com
Best,
Lucy
@Lucy Thanks for the link. I will be sure to check it out.