Can Nonprofits Escape Corporate Capture?

Below is a transcript, edited for length and clarity, of “Escaping Corporate Capture: Nonprofit Survival in a For-Profit World,” hosted by Opus 40 in Saugerties, NY, on July 26, 2024. Moderating the conversation are Caroline Crumpacker of Ultra Advising and Steve Dubb of Nonprofit Quarterly. Participating as panelists are Jule Hall of the Innocence Project, Alissa Quart of the Economic Hardship Reporting Project, and Amarah Sedreddine, general counsel at Sedreddine & Whoriskey.

This article was co-produced and co-published with the Economic Hardship Reporting Project (EHRP).

Caroline Crumpacker: Hello everyone. We’re so excited to be here with you.

We have watched the nonprofit sector, which ranges from large hospitals and universities to the small magazine that’s being folded in someone’s living room, being ever more caught up in the matrix of what we might call late-stage capitalism. At the same time, within this austerity framework, nonprofits increasingly fill holes in sectors ranging from education to healthcare to journalism to social services that we depend on the most and that have been receiving less and less government support. There’s also the kind of “emotional labor” involved in courting individual donors.

Steve Dubb: Thank you, Caroline, for inviting me here. A few remarks: as it happens, NPQ just published its summer 2024 issue. Rithika Ramamurthy and I asked the authors, including Alissa Quart, who is here today, to examine corporate capture and how to organize against it. Our vision extended beyond the nonprofit sector to examine how corporations have captured our politics, large swathes of the economy, our nonprofits, our culture, our ideas, even our dreams. We also asked authors to imagine an economy beyond corporate capture that centers workplace democracy and community ownership. A world free of corporate capture is in plain sight—if we look for it, organize for it, and fight for it.

CC: Thanks. Tonight, we’re going to take a stab at parsing all of this out. We want your questions, your feedback, your rants, your raves, all of it.

“In a resource-challenged environment, this desire to lead even when it’s duplicating other work, has a negative impact on the sector.”

Jule Hall: I’d just like to note how we approach nonprofits. I’ve had the privilege, since two weeks after my release because of my education in prison with Bard College, of being able to enter the professional space and observe, learn. I think sometimes, when we talk about nonprofits and philanthropy, we get caught up in financial structures. But I like to bring the attention back to the people that we are supposed to serve and for whom I’m an advocate.

Amarah Sedreddine: With apologies, I may go straight to focusing on some technical aspects. Nonprofits are a feature of tax law and corporate governance laws. A recent publication by the American Enterprise Institute, a conservative think tank, highlights the effects of the 2017 Tax Cuts and Jobs Act on nonprofits: what it did was remove the incentive for anyone but the ultra-wealthy to make a tax-deductible donation. We do have data that shows now that corporate capture is absolutely a very real concept.

At the same time, I want to mind the distinction between corporatization and sophistication. Because I do think that while corporatization is not a dynamic that we want to enhance and encourage in the sector, sophistication is. That’s sophistication in infrastructure, sophistication in how nonprofits view their role in society and the policies and the practices that they develop. So, maybe this is a framing note. These terms can, I think, be conflated, and we should just be mindful that the act of adopting corporate practice is not always a negative thing.

CC: Good point.

Alissa Quart: Thank you, Amarah. I run a nonprofit—the Economic Hardship Reporting Project—that’s devoted to working-class writers and independent reporters and so on. It’s really interesting because I have two [types of] clients, right? I have clients who are in the donor class and then also clients who literally can’t pay their rent.

At any nonprofit where you interface with donors and recipients, you’re serving very different clients. I remember PBS used to say, “Donors like you,” and that was the model. Now, I mean, even PBS is a perfect example of corporate capture because they have ads for things like a Swedish boat line before their programs. It’s supposed to be advertisement-free. That’s both corporate capture and a kind of categorical capture of nonprofit media.

JH: I feel that both ideas can exist at the same time. I’ve actually witnessed this. There’s no doubt that these entities have this drive, and I would say we need to investigate that drive. Corporate capture may be one way to describe it. I also like the sophistication that may be involved in handling not only your nonprofit and how it obtains revenues, but again, I go back to advocacy, its mission. Whether those revenues are just to portray the executive director as a fundraiser—this is good clout, social capital in this nonprofit world—or is it about the people that [are] being served? And I think sometimes we lose that aspect.

AQ: Dean Spade, the lawyer who does trans law, he had a great point. He writes that his students all want to be nonprofit directors. They don’t want to work for nonprofits. They want to run them. And really, that’s one of the ways that I think nonprofits also mirror the corporate structure.

AS: Absolutely. Our country’s individualist inclination is another dynamic that I think challenges the resource constraints that nonprofits are facing. If everyone wants to be an executive director, we have too many nonprofits doing the same thing, and that’s also a dynamic that I see across my desk all the time. I think…especially in a resource-challenged environment, this desire to lead even when it’s duplicating other work, has a negative impact on the sector.

CC: I wanted to go back to what you said at the beginning about the incentivizing of extremely wealthy people. My understanding is that philanthropic individual giving is up, but fewer people are giving bigger amounts of money. And that is having the same effect on the nonprofit sector that you see in the political sector, right? This means that if you’ve got one donor who is giving you $20 million, what if that donor doesn’t like a program you want to offer or a political statement you feel aligned with? And I think that is very problematic.

AQ: I have a phrase for these people. I call them shock benefactors because it’s like shock capitalism. They give money to get their name on the university. They give it to Johns Hopkins; they give it to Morehouse. They don’t give it to community colleges. Then there’s MacKenzie Scott, other people who are, you know, trying out bottom-up giving. But shock benefactors are like the uncles in Victorian novels that just kind of say, “Here, let me give you many millions for your Ivy League or fancy college,” and that is also about ego. That’s like wanting to have your name on the Museum of Modern Art or something. You know what I mean? It’s nominalism.

JH: And I just want to say quickly, I don’t want to make a value judgment about that. I think that one of the unique aspects of this, we just brought an additional element, philanthropy. Are we saying philanthropy is separate from nonprofits? I just want to kind of acknowledge that nonprofits/philanthropy hold a unique position in our society that we need to evaluate.

I just think that we have to be ready not to say something is negative or positive, but definitely evaluate: Why is this unique in American society at this time?

AS: One other point I want to raise with that, Steve, I think you said earlier that nonprofit is too limited a term to encompass, in your words, civil society and social justice. I agree. And because of this change in the tax laws and the fact that everyday people no longer have a financial incentive to give charitable contributions, we have seen a rise of good acts taking place outside of the charitable framework. GoFundMe campaigns and the like. Are we concerned about nonprofits specifically, or are we simply concerned about our society writ large and our society’s capacity and interest in doing good? I think it’s the latter and not the former.

CC: What you’re talking about [is] how much energy goes into fundraising, and I think that’s where you want to have a daily practice of an alternative to hyperactive capitalism, right?

JH: I agree. We should be identifying the characteristics of capitalism that are manifest in nonprofits so we can better make an equitable society and help the nonprofit and philanthropic entities to fulfill their purpose in our society.

A couple of things: First, open up the boardrooms. I work for companies and never interacted with the board of the company. There’s a void between the people on the upper echelons of capitalism or nonprofits.

“Boards would benefit from having people who are closer to work to be able to say, ‘Hey, this is how this experience is for me’.”

And I feel we must have more interaction. I don’t think it’s a big lift—more interaction from senior leadership, board members, and people on the ground, the people we are supposed to help. I would love to see young people in a boardroom, just to switch up the energy a little bit. I have nothing against data. I just feel data is important with anecdotal information and stories as well.

AQ: One thing I want to say also is funders ask for this. I’m not anti-growth per se, but I am maybe post-growth. Right now, at EHRP, I’m actually…trying to slow down our growth as a nonprofit and just make it about stabilizing our infrastructure and our relationships with our clients, our writers, and our photographers. And we need mental health support because we’re working with people who are in a lot of pain. It can be hard for writers and editors.

CC: Jule, [for Philanthropy New York], you wrote, “The efficacy of the philanthropic approach is that it engages the long-standing, and overarching structures, such as laws and institutions, that perpetuate inequality in society.”

So, if I’m reading you correctly, it’s kind of like you’re saying there’s power in this, too. It’s not just something that washes over us. We can leverage this. And I’d love to hear you talk about that.

JH: Well, look at the example of the Ford Foundation. Ford understands that the better bang for its buck is when it’s engaging these long-standing policy issues, where it’s investing in the change of laws and not just one person’s reentry into society. To say it differently, it protects against the American tradition of taking on issues and walking away from them. You know, we have a four- to eight-year presidential cycle, and our country can be completely a different country when a new person comes in and sets new policies. Institutions like the Ford Foundation and other long-standing philanthropies have an actual legacy of engaging these structures and these institutions that allows a consistent engagement with these issues on a policy level.

We also have intermediaries, entities that operate in a role like Borealis [Philanthropy].

AS: I don’t like intermediaries.

JH: So, this is when we’re talking about relationships between the community and these larger structures, [and] you have organizations like Borealis that perform that work for a large entity. I would love to hear your ideas about what is it about the intermediary you don’t like, but they are very central and a lot of large foundations who recognize that they’re not close enough to issue to fund it, so they get the intermediary who already have that connection with grassroots to be able to say, “Hey, this is where this money could be impactful.”

AS: I think it just has to be the right intermediary—and talk about corporate capture, what we’ve seen over the last 25 years is the rise of donor-advised funds (DAFs) and these financial intermediaries that pool charitable funding, but they’re really arms of for-profit corporations. They don’t have a charitable core. They don’t have those connections to the community. It’s a money-making venture that’s making money out of people’s philanthropic contributions, and a lot of it is not actually getting to the charities. On the other hand, when you have a community foundation, and community foundations hold donor-advised funds too, but they have a more authentic charitable purpose, and they’re closer to their communities, they are able to make an impact in a different way than Fidelity [Charitable], for example.

SD: So, if you had to list specific reforms you would like to see made to nonprofit structures, philanthropic mechanisms, and public participation, and what would they be, how can we actually address this question of corporate capture? And you know, some of the folks who worked on the panel hope to write a manifesto of sorts based on the event. So, you know, be bold in your recommendations, and hopefully, that’ll also provoke some response from the folks in the audience as well.

JH: Well, like I said in the beginning, I come from a perspective that what’s on the ground is going to improve what’s up in the sky.

AQ: Nicely put.

JH: And I think there’s something about the board that is a bit gatekeeping and should be opened up for people, even if it’s just advisory….And I think boards would benefit from having people who are closer to work to be able to say, “Hey, this is how this experience is for me.”

AS: That’s part of the reason why I am such a fan of community foundations. I think they serve that kind of connection; they get the ultra-wealthy up here with their DAFs closer to the people in the community who are doing the work and who actually have the expertise to drive the vision and drive the work. So, 100 percent, community foundations. Also, we should explore changing the corporate and the tax laws. But I agree with you, Jule, I think that’s [the] crux of it, getting decision-makers closer to the work.

AQ: One thing is to raise awareness. I call the nonprofit industrial complex the dystopian social safety net. And what I mean by that is things that shouldn’t have to exist but do because nothing gives. Everything’s held together with duct tape in this country. And so that sort of, to me, that kind of framework unites the GoFundMe and the Kickstarters, the co-ops, to some extent, the nonprofits, the volunteerism, you know, there’s just like so much, and it’s put back on us as individualism: it’s on us to save ourselves, right?

“I call the nonprofit industrial complex the dystopian social safety net.…Everything’s held together with duct tape in this country.”

An example: During the pandemic in my neighborhood, Prospect Heights, Crown Heights, some of the older ladies at the mutual aid would ask for chicken feet, and some of the older guys would ask for a Budweiser and their neighbors in the mutual aid brought them that. They didn’t say to these people, “You should have tofu.” Traditional philanthropy, in contrast, sometimes says to grant recipients the equivalent of “we are giving you tofu” when the grantee is asking for Budweiser!

Zuhirah Khaldun-Diarra [audience member]: I wanted to make a point about nonprofit labor practices. A lot of people choose to work at nonprofits because they are mission driven. People work there because they’re passionate about the mission. And a lot of times the salaries, because of lack of funding, are lower than corporate entities. And so, one issue with the funders is asking them to fund higher salaries and administrative costs and understand that people doing this work, our work, are worthy of salaries that they can live on. But then also, the nonprofit itself becomes a discriminatory place because people who don’t have trust funds can’t work at nonprofits.

CC: 100 percent.

ZKD: I think that’s another issue, that it’s not a corporate structure, it’s where we at nonprofits could become more sophisticated.

AS: Exactly the point that I wanted to make at the beginning. Let’s keep in mind the distinction between corporatization and sophistication. The reason my practice exists is because I noticed at some point over my career working within large institutions, as outside counsel to large charitable institutions, and teaching…I observed that operating charities didn’t have a good source of legal support. I always talk about places where the law and an organization’s vision align, and in the employment space, that is definitely the case.

Kim Cutter [audience member]: But then I also feel like, on another level, isn’t this kind of a broader thing that has to do with government? I feel like—and this really is philosophical—our government no longer serves the common good. And it seems to me that these systems are essential, but until somehow they are codified into our government, and the government serves the good of the people, I don’t understand how nonprofit change is going to happen.

AS: Unfortunately, I don’t think everyone in the country agrees with that statement.

JH: I feel you’re onto something great because there’s hypocrisy here as well. Philanthropy and nonprofits are not supposed to be perpetually engaged in the issues that they are engaging in, right?

AS: But the government is not accountable, and that’s why the charitable sector exists. So, when you compare charitable giving in the US, it is double what it is in European countries because in Europe, the government provides all the services and the social net that we rely on the nonprofit sector to provide.

JH: But the inverse is the nonprofit sector—and we just spoke about this actually—tells people, “I’m only going to give you a two-year grant because you need to be sustainable,” so that the motivation behind that is, I’m not supposed to perpetually engage you. The ideal scenario is a scenario that happened with college in prison. Private interests funded college in prison, and then the world saw its public good, and then policies came from the government. That’s what needs to happen, but it’s not happening. You’re so on point.

SD: I think it’s important to understand—and this may sound weird, coming from Nonprofit Quarterly—but the US has a bloated nonprofit sector, right? One good book to read is The Sum of Us by Heather McGee, which identifies some of the racist reasons why this happened. But there is a need for advocacy. Because the public good is at stake. Alissa calls what we have now the dystopian social safety net that picks up the slack. This is not what should be happening, and it’s a problem.

AS: Well, the paradoxical thing is, as we’re talking about “escaping corporate capture,” the dynamic that we’re now onto as a solution is social entrepreneurship, which is just reinforcing and doubling down on the corporate capitalist instincts to drive more public good. I think that’s a fine outcome.

AQ: I love the college prison model. And, for example, the Local Journalism Sustainability Act in New York State, and there was one in DC. All supporting local journalism. That started with this renaissance of media nonprofits. So, they were following us in the same way that other prison initiatives are following Bard’s Prison Initiative. I’m sure we could point to other industries where that has been true.

So maybe that’s one way of wrapping up here is to get the government policy experts to come and see what nonprofits are cooking up and to try to model themselves on us instead of the other way around.