Amid speculation that a certain nonprofit agency may
have diverted money raised for the families of victims of the Sept. 11
terrorist attacks for other purposes, two fund-raising former presidents
found themselves having to reassure the public that they would monitor
how the money was used.
The problem lies far deeper. Philanthropy has been accused of being decades behind
business in applying rigorous thinking to the use of money. The lines are blurring
between nonprofit and for-profit activities: Nonprofits are increasingly engaged
in market-oriented transactions, such as charging fees for services; partnerships
between community groups and corporations are expanding; and social entrepreneurs
are creating a new generation of hybrid organizations that blend nonprofit and
Americans have broadly followed the blueprint laid out by Andrew Carnegie. The
steel tycoon believed that growing inequality was the inescapable price of the
wealth creation that made social progress possible.
The world of giving is in the process of being reformed, even transformed, through
lessons learned from the world of business. Leaders of the new generation of
philanthropists seem determined to bring about a productivity revolution in the
industry by applying the best elements of the for-profit business world they
know. That has prompted the industry to adopt (and adapt to) some of the jargon
familiar from the world of business. The new philanthropist talks about social
investing, venture philanthropy, social entrepreneurship and the triple bottom
line. The new approach to philanthropy is “strategic,” “market-conscious,” “knowledge-based” and
often “high-engagement”—and always involves maximizing the “leverage” of
the donor’s money.
Leverage is particularly important to the new philanthropist. They know that
however large their personal fortunes, they are dwarfed by the financial resources
at the disposal of governments and in the for-profit marketplace. They need to
concentrate their resources on problems that are not being dealt with by governments
or for-profit organizations. A host of new firms and institutions have been created
that, with luck and good management, will provide the infrastructure and intermediaries
of a philanthropic capital market and an efficient way for philanthropists to
get their money to those “social entrepreneurs” and others who need
Still, there is no way to force philanthropists to adopt innovations, however
desirable. The new rich have often made their money very fast, and get intoxicated
with their own brilliance into thinking they can quickly achieve results in the
nonprofit sector. They forget that their success may have been due to luck, and
that the nonprofit sector may be far more complex than where they have come from.
This global elite—seeking to change the world by combining lots of money
with new ideas, cutting-edge business techniques, media and marketing savvy,
the mobilization of citizens, and helpful political connections—is bound
to set alarm bells ringing in some quarters even as it spreads hope in others.
Already George Soros, a famous hedge-fund philanthropist, has become embroiled
in controversy over the role of some of the organizations he funds in various
former communist countries as well as in America. And last year Bob Geldof, Bono’s
philanthropist partner in rock activism, provoked demonstrations in Uganda when
he suggested that the country’s president should not stand for re-election.
Philanthropy seems sure to become an increasingly hot political potato.
Changing the Global Economic Landscape
Like many nonprofit organizations, SeedAmerica is keenly aware of how the changing
global economic landscape affects businesses and communities. SeedAmerica (Supporting
Economic and Entrepreneurial Development) is determined to strengthen American
businesses and entrepreneurs through business education, business incubation
and job creation in local communities. To accomplish this, SeedAmerica has adopted
and mastered the practice of acquiring properties and using them along with grants
and other donations to help create the right environment for entrepreneurs and
small-business owners to flourish.
Social enterprise is not a new idea, but there is a new definition of philanthropy. Over
the past two decades, private, nonprofit organizations in the United States and
elsewhere have become increasingly embedded in the market economy. As corporations
go overseas to compete and become leaner at home, they find themselves with a
vast number of underused buildings for which there is little demand. SeedAmerica
works with corporations burdened with underused buildings with sometimes extremely
high carrying costs.
Corporations convey title in exchange for receiving significant cash benefits
in reduced taxes. The cash benefits are so great for the right kind of property
that it usually outweighs a cash offer at the list price after you account for
taxes and carrying costs on mostly depreciated properties. The advantage is that
local entrepreneurs and local businesses gain inexpensive spaces in which to
operate. Additionally, SeedAmerica helps entrepreneurs develop their business
plans and teaches them the ins and outs of how to do business right. The local,
state and federal governments along with communities preserve and increase tax
bases and jobs. Hence, underused buildings become “seeds” for American
growth through SeedAmerica.
Not only do the corporations receive incredible cash benefits, but they also
receive priceless intangibles, such as gaining back the trust of a community
through SeedAmerica’s public relations campaigns for the corporations they
work with even after shutting down its facility and laying off employees. To
top it off, corporations are able to focus on their core business and not managing
a headache—which again leads to more economic productivity both for the
corporation and America.
All this is done through the 561 Exchange Program, also known as RIM Exchange.
The 561 Exchange Program is an IRS-approved transaction using IRS publication
561 that allows property owners to convey title in exchange for a substantial
cash benefit that exceeds the cash benefit attained by selling a property at
list price if the owner has certain tax liabilities and has a certain amount
of carrying costs. The process is very quick and simple—usually less than
In order to have a successful 561 Exchange transaction, you need three ingredients:
the right property—usually, but not always, 50,000 square feet or more—of
industrial, warehousing, office or special property; the right seller (if the
seller does not have a tax liability then it will not work); and the right buyer—a
nonprofit, tax-exempt organization that specializes in 561 Exchange transactions,
ConAgra Foods, FMC Technologies, Essex Electric, the Pritzker family (owner of
the Hyatt Hotels), McQuay International, Chapel-Thorpe, GEM and Kaydon Corporation
are just some of the companies that have used the 561 Exchange program with SeedAmerica.
The 561 Exchange has provided these corporations great tangible and intangible
benefits by getting an immediate and significant cash benefit, eliminating expensive
carrying costs, giving back to the community, and having a great PR campaign,
while getting rid of a management headache so these corporations focus on what
they do best.
But the best part is that the property becomes the “seed” for economic
and entrepreneurial growth in each local community. Some properties go through
environmental cleanup, while others become small-business incubators, and others
help fund the business educational programs of SeedAmerica—all helping
our country to stay competitive while corporations focus on boosting profits,
helping the community through small business enterprise and cleaning up the environment.
The corporate world benefits; the local, state and federal governments benefit;
and most importantly, the local community benefits.
It’s no wonder that thousands of 561 Exchange transactions have occurred
in recent years, making the 561 Exchange the hottest trend in the corporate real
There Are So Many People In Need
We tend to live in our own little worlds and fail to see the need all around
us. It is there. If we look long and hard enough, we will see it. If we care
to think about it, we will realize that everybody can do something that makes
a difference. Everybody has talents that could help someone else. Still, lots
of people are afraid to volunteer. They think that getting involved is a slippery
slope: The next thing they know, they will have to sell their possessions and
become another Gandhi. It is true; we do have to set limits. We have to be honest
about how much time we can really commit. The important thing is to have realistic
expectations about what we can and cannot accomplish, and to be honest about
To create real change in this world, we have to have a vision. We have to have
enormous perseverance. Giving away money has never been so fashionable among
the rich and famous, especially when so many benefit. The rich seem to be trying
to figure out a moral biography of wealth, and philanthropy provides a large
part of the purposeful side of living the good life. Abraham Maslow’s hierarchy
of needs described the highest need as a desire for purpose beyond ourselves.
Bill Gates already has handed over billions of dollars to the Bill and Melinda
Gates Foundation, mostly to tackle the health problems of the world’s poor.
The next generation of technology leaders is already following his example.
Pierre Omidyar, the founder of eBay, and Jeff Skoll, the auction site’s
first chief executive, are each putting their billions to work to “make
the world a better place.” The founders of Google, Sergey Brin and Larry
Page, have committed a large slice of the search engine’s equity and profits
to Google.org, a philanthropic arm of Google that ambitiously applies innovation
and significant resources to the largest of the world’s problems.
The new enthusiasm for philanthropy is in large part a consequence of the rapid
wealth creation of recent years, and its uneven distribution. Forbes claims there
are 691 billionaires in the world; half of them are self-made. This extra wealth
is creating huge new opportunities for philanthropy. Faced with the world’s
many and urgent problems, a lot of wealthy people are asking themselves, “If
I can help, why not?” They have been fortunate, and want to give something
It may be hard to tell whether some of the new wealthy feel guilty, but many
of them seem to think that philanthropy is part of a social contract: both a
duty and an insurance policy against populist redistribution. They believe they
should be socially responsible because they are obligated to do so.
We do not have to be the Bill and Melinda Gates Foundation to make a meaningful
difference. Giving USA says that charitable giving in America is increasing.
Even Congress, together with the IRS, has given property owners another reason
to be more giving through the great tax benefits of the 561 Exchange program.
People everywhere want to make a difference, and now corporations are joining
in. But we do need to know that our time and money are going toward something
worthwhile. It is not just writing a check. It means devoting time and skills
to really do something. With all of the cuts in government services, it is up
to us to work together to improve other people’s lives. Fundamentally,
we are social beings. Our nature calls us to connect deeply to our community
and to find larger meaning in what we do. Community makes life fun and meaningful.
It brings depth to our lives and enriches our most intimate relationships. In
that way, making a contribution becomes a mutual exchange rather than a one-way
Philanthropy Is Good For Business
You can do well by doing good” is SeedAmerica’s motto. We can indeed
do good and do well at the same time. For one thing, we will differentiate ourselves
from the competition: Down the road, clients might choose us over another company
because they appreciate that we are good neighbors. In this market, where everyone
is competing for staff, we have to be able to offer people more than just good
wages and benefits. Showing that we truly care about the community is an effective
way to do that.
A secondary motive may be the desire to take advantage of the many tax incentives
and other fixes that can make a wealthy corporation look virtuous at an appealingly
low cost or no cost at all, depending on a property’s carrying costs. America
has the most generous treatment of charitable giving, allowing taxpayers and
corporations to deduct their donations from their taxable income. But just as
the world’s wealthy and powerful corporations are discovering the joys
of giving, most people seem to agree that philanthropic motivation is beside
the point. The act of giving and the effectiveness of that giving are what really
matters. But if you can do well by doing good, you get the best of both worlds.
Dennis Walsh is a communications specialist focusing on renewable energy, social
and green philanthropy. He is the editor of America’s GreenHouse, a renewable
energy newsletter, and the increasingly popular Green Philanthropy blog.