What is Drexel, anyway?
The noble purpose of a nonprofit can become quite complicated by private contracting.
By: Roger McCain
Issue date: 5/18/07 Section: Ed-Op
Originally published: 5/18/07 at 3:59 AM EST
Last update: 5/18/07 at 3:59 AM EST
Originally published: 5/18/07 at 3:59 AM EST
Last update: 5/18/07 at 3:59 AM EST
Nonprofits are a small segment of our organizational economy, but a crucial and rapidly growing one. Why? Why not (as free-market believers would have it) leave it to profit-seeking corporations? Or why not (as central planning believers would have it) entrust the government to do the jobs that nonprofits do? What do nonprofits have that makes them special and able to perform a special function in our economy?
The answer is commitment. To some students and many donors, it is important that Drexel is committed to its mission. A profit-seeking corporation cannot share that commitment, no matter what its "mission statement" may say. In the words of Milton Friedman, "The social responsibility of business is to increase the profits." That is the role of profit-seeking business in our economy. As for government organizations, they are the servants of the sovereign, and whatever resources are entrusted to them today may be shifted to other purposes (perhaps equally worthy ones) at a change in the will of the sovereign. But a nonprofit is committed, long-term, to its mission, and that is unique to the nonprofit organization.
In all of this I am assuming honest, law-abiding governance. Any organization can be perverted by dishonesty, and crooks are as likely to steal from the shareholders or the taxpayers as to loot the resources of a nonprofit.
Unavoidably, nonprofit corporations have extensive dealings with for-profit corporations, if only because for-profit corporations command most of the resources in our economic system. For-profits provide services to the University and its students and faculty, often on the basis of contractual agreements with the University. A well-managed endowment fund will hold shares in many for-profit corporations and thus benefit from increases in their profits. Such endowments can have a great influence on the direction of particular companies and on the for-profit sector in general, as the example of some large retirement funds shows. Some subordinate enterprises of the university, such as a book store, may operate on a for-profit basis. These services may be operated by for-profit companies on the basis of a contract or may be operated for profit by the University itself. In a case such as this, and in its real estate operations and other essential activities, the University may be in competition with private, for-profit companies or may impinge on them in other ways.
The answer is commitment. To some students and many donors, it is important that Drexel is committed to its mission. A profit-seeking corporation cannot share that commitment, no matter what its "mission statement" may say. In the words of Milton Friedman, "The social responsibility of business is to increase the profits." That is the role of profit-seeking business in our economy. As for government organizations, they are the servants of the sovereign, and whatever resources are entrusted to them today may be shifted to other purposes (perhaps equally worthy ones) at a change in the will of the sovereign. But a nonprofit is committed, long-term, to its mission, and that is unique to the nonprofit organization.
In all of this I am assuming honest, law-abiding governance. Any organization can be perverted by dishonesty, and crooks are as likely to steal from the shareholders or the taxpayers as to loot the resources of a nonprofit.
Unavoidably, nonprofit corporations have extensive dealings with for-profit corporations, if only because for-profit corporations command most of the resources in our economic system. For-profits provide services to the University and its students and faculty, often on the basis of contractual agreements with the University. A well-managed endowment fund will hold shares in many for-profit corporations and thus benefit from increases in their profits. Such endowments can have a great influence on the direction of particular companies and on the for-profit sector in general, as the example of some large retirement funds shows. Some subordinate enterprises of the university, such as a book store, may operate on a for-profit basis. These services may be operated by for-profit companies on the basis of a contract or may be operated for profit by the University itself. In a case such as this, and in its real estate operations and other essential activities, the University may be in competition with private, for-profit companies or may impinge on them in other ways.
