The Double Standard for Nonprofits and For-Profits

Posted by Laura Otten, Ph.D., Director on March 14th, 2008 in Thoughts & Commentary


We live in a world where double standards are the accepted norm. As a society, we are slowly working on redressing certain double standards, as in race and gender. It’s time to call attention to an enduring double standard for for-profits and nonprofits.

We hear again and again that nonprofits are businesses and they should be run as such. I couldn’t agree more, but with a few caveats, such as tempering our bottom line with our mission and having to raise some of our income via fundraising. Both of those, however, are totally doable within the business model. So, if we all agree that both for-profits and nonprofits are businesses, why is there the double standard when it comes to expectations of how each will run?

I’m a standard bearer on the importance of being excellent stewards of other people’s money. When you raise dollars in exchange for a promise of doing good, it is fair to expect that the recipients will not be frivolous with that money. But, is this any different from giving a for-profit business money in exchange for a tangible product, such as a box of cereal, a pair of sneakers, or a medication? Shouldn’t we, in both cases, have the expectation that the organization receiving that money will not be wasteful with that money? 

Why is it okay for a for-profit company to use the profit made from the sale of shoes in the first quarter to buy handmade mahogany furniture for the CEO’s executive secretary, but the executive director of a nonprofit should be grateful for the donated desk from a family downsizing its home? Why is it okay for some for-profit companies to get the latest and best in technology each year, while nonprofits, who are still not even networked or have web access, struggle to find donors willing to help them gain the infrastructure support they need to deliver their programs? When we buy that pair of shoes, the price tag doesn’t come labeled: $50 for shoes, $10 for the electric bill, $30 for new desk, but, in essence, that is what that $90 dollar price tag is all about.

But nonprofits trying to sell their pair of “shoes” must detail that price tag: $50 for food to feed the hungry, $10 for the electric bill, $10 for new furniture, and hope that donors will be willing to pay the full freight. But, as one of my graduate students said, “I don’t want to pay the electric bill. I only want to feed the hungry.” Does he understand that the lights must be on in order for that soup kitchen to serve meals to needy people? Absolutely. But he doesn’t want his dollar paying that bill; he only wants his dollar to buy the food being served.

It’s not uncommon to read an article that identifies the compensation packages of the region’s highest paid for-profit executives. When some of us see those numbers, we give a nod to the benefits and rewards of capitalism. Others of us read those articles, see those numbers, and are appalled that one person makes so much money. But how many of us think, “I’m not going to buy any more of that company’s products because I don’t want to pay for that CEO’s penthouse?”

And then there’s the annual story about the salaries of the heads of large nonprofits. When the last such story came out in 2007, one of the people at the top of the list was the president of WHYY, one of the region’s public radio stations. Shortly after the article, WHYY was doing its annual fundraising drive. An area nonprofit had signed up to cover the phones during a period of the fund drive, but when the board got wind of the salary of the head of WHYY, they pulled out, saying that their organization would not help to pay for what they saw as an outrageous salary. And this one nonprofit board was not alone.

Competitive salaries and compensation packages are a way of life in the for-profit sector. Why? Every company wants to woo the best and the brightest. Shouldn’t that include nonprofits? Our employees, too, want smart, bright colleagues, as well as nice offices with the latest technology, health and retirement benefits, a living wage, professional development opportunities, and so on. We all want the same things because we understand that running a business requires, among other things, investing in our most important commodity—our people. But why, then, is one sector—the nonprofit sector—criticized for and hampered in trying to achieve that goal?

Let’s be real here. For-profits fund their businesses in a very similar manner as nonprofits. The latter, however, is required to be absolutely transparent about it while the former, well, not so much.

Nonprofits, as noted above, must give you the option of picking and choosing which part of our business you wish to fund. For-profits don’t: we can’t elect to pay for the meal, but not the chef’s salary. We can’t elect to pay for the shirt, but not the labor that went into making the shirt. Because to do either would be absurd, correct? Everyone knows that if the laborer doesn’t get paid the shirt doesn’t get made, so of course we understand that a share of the price of the shirt includes a fee for the laborer. Then how come everyone doesn’t know that if the electric bill isn’t paid the hungry don’t get fed, and that, therefore, a share of the price of feeding the hungry must go to pay the electric bill.

The opinions expressed in Nonprofit University Blog are those of writer and do not necessarily reflect the opinion of La Salle University or any other institution or individual.